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  • DXY bounces off recent lows in the sub-96.00 area.
  • The Fed expects the economy to shrink by 6.5% in 2020.
  • Initial Claims, Producer Prices next of relevance in the docket.

The greenback, in terms of the US Dollar Index (DXY), has managed to regain some composure and is now climbing to the 96.30 region early on Thursday in Europe.

US Dollar Index bid post-Fed, looks to data

After hitting fresh 3-month lows in the sub-96.00 region on Wednesday, the index seems to have met some buying interest following the FOMC event and the renewed offered bias in the risk complex.

In fact, the Federal Reserve left unchanged the Fed Funds Target Range (FFTR) at 0.00%-0.25%, matching estimates. In addition, there were no changes to the size of the bond-purchasing programme and the Fed reiterated its commitment to support the economy.

In the meantime, the Fed now forecasts the economy to shrink by around 6.5% this year and expanding more than 5% in 2021 and by 3.5% in 2022.

Later in the docket, the usual weekly Claims will be in the limelight seconded by Producer Prices for the month of May.

What to look for around USD

The dollar met support below the 96.00 mark so far this week, recording at the same time fresh multi-month lows. As usual in past weeks, price action around the dollar is expected to keep tracking the performance of the broad risk appetite trends, US-China trade developments and the progress on the re-opening of the economy. On the constructive stance around the buck, bouts of risk aversion should support the investors’ preference for the greenback as a safe haven along with its status of global reserve currency and store of value.

US Dollar Index relevant levels

At the moment, the index is gaining 0.29% at 96.33 and a breakout of 97.87 (61.8% Fibo of the 2017-2018 drop) would aim for 98.43 (200-day SMA) and finally 98.98 (100-day SMA). On the downside, immediate contention emerges at 95.72 (monthly low Jun.10) followed by 95.03 (2019 low Jan.10) and then 94.65 (2020 low Mar.9).

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