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  • DXY bounces off 3-month lows and re-visits 97.60.
  • US ADP report came in above expectations in May.
  • Markit’s Services PMI, Factory Orders next on the docket.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main rivals, remains on the defensive although it has managed to cut initial losses and reclaim the 97.60 area at the time of writing.

US Dollar Index weaker on risk appetite

After bottoming out in the 97.30/25 band during early trade, the index managed to regain some composure, as the risk-off sentiment appears to be taking a breather ahead of the opening bell in Wall St.

As usual in past weeks, the better mood in the riskier assets continue to support the outflows from the safe haven dollar in favour of its riskier peers. The move has been always propped up by the relentless return to life of the global economy.

Data wise in the US, the ADP report surprised to the upside and showed the private sector shed nearly 2.8 million jobs during May, markedly lower than the 9 million drop forecasted and well below April’s 19.5 million loss.

Later in the NA session, Factory Orders for the month of April are due seconded by Markit’s May final Services PMI and the ISM non-Manufacturing.

What to look for around USD

The greenback remains under heavy pressure at the beginning of the month, prolonging the downtrend well below the 98.00 mark and always against the backdrop of the solid risk-on sentiment in the global markets. In the meantime, the dollar remains vigilant on the US-China trade front, the gradual return to some sort of normality in the US economy and the broader risk appetite trends as main drivers of the price action. 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 losing 0.14% at 97.55 and faces immediate contention at 97.29 (monthly low Jun.3) followed by 97.11 (monthly low Nov.1 2019) and finally 96.33 (monthly low Dec.31 2019). On the other hand, a breakout of 98.49 (200-day SMA) would aim for 99.04 (100-day SMA) and finally 99.98 (high May 25).