- The DXY index flirts with the 8-month support line near 92.20.
- The risk appetite sentiment prevails at the beginning of the week.
- Markit’s preliminary PMI, the Chicago Fed Manufacturing Index and several Fed speeches will draw investors’ attention.
The US dollar DXY index, which measures the strength of the dollar against a basket of the main currencies, has started the week with a negative tone and falls back to the 92.20 zone during the European session on Monday.
US Dollar DXY Index focuses attention on pandemic risk trends, data and developments
The DXY Index resumes falling and moves near the 92.20 region due to the growing investor preference for riskier assets, weighing on the safe-haven USD.
In fact, more positive news regarding a vaccine for COVID-19, this time from the biopharmaceutical AstraZeneca, lend additional oxygen to the assets with the highest perceived risk at the beginning of the week and further contribute to the selling pressure around the dollar.
Later in the day, the release of preliminary indicators for the Markit Manufacturing and Service PMI will focus investors’ attention, followed by the Chicago Fed index and speeches by San Francisco Fed Governor M. Daly and Chicago Fed Governor C. Evans.
What can we expect around the USD?
The downside momentum in the DXY index stopped just above the 92.00 region for now, where decent support appears to have emerged. Meanwhile, the dollar remains focused on the post-election scenario in the United States and the prospects for the US economy under the Biden administration, while simultaneously monitoring the impact of the second wave of the pandemic on the economic recovery. On another front, the Federal Reserve’s “lower rates longer” stance is expected to continue to limit serious upside potential in the DXY index.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.15% on the day, trading at 92.22. The next support is at 92.13 (November 9 low), followed by 91.92 (23.6% Fibonacci retracement from the 2017-2018 dip) and 91.80 (May 2018 low). On the other hand, a break of 93.20 (November 11 high), would open the door to 93.57 (100-day SMA) and finally 94.30 (November 4 high).
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