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  • DXY remains on the defensive in the 92.80 region after US data.
  • The Empire State index surpassed estimates at 17.00 in September.
  • US Industrial Production missed expectations in August.

The greenback remains under heavy pressure in the first half of the week and drags the US Dollar Index (DXY) to fresh 3-day lows in the 92.80 region.

US Dollar Index now looks to the FOMC event

The index is down for the third straight session on Tuesday, coming under increasing selling pressure in response to the persistent improvement in the risk complex.

In fact, positive results from the Chinese docket during early trade plus last week’s firm (ish) message from the European Central Bank have lifted spirits in the risk universe and motivated investors to resume the selling bias in the buck.

Tuesday’s mixed data in the US data space is not helping the buck either after the Empire State index rose more than expected to 17.00 for the current month and the Industrial Production expanded “just” 0.4% from a month earlier in August. Additional data saw Manufacturing Production also expanding less than forecasted by 1.0% MoM and Capacity Utilization ticking a tad higher to 71.4% (from 71.1%).

Later in the session, the Federal Reserve will start its 2-day meeting.

What to look for around USD

The rally in the dollar failed near 93.70 in the middle of last week, exposing the index to the resumption of the bearish trend. Occasional bullish attempts, however, are still considered as corrective only amidst the broad bearish stance surrounding the dollar. Supporting this view emerge a more dovish Fed, the unremitting progress of the coronavirus pandemic and political uncertainty ahead of the November elections. On the supportive side of the buck emerge occasional bouts of US-China tensions and the resumption of the risk aversion among investors.

US Dollar Index relevant levels

At the moment, the index is losing 0.16% at 92.90 and faces the next support 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). On the other hand, a break above 93.66 (monthly high Sep.9) would open the door to 93.99 (monthly high Aug.3) and finally 94.20 (38.2% Fibo of the 2017-2018 drop).