US Dollar Index drops to 3-day lows near 92.70 ahead of ISM

• DXY loses the grip and tests 3-day lows around 92.70.
• US ADP rose by ‘just’ 167K jobs during last month.
• US ISM Non-Manufacturing next of note in the calendar.

The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main competitors, is prolonging the offered bias to fresh 3-day lows in the 92.75/70 band.

US Dollar Index now looks to ISM

The index is clinching its second session in a row with losses on Wednesday, trading closer to the 2020 lows in the 92.50 region recorded last Friday.

The selling mood around the buck is extending on Wednesday despite the rebound in yields of the 10-year benchmark to the 0.54% zone after bottoming out near 0.50% during early trade.

The dollar stays well under pressure against the backdrop of rising optimism over another potential coronavirus stimulus package, currently under debate in the US political arena.

In the data space, the US private sector added 167K jobs during last month, markedly lower than forecasts for a 1,5 million gain. Additionally, the trade deficit shrank to $50.7 billion in June, a tad above estimates. Later in the session, all the looks will be upon the ISM Non-Manufacturing for the month of July.

What to look for around USD

The dollar’s recovery appears to have run out of favour in the 94.00 region on Monday, resuming the downside soon afterwards and re-shifting its focus to recent lows in the mid-92.00s (July 31). Looking at the broader picture, investors keep the bearish stance on the currency unchanged against the usual backdrop of US-China jitters, the spread of the pandemic and the dovish message from the Fed. Also weighing on the buck, market participants seem to have shifted their preference for other safe havens instead of the greenback on occasional bouts of risk aversion. On another front, the speculative community remained well into the negative territory for yet another week, adding to the idea of a more serious bearish trend in the dollar.

US Dollar Index relevant levels

At the moment, the index is losing 0.56% at 92.74 and faces the next support at 92.55 (2020 low Jul.31) seconded by 91.80 (monthly low May 18) and finally 89.23 (monthly low April 2018). On the other hand, a break above 93.99 (weekly high Aug.3) would target 94.20 (38.2% Fibo of the 2017-2018 drop) en route to 96.03 (50% Fibo of the 2017-2018 drop).