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  • DXY drops to 2-week lows near 96.60 on Monday.
  • Strong risk-on sentiment puts the dollar under heavy pressure.
  • US ISM Non-Manufacturing expected to come in above 50.0.

The US Dollar Index (DXY), which gauges the buck vs. a bundle of its main competitors, is trading well on the defensive on Monday below the key support at 97.00 the figure.

US Dollar Index weaker on risk trends, looks to ISM

The index came under extra selling pressure at the beginning of the week, extending last week’s decline and breaking below the key support at 97.00 against the backdrop of the strong inflows into the risk-associated universe.

In the meantime, investors’ preference for the riskier assets continue to weigh on the dollar, as market participants keep favouring the (potentially strong) economic recovery vs. the unremitting advance of the coronavirus pandemic.

In the US docket, final Markit’s Services and Composite PMIs came in at 47.9 and at 47.9, respectively, for the month of June. Later, the ISM Non-Manufacturing is seen returning to the expansion territory (>50) following the sharp drop recorded in April (41.8).

What to look for around USD

The progress of the COVID-19 in the US remains in the centre of the debate amidst efforts to keep the re-opening of the economy well in place. As always, the broad risk appetite trends emerge as the main driver for the dollar in the short-term coupled with omnipresent US-China trade and geopolitical effervescence. 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. Playing against this, the ongoing (and potentially extra) stimulus packages by the Federal Reserve could limit the dollar’s upside.

US Dollar Index relevant levels

At the moment, the index is losing 0.56% at 96.50 and faces the next contention at 96.39 (weekly low Jun.23) seconded by 96.03 (50% Fibo of the 2017-2018 drop) and finally 95.72 (monthly low Jun.10). On the other hand, a break above 97.80 (weekly high Jun.30) would aim for 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 98.31 (200-day SMA).