- DXY adds to recent losses and drops to the 97.40 region.
- All the attention stays on the “coordinated easing” by central banks.
- Fedspeak only due later in the NA session.
The greenback, in terms of the US Dollar Index (DXY), is extending the leg lower to the 97.40 region on Tuesday, just pips above Monday’s weekly lows in the 97.20/15 band.
US Dollar Index now looks to coronavirus, central banks
The index dropped and tested fresh 7-week lows vs. its rivals at the beginning of the week amidst mounting speculations on an interest rate cut by the Federal Reserve, while poor results from the key ISM Manufacturing also collaborated with the downside.
In addition, G7 central bankers will hold a conference call later in the day, opening the door to a potential “coordinated easing” measure in order to counteract the impact of the coronavirus on the world economy.
In the meantime, Monday’s ISM Manufacturing receded to 50.1 (from 50.9) for the month of February, also coming in below estimates. Further data also saw Markit’s final manufacturing PMI at 50.7 (vs. 50.8 expected) and Construction Spending expanding 1.8% during January.
Later in the session, Cleveland Fed L.Mester (voter, hawkish) will address the UK Society of Professional Economists against the backdrop of an empty US docket.
What to look for around USD
The index has accelerated the downside to the vicinity of the 97.00 mark on Monday, recording at the same time fresh multi-week lows and fading further the 2020 rally (currently close to the 78.6% Fibo of that move). The outlook on the dollar is now neutral to bearish, particularly after breaking below the key 200-day SMA, today at 97.83. Investors’ attention is now on the increasing likeliness of further easing by the Fed amidst coronavirus concerns and despite the resilience observed in the US economy. That said, and despite the outlook on the buck now looks compromised, its stance still appears constructive and propped up by 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 retreating 0.09% at 97.42 and faces the next support at 97.18 (weekly/monthly low Mar.2) seconded by 96.74 (low Dec.12 2019) and then 96.53 (monthly low Dec.31 2019). On the flip side, a breakout of 97.84 (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).
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