US Dollar Index extends the upside to the 93.60 area

The greenback, in terms of the US Dollar Index (DXY), extends the positive mood and clinches new multi-day highs in the 93.60 zone ahead of the opening bell in the Old Continent.

US Dollar Index looks to risk trends, politics

The index adds gains to Tuesday’s strong advance and reaches the 93.60 region on the back of the generalized cautious note in the global markets.

In fact, stalled negotiations around further COVID-19 stimulus gives extra oxygen to the dollar, particularly after President Trump’s proposal on Tuesday came in significantly short of expectations, according to the House Speaker N.Pelosi.

Furthermore, latest inflation figures in the US economy noted the lack of upside traction in consumer prices, adding to the view that the economic recovery could be losing momentum. That, plus news that Johnson & Johnson halted the study of its candidate vaccine earlier in the week dragged US yields lower and collaborated with the prevailing risk aversion bias.

In the US data space, usual weekly Mortgage Applications are due seconded by September’s Producer Prices and the API’s report on US crude oil supplies. In addition, FOMC’s R.Clarida (permanent voter, dovish) and R.Quarles (permanent voter, centrist) are due to speak later in the NA session.

What to look for around USD

The index managed to rebound further from recent lows in the 93.00 region and reached the mid-93.00s as the risk aversion keeps dominating investors’ sentiment. Occasional bullish attempts, however, are seen as temporary, 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 rising bets of a “blue wave” win at the November elections. The resumption of market chatter surrounding another stimulus package also puts the dollar under extra pressure.

US Dollar Index relevant levels

At the moment, the index is gaining 0.03% at 93.55 and a break above 94.20 (38.2% Fibo retracement of the 2017-2018 drop) would aim for 94.74 (monthly high Sep.25) and finally 94.75 (100-day SMA). On the downside, immediate contention lines up at 93.01 (weekly low Oct.12) followed by 92.70 (weekly low Sep.10) and then 91.92 (23.6% Fibo of the 2017-2018 drop).