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  • DXY extends the rally to the 94.50 region, or 2-month peaks.
  • Chief Jerome Powell will testify once again later on Thursday.
  • US Initial Claims, New Home Sales, Fedspeak next on the calendar.

The greenback keeps the upside momentum well and sound so far in the second half of the week, lifting the US Dollar Index (DXY) to fresh 2-month tops around 94.50.

US Dollar Index focused on Powell and data

The index is looking to add to the ongoing rally well above the 94.00 barrier on Thursday, always propped up by the prevailing risk aversion sentiment.

In fact, concerns over the impact of the second wave of the coronavirus pandemic on the economic recovery and rising uncertainty over extra stimulus from the Federal Reserve have been sustaining the renewed buying interest in the buck in past sessions.

Recent Fedspeak, in addition, leaned towards the current dovish stance from the Fed, after Chicago Fed Charles Evans (2021 voter, centrist), Cleveland Fed Loretta Mester (voter, hawkish) and FOMC’s Richard Clarida (permanent voter, dovish) all agreed in that the current Fed’s accommodative stance should stay until inflation and employment reach the central bank’s goals, and that low rates are here to stay for some years.

In the calendar, another testimony by Chief. Jerome Powell – this time before the Senate Banking Committee – will be in the limelight as well as weekly Claims and New Home Sales for the month of August.

What to look for around USD

The dollar keeps the buying bias unchanged in the second half of the week, looking to stabilize the recent breakout of the 94.00 barrier. The ongoing and moderate bullish move in DXY is (still) seen as temporary, however, as the underlying sentiment towards the greenback remains on the negative side. This view is reinforced by the “lower for longer” stance from the Federal Reserve, hopes of a strong recovery in the global economy, the negative position in the speculative community and political uncertainty ahead of the November elections and over further monetary/fiscal stimulus.

US Dollar Index relevant levels

At the moment, the index is gaining 0.09% at 94.43 and a break above 94.49 (monthly high Sep.24) would open the door to 95.59 (100-day SMA) and finally 96.03 (50% Fibo of the 2017-2018 drop). On the other hand, the next support emerges at 92.70 (weekly low Sep.10) seconded by 91.92 (23.6% Fibo of the 2017-2018 drop) and then 91.75 (2020 low Sep.1).