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  • DXY extends the downside to fresh 3-month lows around 96.40.
  • Risk-on sentiment remains on the rise and weighs on the dollar.
  • Non-farm Payrolls will be the salient event later in the NA session.

The greenback, when tracked by the US Dollar Index (DXY), remains well on the defensive and is now hovering around 3-month lows near 96.40.

US Dollar Index looks to data, risk appetite

The index is losing ground for yet another session at the end of the week, quickly leaving behind the key support at 97.00 the figure and entering into oversold territory in the mid-96.00s.

The prevailing risk-on sentiment keeps the buck under heavy pressure so far this week, particularly after the ECB increased its stimulus package by an extra €600 billion at its meeting on Thursday. The central bank’s announcement gave extra legs to the rally in the risk complex and motivated USD-bears to increase their presence in the markets.

Later in the NA session, the US monthly labour market report will grab all the attention, with consensus seeing the jobless rate to have ticked higher to nearly 20% during May and the economy to have shed 8 million jobs during the same period.

What to look for around USD

The greenback remains under heavy pressure at the beginning of the month, prolonging the downtrend well below the 97.00 mark and always against the backdrop of the solid pick-up in the appetite for riskier assets. In the meantime, the dollar remains vigilant on the US-China trade front, the gradual return to some sort of normality in the US economy and the broader risk trends as main drivers of the price action. 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.

US Dollar Index relevant levels

At the moment, the index is losing 0.23% at 96.54 and faces immediate contention at 96.44 (monthly low Jun.5) followed by 96.33 (monthly low Dec.31 2019) and then 96.03 (50% Fibo of the 2017-2018) drop. On the upside, a breakout of 97.87 (61.8% Fibo of the 2017-2018 drop) would aim for 98.47 (200-day SMA) and finally 99.02 (100-day SMA).