- DXY loses momentum and retreats below 102.00.
- The dollar stays weak after extra easing by the Fed.
- Markit’s flash PMI, New Home Sales next on the docket.
The greenback, in terms of the US Dollar Index (DXY), has come under further downside pressure and recedes to the sub-102.00 area on Tuesday.
US Dollar Index weaker post-Fed
After climbing to fresh 2020 peaks in the boundaries of 103.00 the figure at the beginning of the week, the index gave away some gains and it has now returned to the 101.90 region at the time of writing.
The dollar is trading on a weaker footing on Tuesday after the Federal Reserve announced open-ended purchases of Treasuries and MBS “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy”.
In fact, the Fed will purchase $75B/day of US Treasuries and $50B/day of MBS as well as pumping in around $300B in credit programs for employers, businesses and households.
In the US docket, Markit will publish its flash gauge of the Manufacturing/Services PMI for the month of March as well as New Home Sales during February and the Richmond fed manufacturing index.
What to look for around USD
DXY saw its upside momentum decelerate somewhat in response to the latest stimulus measures announced by the Fed on Monday. The recent sharp upside momentum in the dollar has been sustained by firm demand on the back of funding concerns, while easing monetary conditions by central banks other than the Fed have been also collaborating with the upbeat sentiment around the greenback. In the meantime, the progress of the fast-spreading COVID-19 are expected to keep driving the global sentiment for the time being.
US Dollar Index relevant levels
At the moment, the index is losing 0.56% at 101.90 and faces the next support at 100.49 (78.6% Fibo of the 2017-2018 drop) followed by 99.91 (monthly high Feb.20) and then 98.37 (55-day SMA). On the flip side, a breakout of 102.99 (2020 high Mar.20) would open the door to 103.65 (monthly high December 2016) and finally 103.82 (monthly high January 2017).
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