- DXY met resistance in the 96.60 region once again.
- Risk-off resurged on the back of coronavirus fears.
- US Producer Prices, Initial Claims next on the docket.
The greenback, when tracked by the US Dollar Index (DXY), is trading on the defensive in the second half of the week and retreats to the 96.30 area.
US Dollar Index focused on data, COVID-19
After two consecutive daily advances, the index has now come under some selling pressure on the back of the renewed demand for the safe haven universe, with investors’ preference leaning towards the yen and the Swiss franc.
The dollar retreated further after the White House made no announcement of any stimulus package on Wednesday, disappointing market participants against the backdrop of a broad-based deterioration of the situation around the coronavirus. On the latter, the World Health Organization (WHO) finally declared the current situation as a pandemic.
In the US docket, February’s Producer Prices are due later in the NA session seconded by the usual weekly Claims. In addition, investors will closely follow the ECB event and the likeliness of an interest rate cut aimed to battle the impact of the COVID-19.
What to look for around USD
Despite the ongoing bounce off multi-month lows near 94.60, the outlook on the index remains on the bearish side for the time being. In the meantime, the dollar remains under heavy pressure in response to rising bets on another Fed move on rates at the March meeting, depressed yields and heightened concerns on the impact of the coronavirus on the global economy.
US Dollar Index relevant levels
At the moment, the index is retreating 0.25% at 96.36 and faces the next support at 94.65 (2020 low Mar.9) seconded by 94.20 (38.2% Fibo of the 2017-2018 drop) and then 93.81 (monthly low Sep.23 2018). On the upside, a break above 96.69 (weekly high Mar.11) would open the door to 97.78 (200-day SMA) and finally 98.19 (monthly high Jan.29).