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  • DXY loses momentum and test lows near 99.60.
  • Markit’s preliminary PMI prints, Existing Home Sales next on tap.
  • FMOC’s Bostic favoured for the continuation of the “on-hold” stance.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, remains on the defensive at the end of the week around the 99.70/60 band.

US Dollar Index now looks to data

The index is giving away part of the recent gains for the first time after three consecutive daily advances, coming under some selling pressure following the rejection from YTD peaks near 100.00 the figure.

In fact, some profit taking mood appears to be weighing on the buck in light of the recent and strong rally, always amidst persistent concerns regarding the Chinese COVID-19 and the current decline in US yields and the risk aversion context.

Later in the US docker, initial estimates of the manufacturing and services PMIs are due seconded by Existing Home Sales for the month of January.

On another front Atlanta Fed R.Bostic advocated for the continuation of the “wait-and-see” stance from the Federal Reserve, adding that he expects the GDP to be between 2%-2.25% this year. Furthermore, St.Luis Fed J.Bullard noted that market expectations are likely to return to the “on hold” outlook.

What to look for around USD

The index has extended the march north to new 2020 highs just below 100.00 the figure on Thursday, keeping the bid bias well in place for the time being. Investors are expected to keep looking to the performance of US fundamentals and the broader risk appetite trends for direction as well as any fresh developments from the COVID-19. In the meantime, the outlook on the dollar remains constructive and bolstered by the current “appropriate” monetary stance from the Fed (once again confirmed at the FOMC minutes on Wednesday) vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.

US Dollar Index relevant levels

At the moment, the index is retreating 0.21% at 99.67 and faces the next support at 98.94 (23.6% Fibo retracement of the 2020 rally) seconded by 98.54 (monthly high Nov.29 2019) and then 98.46 (38.2% Fibo retracement of the 2020 rally). On the other hand, a break above 99.91 (2020 high Feb.20) would aim for 100.00 (psychological barrier) and finally 101.34 (monthly high Apr.10 2017).

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