- DXY drops further below the key support at the 93.00 yardstick.
- The “reflation trade” keeps propping up the mood in the risk space.
- Mortgage Applications, Fedspeak, EIA’s report next in the calendar.
The greenback, when gauged by the US Dollar Index (DXY), remains well on the defensive and slips further back below the key 93.00 support.
US Dollar Index hurt by politics, risk-on trade
The index extends the leg lower for the fourth session in a row on Wednesday following the rejection from the vicinity of the 94.00 mark (October 16) and particularly after breaking below the 55-day SMA in the 93.30 region.
The index stays on the negative footing and flirts with multi-week lows in the proximity of 92.70 against an unfavourable context for the greenback, with extra fiscal stimulus and a Democratic presidential candidate Joe Biden win at the November elections taking centre stage and driving the mood in the risk complex.
Later in the US data space, MBA’s Mortgage Applications are due in the first turn seconded by the Fed’s Beige Book and the weekly report on US crude oil inventories by the EIA.
In addition, FOMC’S Lael Brainard (permanent voter, dovish) and Cleveland Fed Loretta Mester (voter, hawkish) are also due to speak.
What to look for around USD
The index has finally broken below the solid contention around monthly lows in the 93.00 region. The move lower comes in tandem with increasing hopes of extra stimulus and rising bets of a “blue wave” win at the presidential elections. This view is reinforced by the “lower for longer” stance from the Federal Reserve and hopes of a strong recovery in the global economy despite the second wave of the pandemic threatens to put this idea to the test.
US Dollar Index relevant levels
At the moment, the index is losing 0.41% at 92.70 and faces immediate contention at 91.92 (23.6% Fibo of the 2017-2018 drop) followed by 91.80 (monthly low May 2018) and then 89.23 (monthly low April 2018). On the other hand, a break above 93.90 (weekly high Oct.15) would expose 94.20 (38.2% Fibo retracement of the 2017-2018 drop) and finally 94.74 (monthly high Sep.25).
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