- DXY loses the grip and debilitates to the 92.30 area, new YTD highs.
- Solid sentiment in the risk complex keeps the buck under pressure.
- Housing Starts, Building Permits surpassed expectations in July.
The US Dollar Index (DXY), which gauges the buck vs. a bundle of its main rivals, is trading well on the defensive around 92.30, or new 2020 troughs.
US Dollar Index now looks to 91.92/80
The index clinched another 2020 lows near 92.30 on Tuesday. No surprises there, as the solid sentiment surrounding the riskier assets is giving no signs of subsiding for the time being.
Furthermore, the rally in the risk complex have been weighing on the buck since mid-May, forcing the dollar to break below the April-May consolidative theme and embark in a (very) deep pullback. Against this, there is an interim support at the Fibo level (of the 2017-2018 drop) at 91.92 ahead of the May 2018 low at 91.80.
In the meantime, uncertainty in the US political scenario keeps running high with the fiscal stimulus bill losing traction and the run up to the November elections – 76 days to go – signalling no clear winner for the time being.
In the US data space, Housing Starts rose 22.6% in July from a month earlier to nearly 1.5 million units. Building Permits followed suit and also increased by almost 1.5 million units, or 18.8%. Later in the session, the American Petroleum Institute (API) will publish its weekly report on crude oil supplies.
What to look for around USD
The index remains on the defensive below the 93.00 level and is already flirting with +2-year lows in the 92.50 zone. Looking at the broader picture, investors remain bearish on the dollar against the usual backdrop of a dovish Fed, the unabated advance of the pandemic, political uncertainty and somewhat diminishing momentum in the economic recovery, whereas persistent US-China effervescence could lend some occasional legs to the greenback.
US Dollar Index relevant levels
At the moment, the index is losing 0.51% at 92.35 and faces the next support at 92.28 (2020 low Aug.18) seconded by 91.80 (monthly low May 18) and then 89.23 (monthly low April 2018). On the flip side, a break above 93.99 (weekly high Aug.3) would aim for 94.20 (38.2% Fibo of the 2017-2018 drop) and then 96.03 (50% Fibo of the 2017-2018 drop).
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