US Dollar Index challenges 4-month lows around 95.80, looks to Fed

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.

Pablo Piovano FXStreet

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).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

EUR/USD accelerates losses, focus is on 1.1800

EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.

GBP/USD turns negative near 1.3540

GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold picks pace, flirts with $5,000

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and pushing higher towards the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Fed Minutes to shed light on January hold decision amid hawkish rate outlook

The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.