• The index loses further momentum and tests the 90.30 region.
  • Upbeat sentiment persists after Biden sworn in as US President.
  • Weekly Claims, Philly Fed index, housing data next of relevance in the docket.

The greenback extends the weekly correction lower to the 90.30 region when measured by the US Dollar Index (DXY).

US Dollar Index weaker on risk appetite, looks to data

The index loses ground for the third consecutive session so far on Thursday on the back of the persistent improvement in the risk-associated universe.

In fact, the demand for the riskier assets has been boosted in past hours, particularly after the inauguration of President Joe Biden on Wednesday. Indeed, the likeliness of extra fiscal stimulus under the Biden’s Administration coupled with the vaccine rollout sustains the reflation trade and is expected to keep weighing on the buck in the near/medium-term.

Also collaborating with the downtick in DXY, yields of the key US 10-year benchmark have now clearly breached the 1.10% region and leave the door open for further retracement in the near-term.

In the US data space, weekly Claims will take centre stage along with the Philly Fed index, Housing Starts and Building Permits.

What to look for around USD

DXY’s upside run out of steam in the 91.00 region earlier in the week, sparking a subsequent a corrective move to the 90.30 zone. Occasional bullish attempts in the dollar, however, are expected to be short-live amidst the fragile outlook for the greenback in the short/medium-term, and always amidst the massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Federal Reserve and prospects of a strong recovery in the global economy.

US Dollar Index relevant levels

At the moment, the index is losing 0.12% at 90.36 and faces the next support at 89.20 (2021 low Jan.6) followed by 88.94 (monthly low March 2018) and the 88.25 (monthly low February 2018). On the other hand, a breakout of 91.01 (weekly high Dec.21) would open the door to 92.10 (100-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop).

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