US Dollar Index looks weak and approaches 93.00 ahead of data

• DXY loses further ground and trades closer to the 93.00 support.
• Markets’ attention remains on the US political scenario.
• The ADP report, Trade Balance, ISM Non-Manufacturing next of note.

The greenback, when gauged by the US Dollar Index (DXY), is prolonging the leg lower and is already trading at shouting distance from the key support at 93.00 the figure.

US Dollar Index focused on data, politics

The index is down for the second consecutive session on Wednesday, trading in fresh 3-day lows near the key support in the 93.00 neighbourhood.

The dollar keeps correcting lower after being rejected from Monday’s peaks in the boundaries of the 94.00 level, all amidst a mostly technical bounce in the dollar in response to the drop to the oversold territory.

In the meantime, the focus of attention is fixed on the US political scenario where an extra coronavirus stimulus package still remains stuck within discussions between Republicans and Democrats lawmakers.

Later in the US docket, the monthly report from the ADP will take centre stage seconded by June’s Trade Balance figures, the key ISM Non-Manufacturing for the month of July and the EIA’s weekly report on US crude oil stockpiles.

What to look for around USD

The dollar’s recovery appears to have run out of favour in the 94.00 region on Monday, resuming the downside soon afterwards and re-shifting its focus to recent lows in the mid-92.00s (July 31). Looking at the broader picture, investors keep the bearish stance on the currency unchanged against the usual backdrop of US-China jitters, the spread of the pandemic and the dovish message from the Fed. Also weighing on the buck, market participants seem to have shifted their preference for other safe havens instead of the greenback on occasional bouts of risk aversion. On another front, the speculative community remained well into the negative territory for yet another week, adding to the idea of a more serious bearish trend in the dollar.

US Dollar Index relevant levels

At the moment, the index is losing 0.25% at 93.03 and faces the next support at 92.55 (2020 low Jul.31) seconded by 91.80 (monthly low May 18) and finally 89.23 (monthly low April 2018). On the other hand, a break above 93.99 (weekly high Aug.3) would target 94.20 (38.2% Fibo of the 2017-2018 drop) en route to 96.03 (50% Fibo of the 2017-2018 drop).