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  • DXY breaks below the 99.00 barrier on Thursday.
  • Coronavirus stays in centre stage and spreads outside China.
  • Flash Q4 GDP, Durable Goods Orders, Claims, housing data next on tap.

The greenback, when tracked by the US Dollar Index (DXY), is trading on the defensive and navigates the area below the key 99.00 mark in the second half of the week.

US Dollar Index looks to data and COVID-19

The index is challenging weekly lows in the 98.90 region on Thursday, as the greenback remains under pressure following new developments from the Chinese COVID-19 spreading faster outside China.

US stocks receded on Wednesday along with the decline of yields of the US 10-year reference to record lows in sub-1.30% levels amidst rising concerns surrounding the coronavirus and increasing speculations of another move on rates by the Federal Reserve.

In the docket, another revision of the US Q4 GDP will be the salient event along with Durable Goods Orders, usual weekly Claims, Pending Home Sales and the speech by Chicago Fed C.Evans (2021 voter, dovish).

What to look for around USD

The index has come under renewed downside pressure as fears around the COVID-19 dragged yields to record lows and triggered speculations of extra easing by the Federal Reserve. While further correction is not ruled out in the greenback, its outlook still appears constructive and bolstered by the current “appropriate” monetary stance from the Fed (once again confirmed at the FOMC minutes last week) vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.

US Dollar Index relevant levels

At the moment, the index is losing 0.24% at 98.91 and faces the next support at 98.88 (weekly low Feb.25) seconded by 98.58 (38.2% Fibo retracement of the 2020 rally) and then 98.54 (monthly high Nov.29 2019). On the flip side, a breakout of 99.91 (2020 high Feb.20) would aim for 100.00 (psychological barrier) and finally 101.34 (monthly high Apr.10 2017).