Dollar index begins 2021 on a negative note

The US dollar remains on the offer on dovish Fed expectations.
Investors ignore weak China data, coronavirus concerns.

Omkar Godbole FXStreet Contributor

The dollar index, which gauges the greenback's value against majors, trades on the defensive on the first trading day of the new year, having declined by 6.83% in 2020.

Investors continue to offer the safe-haven greenback on expectations that the Federal Reserve would keep rates low for a prolonged period, shrugging off coronavirus concerns and weaker-than-expected China data.

As per The Japan Times, Prime Minister Yoshihide Suga is considering a new state of emergency declaration for Tokyo and three neighboring prefectures amid a surge in COVID-19 cases. The declaration could come this week. Meanwhile, the cases continue to rise in the US and across Europe. Further, China data released early Monday showed the pace of expansion in the manufacturing activity slowed slightly in December. So far, however, that has failed to put a bid under the greenback. At press time, DXY is hovering near 89.68, representing a 0.27% decline on the day.

Prominent investment banks such as Morgan Stanley, Goldman Sachs, and JP Morgan expect the greenback to depreciate by at least 5% this year.

"We remain upbeat on EUR/USD, EM FX and risk assets in general into the start of this year, and we don't really want to question this narrative until the recovery is strong enough for both fiscal and monetary administrations to consider removing the foot from the QE/stimulus-pedal," Nordea analysts said in their weekly note.

Meanwhile, Robin Brooks, Chief Economist at the Institute of International Finance, foresees a 2013-like taper tantrum once major economies begin mass coronavirus vaccinations. In that case, the safe-haven dollar could find bids.

Technical levels

Dollar Index Spot

Overview
Today last price	89.68
Today Daily Change	-0.25
Today Daily Change %	-0.27
Today daily open	89.94

Trends
Daily SMA20	90.37
Daily SMA50	91.66
Daily SMA100	92.46
Daily SMA200	95

Levels
Previous Daily High	89.94
Previous Daily Low	89.94
Previous Weekly High	90.38
Previous Weekly Low	89.52
Previous Monthly High	92.02
Previous Monthly Low	89.52
Daily Fibonacci 38.2%	89.94
Daily Fibonacci 61.8%	89.94
Daily Pivot Point S1	89.94
Daily Pivot Point S2	89.94
Daily Pivot Point S3	89.94
Daily Pivot Point R1	89.94
Daily Pivot Point R2	89.94
Daily Pivot Point R3	89.94

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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