US Dollar Index flirts with daily lows near 96.50

  • DXY comes under further pressure near 96.50 on Friday.
  • Markets’ sentiment now favours the riskier assets over the buck.
  • Headline/Core Producer Prices disappointed expectations in June.

After climbing to the doorsteps of the 97.00 mark earlier in the session, the US Dollar Index (DXY) sparked a move lower to the current area near 96.50.

US Dollar Index closing its third week with losses

The index remains under pressure amidst investors’ preference for riskier assets and the improved sentiment stemming from the ongoing economic recovery across the world.

However, recent and fresh outbreaks of COVID-19, particularly in Europe, plus the unabated advance of the pandemic in the US threaten to slow down the pace of the re-opening of the economy, while lockdown restrictions have returned to some places.

In the US data space, Core Producer Prices contracted 0.3% inter-month in June and rose just 0.1% from a year earlier, while headline prices contracted 0.2% MoM and 0.8% YoY.

What to look for around USD

The progress of the COVID-19 in the US remains in the centre of the debate amidst efforts to keep the re-opening of the economy well in place. As always, the broad risk appetite trends emerge as the main driver for the dollar in the short-term coupled with omnipresent US-China trade and geopolitical effervescence. On the constructive stance around the buck, bouts of risk aversion should support the investors’ preference for the greenback as a safe haven along with its status of global reserve currency and store of value. Playing against this, the ongoing (and potentially extra) stimulus packages by the Federal Reserve could limit the dollar’s upside.

US Dollar Index relevant levels

At the moment, the index is losing 0.20% at 96.59 and faces the next support at 96.24 (monthly low Jul.9) seconded by 96.03 (50% Fibo of the 2017-2018 drop) and then 95.72 (monthly low Jun.10). On the upside, a break above 97.80 (weekly high Jun.30) would aim for 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 98.27 (200-day SMA).

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