- DXY accelerates the downside to the 95.80 region.
- US Industrial Production rebounded more than estimated in June.
- The Fed’s Beige Book will close the daily US docket later in the session.
The greenback, when measured by the US Dollar Index (DXY), remains under heavy pressure and navigates at shouting distance from June’s lows near 95.70.
US Dollar Index hurt by risk-on sentiment
The index is down for the fourth session in a row on Wednesday, breaking below the support at the 96.00 neighbourhood – where coincide a Fibo level (of the 2017-2018 drop) and therefore opening the door to a probable move to June’s low at 95.71 (June 10).
The greenback, as well as its safe haven peers, remains well on the defensive in a context totally dominated by the risk appetite mood, in turn bolstered by rising optimism on a coronavirus vaccine and a strong (‘V’-shaped?) rebound in the economic activity.
In the docket, positive results only added to the upbeat sentiment after the NY Empire State Index reclaimed the positive territory in July and Industrial Production expanded 5.4% inter-month in June. In addition, Manufacturing Production expanded 7.2% MoM and the Capacity Utilization Rate ticked higher to 68.6%. Later in the session, the Fed will publish the Beige Book.
What to look for around USD
The relentless advance of the COVID-19 pandemic in the US and across the world vs. news of a potential vaccine that could be developed before markets’ expectations plus the ongoing reopening of global economies are all driving the sentiment in the global markets and keep the dollar under pressure. On the constructive view of the dollar, 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.
US Dollar Index relevant levels
At the moment, the index is losing 0.28% at 95.92 and faces the next support at 95.72 (monthly low Jun.10) followed by 94.65 (2020 low Mar.9) and then 93.81 (monthly low Sep.21 2018). 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 98.22 (200-day SMA).
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