US Dollar Index pushes higher and tests 97.60 ahead of US ISM

• DXY advances further and retakes the 97.50/60 band.
• Markit’s final Services PMI came in at 49.4 in February.
• ISM Non-Manufacturing, Fed’s Beige Book next on the docket.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, keeps recovering ground lost and extends the rebound from sub-97.00 levels.

US Dollar Index now looks to ISM

After four consecutive daily pullbacks, the greenback appears to have recovered the smile on Wednesday and is now testing daily highs in the 97.50/60 band following the drop to fresh 2-month lows after the Fed reduced its FFTR to 1.00%-1.25% on Tuesday.

In the US data universe, the ADP report came in above expectations at 183K for the month of February, also adding extra legs to the buck’s recovery. Additionally, Markit’s Services PMI matched the preliminary print at 49.4 in February. Later in the session, the ISM Non-Manufacturing is due seconded by the Fed’s Beige Book.

What to look for around USD

The index has accelerated the downside to the sub-97.00 area on Tuesday, recording at the same time fresh multi-week lows. Following the breach of the 200-day SMA (today at 97.82), the outlook on the dollar has now shifted to bearish and further pullbacks should not be ruled out. In the meantime, investors’ attention is now on the upcoming FOMC meeting (March 17-18) and the probability of extra easing after Tuesday’s exceptional 50 bps interest rate cut.

US Dollar Index relevant levels

At the moment, the index is gaining 0.30% at 97.44 and a breakout of 97.82 (200-day SMA) would aim for 98.54 (monthly high Nov.29 2019) and finally 99.09 (23.6% Fibo retracement of the 2020 rally). On the downside, the next support emerges at 96.98 (weekly/monthly low Mar.2) seconded by 96.74 (low Dec.12 2019) and then 96.53 (monthly low Dec.31 2019).