US Dollar Index challenges 94.00 ahead of data, Trump-Biden debate

The greenback remains well on the defensive in the first half of the week and forces the US Dollar Index (DXY) to briefly dip to the sub-94.00 level.

US Dollar Index now looks to further data, debate

The index came under further downside pressure, as the mood in the risk complex continues to improve on turnaround Tuesday.

In fact, the risk appetite trends remain biased towards the riskier assets despite the mixed tone from European stock markets, whereas the dollar’s peers like the euro, the sterling and the aussie dollar all navigate well into the positive ground so far.

Later in the NA session, US politics will take centre stage as President Trump and Democrat nominee Joe Biden will participate in the first presidential debate in Cleveland, where the pandemic and the US economic outlook are expected to be on top of the agenda.

In the US data space, advanced Trade Balance results showed the trade deficit is expected to tick higher to almost $83.0 billion during August. Additional data will see the S&P/Case-Shiller Index and speeches by New York Fed John Williams (permanent voter, centrist) and Philadelphia Fed Patrick Harker (voter, hawkish).

What to look for around USD

The index started the week on a weak note, although it manages well to keep the trade above the 94.00 yardstick for the time being. It seems the dollar met an important hurdle at the 94.70 region, where coincide a 6-month resistance line. Occasional bullish attempts in DXY are (still) seen as temporary, however, as the underlying sentiment towards the greenback remains cautious-to-bearish. This view is reinforced by the “lower for longer” stance from the Federal Reserve, hopes of a strong recovery in the global economy, the negative position in the speculative community and political uncertainty ahead of the November elections and over further monetary/fiscal stimulus.

US Dollar Index relevant levels

At the moment, the index is retreating 0.25% at 94.04 and faces the next support at 93.55 (55-day SMA) followed by 92.70 (weekly low Sep.10) and then 91.92 (23.6% Fibo of the 2017-2018 drop). On the flip side, a break above 94.74 (monthly high Sep.25) would open the door to 95.42 (100-day SMA) and finally 96.03 (50% Fibo of the 2017-2018 drop).