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US dollar DXY index remains under pressure near 89.70 ahead of data

  • The dollar extends Monday’s losses near 89.70.
  • The focus is on American politics and voting in Georgia.
  • ISM’s Manufacturing PMI stands out on the US economic calendar.

He US dollar DXY index, which measures the strength of the dollar against a basket of the main currencies, maintains the negative tone unchanged during the first half of the week and always below the 90.00 level.

The US Dollar DXY Index focuses attention on politics and data

The DXY index extends the pessimism observed earlier in the week, although it remains above the new lows in the region of 89.40 marked on Monday, levels last seen in April 2018.

The dollar regained some ground on Monday, after bottoming out near 89.40, due to risk aversion mainly stemming from the increase in coronavirus cases and new concerns about virus mutations.

On the political front, investors will continue to vote counting closes in Georgia, where control of the United States Senate is at stake. On this, Democrats need to win two seats to provoke a 50-50 split, in which case Vice President-elect Kamala Harris will have the final deciding vote.

Regarding US economic data, the ISM manufacturing PMI release will draw the attention of investors, followed by speeches by Chicago Fed Governor C. Evans and Chicago Fed Governor New York, J. Williams.

What can we expect around the USD?

The DXY index regains its downside momentum at the start of the new year, always supported by the widespread optimistic sentiment in risk appetite. In addition, the outlook for the dollar remains on the bearish side amid the increasing likelihood of additional monetary / fiscal stimulus in the US economy, the Federal Reserve’s “lower rates for longer” stance, and prospects for a strong economic recovery.

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is down 0.14% on the day, trading at 89.74. The next support is at 89.42 (January 4 low), followed by 89.22 (April 2018 low) and 88.94 (March 2018 low). On the upside, a breakout of 91.01 (December 21, 2020 high), would point to 91.23 (December 7, 2020 high) and finally 91.92 (23.6% Fibonacci retracement of the 2017-2018 dip) .

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