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US Dollar Index plummets to 22-month lows near 94.60

  • DXY loses further ground and records lows in the 94.60/55 band.
  • Solid bid tone in the risk complex keeps weighing on the dollar.
  • Markit’s flash PMIs, New Home Sales next on the US calendar.

The greenback, when gauges by the US Dollar Index (DXY) is accelerating the downside to fresh nearly-2-year lows around 94.60 on Friday.

US Dollar Index weaker on risk-on mood

The index is losing ground for yet another session at the end of the week, testing levels last seen in October 2018 in the 94.60/50 band.

As usual in past weeks, the firm buying bias in the risk-associated universe keeps the buck under heavy downside pressure. This strong change of heart among investors tracks positive news regarding a COVID-19 vaccine could potentially be delivered early in 2021, while hopes of a ‘V’-shaped recovery in the global economy remain on the rise and add to the positive momentum.

In the docket, Markit will publish its preliminary gauges of the manufacturing and services PMIs for the current month followed by June’s New Home Sales figures.

What to look for around USD

The relentless advance of the coronavirus pandemic in the US and across the world vs. the probability that a COVID-19 vaccine could be out in the medium-term plus the ongoing reopening of global economies are all driving the sentiment in the global markets while keeping the demand for the safe haven dollar depressed. While bouts of risk aversion are seen supportive of the greenback, these seem quite unlikely at least in the near-term and therefore any rebound in DXY should be deemed as short-lived. On another front, the speculative community kept adding to the offered note around the dollar for yet another week, opening the door to a potential development of a more serious bearish trend in the dollar.

US Dollar Index relevant levels

At the moment, the index is losing 0.07% at 94.71 and faces the next support at 94.57 (2020 low Jul.24) seconded by 94.20 (38.2% Fibo of the 2017-2018 drop) and then 93.81 (monthly low Sep.21 2018). On the other hand, a break above 96.03 (50% Fibo of the 2017-2018 drop) would aim for 97.47 (55-day SMA) and finally 97.80 (weekly high Jun.30).

 

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