US Dollar Index flirts with daily highs near 99.20, looks to data

• DXY moves higher to the 99.20/25 band on Wednesday.
• Weakness in euro, sterling supports the upside in the dollar.
• US New Home Sales, EIA’s weekly report coming up next.

The greenback, in terms of the US Dollar Index (DXY), has reversed the initial pessimism and is now flirting with the area of 99.20/30, or daily highs.

US Dollar Index looks to data and coronavirus

The index is finally posting some gains after three consecutive daily pullbacks, coming under moderate selling pressure following the rejection from new YTD highs in levels just shy of the psychological triple-digit barrier (February 20^th).

In the meantime, concerns around the Chinese COVID-19 remain well unabated, although US yields are edging higher along with bouts of selling pressure in the Japanese safe haven.

In addition, weakness in the euro, the British pound and the (already mentioned) Japanese yen are collaborating with the bounce off recent lows near 98.90.

Later in the NA session, New Home Sales for the month of January is due seconded by the weekly report on US crude oil stockpiles by the EIA.

What to look for around USD

The index has come under renewed downside pressure as fears around the COVID-19 dragged yields to record lows and triggered speculations of extra easing by the Federal Reserve. While further correction is not ruled out in the greenback, its outlook appears constructive and bolstered by the current “appropriate” monetary stance from the Fed (once again confirmed at the FOMC minutes last week) 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 gaining 0.24% at 99.23 and a breakout of 99.91 (2020 high Feb.20) would aim for 100.00 (psychological barrier) and finally 101.34 (monthly high Apr.10 2017). On the flip side, immediate contention emerges at 98.88 (weekly low Feb.25) seconded by 98.58 (38.2% Fibo retracement of the 2020 rally) and then 98.54 (monthly high Nov.29 2019).