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  • DXY reverses the recent pessimism and retakes the 92.60 region.
  • Profit taking in the risk complex gives some respite to the dollar.
  • ADP report, Factory Orders next of note in the US data space.

The greenback, when gauged by the US Dollar Index (DXY), has regained some composure and advances well above 92.00 the figure on Wednesday.

US Dollar Index moves to 3-day highs

The index is up for the second session in a row on Wednesday, managing to regain some traction after bottoming out near 91.70 – levels last seen in April 2018 – on Tuesday.

In fact, the profit taking sentiment appears to be gaining momentum in the middle of the week along with the resumption of the risk aversion, which in turn gives extra legs to the buck. It is worth recalling that better-than-expected ISM Manufacturing for the month of August (Tuesday) has been also lending support to the dollar in past hours.

Later in the session, the ADP report will take centre stage seconded in relevance by Factory Orders and the publication of the Fed’s Beige Book. Additionally, New York Fed J.Williams (permanent voter, centrist) is due to speak seconded by Cleveland Fed L.Mester (voter, hawkish) and Minneapolis Fed N.Kashkari (voter, dovish).

What to look for around USD

The index has exacerbated the downside in the first half of the week, clinching fresh +2-year lows near 91.70, as investors kept selling the dollar on the back of the dovish perception prevailing among traders after Powell’s speech. In the meantime, and looking at the broader picture, investors remain bearish on the dollar against the backdrop of a (more) dovish Fed, the unremitting progress of the coronavirus pandemic, political uncertainty and the massive stimulus package, whereas occasional bouts of US-China tensions could lend some temporary legs to the greenback.

US Dollar Index relevant levels

At the moment, the index is gaining 0.32% at 92.60 and a break above 93.47 (weekly high Aug.21) would aim for 93.99 (monthly high Aug.3) and finally 94.20 (38.2% Fibo of the 2017-2018 drop). On the other hand, the next support is located at 91.75 (2020 low Sep.1) seconded by 89.23 (monthly low April 2018) and then 88.94 (monthly low March 2018).

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