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  • DXY sheds momentum and tests daily lows near 93.20.
  • The dollar resumes the downside following Thursday’s volatile session.
  • US inflation figures tracked by the CPI takes centre stage later on Friday.

The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main rivals, has resumed the downside at the end of the week and is now flirting with session lows near 93.20.

US Dollar Index now looks to data

The index managed to close Thursday’s session on a positive note following a very volatile session in which the dollar dropped to the 92.70 region just to rebound afterwards and close the trading day above the 93.00 yardstick.

In fact, alternating risk appetite trends and the ECB event ruled the price action in the global markets on Thursday. Extra weakness for the dollar emerged after the ECB kind of talked down the recent appreciation of the exchange rate and emphasized the strong recovery in the euro area.

Despite a move to as lows as the 92.70 area, the index later managed to regain composure and close the session not only above the 93.00 mark but also with some decent gains.

Later in the US docket, inflation figures measured by the CPI for the month of August will be the most salient event. Market consensus expects headline consumer prices to have risen 1.2% YoY and core prices to have gained 1.6% over the same period.

What to look for around USD

The rally in the dollar failed near 93.70 earlier in the week, exposing the index to the resumption of the bearish trend. The ongoing recovery from 2020 lows near 91.70, while strong, is still considered as corrective only amidst the broad bearish stance surrounding the dollar. Supporting this view is located of 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 0.14% at 93.22 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).