- DXY loses further momentum and recedes to the 92.20 region.
- Focus remains on the unabated pandemic and pick up in cases.
- US housing data, Fedspeak next of note in the daily calendar.
The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, remains well on the defensive and trading in the low-92.00s on Wednesday.
US Dollar Index offered on risk-on sentiment
The index loses ground for the fifth consecutive session on Wednesday and already trades at shouting distance from the monthly lows in the 92.15/10 band, always against the backdrop of the persistent improvement in the risk-associated universe.
In fact, market participants appear to look past the pandemic and keep favouring the reflation trade in spite of the increasing cases of coronavirus across the world and the re-implementation of restriction measures.
Later in the NA session, MBA’s Mortgage Applications are due in first turn followed by Housing Starts and Building Permits. In addition, Chicago Fed C.Evans (2021 voter, centrist), NY Fed J.Williams (permanent voter, centrist) and St. Louis Fed J.Bullard (2022 voter, dovish) are also due to speak.
What to look for around USD
DXY stays offered and leaves the door open to extra downside in the near-term. In the meantime, the dollar remains focused on the post-elections scenario and a the prospects of the US economy under the Biden administration. On the more macro view, the impact of the second wave of the pandemic on the global economy could favour the occasional re-emergence of the risk aversion and therefore lend some support to the buck, while extra progress regarding vaccines against the COVID-19 should support momentum in the risk complex. Further out, the “lower for longer” stance from the Federal Reserve is expected to keep limiting a potential serious upside in the dollar.
US Dollar Index relevant levels
At the moment, the index is losing 0.23% at 92.22 and faces immediate contention at 92.13 (monthly low Nov.9) followed by 91.92 (23.6% Fibo of the 2017-2018 drop) and then 91.80 (monthly low May 2018). On the other hand, a breakout of 93.20 (weekly high Nov.11) would open the door to 93.71 (100-day SMA) and finally 94.30 (monthly high Nov.4).
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