US Dollar approaches multi-month lows below 99

Eren Sengezer FXStreet

Following yet another failed attempt to hold above the 99 handle, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, came in under a broad-based pressure and fell to 98.64. Last week, the index had set its lowest level since Trump's election victory at 98.56 after pro-EU candidate Emmanuel Macron came on top in the first round of French presidential election, forcing the greenback to lose strength against European currencies.

As of writing, the DXY was losing 0.6% at 98.66. The index's latest slide can be attributed to a weakening risk sentiment in the session. The barrel of WTI is losing more than 4% on Thursday, weighing on the stock indexes and commodities with the Dow Jones Industrial Average losing 0.15% at the moment.

On the other hand, the Treasury yields in the U.S., which usually moves in tandem with the DXY, are showing an inverse correlation as the 10-year T-bond is up more than 2% on the day. Despite this divergence, the performance of the bond yields could help the index find support ahead of tomorrow's important NFP data. After March's big miss with 98K, a rebound to 185K is expected in April. The weak number in March was attributed to unusually bad weather conditions and an upward revision to that number as well as a higher-than-expected reading could help the greenback retrace some of its losses.

Technical outlook

With a break below 98.56 (Apr. 25 low), the index could extend its fall towards 97.60 (Nov. 1 low) and 97 (psychological level). On the upside, resistance could be encountered at 99 (psychological level) ahead of 99.75 (Mar. 23 low) and 100 (psychological level).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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