US Dollar Index recedes from tops, back near 99.00

• DXY climbed to the vicinity of 99.90 on Tuesday.
• US 10-year yields regained the 1.0% barrier.
• MBA’s Mortgage Applications, housing data next on the docket.

After hitting fresh tops in the area of 99.90, the greenback has now receded to the vicinity of the 99.00 mark when tracked by the US Dollar Index (DXY).

US Dollar Index focused on COVID-19 impact

The index is shedding part of Tuesday’s strong gains, although it manages well to keep business above the 99.00 mark for the time being.

The recovery in the greenback came along the moderate rebound in US yields – where the 10-year reference managed to return to the 1.0% neighbourhood – and US equities, which bounced off “black Monday’s” lows.

In the meantime, the Federal Reserve continues to implement extra stimulus after it reduced the FFTR to 0.0%-0.25% on Sunday. Indeed, the Fed announced the return of the Primary Dealer Credit Facility (from March 20^th) and the Commercial Paper Funding Facility (CPFF).

In the docket, MBA’s Mortgage Approvals are due in the first turn seconded by February’s Housing Starts, Building Permits and the EIA’s weekly report on US crude oil supplies.

What to look for around USD

DXY rapidly left behind the pessimism at the beginning of the week and regained the constructive outlook, particularly after surpassing the key 200-day SMA in the 97.80 region. In the meantime, markets’ focus remains on the developments from the COVID-19 and its impact on the global economy amidst (now) looser monetary policy conditions. While market participants continue to adjust to the recent measures by the Federal Reserve (and major central banks), signs of rising stress around USD funding are also lending extra legs to the sharp recovery.

US Dollar Index relevant levels

At the moment, the index is retreating 0.29% at 99.21 and faces immediate contention at 97.45 (low Mar.16) seconded by 97.26 (50% Fibo of the 2017-2018 drop) and then 96.36 (monthly low Dec.31 2019). On the other hand, a breakout of 99.83 (weekly high Mar.16) would open the door to 99.91 (2020 high Feb.20) and finally 100.00 (psychological mark).