US Dollar Index drops to fresh 2020 lows near 91.60

DXY extends the downtrend below the 92.00 level.
Risk-on sentiment keeps weighing on the dollar.
Chicago PMI, Pending Home Sales next in the docket.

Pablo Piovano FXStreet

The greenback, in terms of the US Dollar Index (DXY), remains well under pressure and navigates the area of 2020 lows around 91.60.

US Dollar Index depressed in yearly lows

The index is down for the second session in a row at the beginning of the week and remains depressed against the backdrop of the persistent investors’ preference for the risk-associated assets.

In fact, the index drops to levels last seen more than two years ago around 91.60 despite the relentless advance of the coronavirus pandemic.

Market participants continue to sell the buck vs. expectations of a strong recovery in the months ahead as well as rising optimism on extra US stimulus, particularly exacerbated after Democrat Joe Biden won the elections.

Later in the US docket, the Chicago PMI index is due seconded by Pending Home Sales.

What to look for around USD

The bearish stance does not abandon the dollar and drags DXY to new yearly lows in the vicinity of 91.60. The better mood in the risk-associated space remains underpinned by a clearer US political scenario in combination with auspicious vaccine news and better growth prospects. Furthermore, hopes of extra fiscal stimulus have re-emerged and along with the “lower for longer” stance from the Federal Reserve is seen keeping the buck under extra pressure for the time being.

US Dollar Index relevant levels

At the moment, the index is retreating 0.13% at 91.67 and faces the next support at 89.22 (monthly low Apr. 2018) followed by 88.94 (monthly low March 2018) and then 88.25 (2018 low Feb.16). On the other hand, a breakout of 93.20 (weekly high Nov.11) would open the door to 93.34 (100-day SMA) and finally 94.30 (monthly high Nov.4).

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.

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