US Dollar Index gives away gains and drops to 92.20

  • DXY fades the initial optimism and recedes to 92.20.
  • Better tone in the risk complex weighs on the dollar on Tuesday.
  •  Fedspeak, Consumer Confidence, housing sector next of note later.

The greenback loses the grip and drags the US Dollar Index (DXY) to fresh daily lows in the 92.20 region following the opening bell in Euroland on turnaround Tuesday.

US Dollar Index looks to data, risk trends

The index appears to have resumed the downside on Tuesday after two consecutive daily advances, always amidst alternating risk appetite trends. In fact, the dollar loses traction and erodes part of the optimism seen at the beginning of the week, particularly after auspicious flash PMIs for the current month (released on Monday).

In the meantime, the progress of the pandemic remains in the limelight along with headlines of potential vaccines (apparently) to be delivered in the short-term horizon, all supporting the view of a strong recovery and therefore sustaining the risk-associated universe.

Later in the session, the US housing sector takes centre stage with the releases of the S&P/Case-Shiller Index and the House Price Index tracked by the FHFA. In addition, the Conference Board will publish its Consumer Confidence gauge and St.Louis Fed J.Bullard (2022 voter, dovish), NY Fed J.Williams (permanent voter, centrist) and FOMC Governor R.Clarida (permanent voter, dovish) are all due to speak.

What to look for around USD

The downside momentum in DXY halted just ahead of the 92.00 neighbourhood so far, where some decent contention seems to have turned up. In the meantime, the dollar remains focused on the post-elections scenario and the prospects of the US economy under the Biden administration while gauging at the same time the impact of the second wave of the pandemic on the economic recovery vs. prospects of an effective vaccine. On another front, the “lower for longer” stance from the Federal Reserve is expected to keep limiting a potential serious upside in the dollar.

US Dollar Index relevant levels

At the moment, the index is retreating 0.30% at 92.22 and faces the next support at 92.13 (monthly low Nov.9) followed by 91.92 (23.6% Fibo of the 2017-2018 drop) and then 91.80 (monthly low May 2018). On the other hand, a breakout of 93.20 (weekly high Nov.11) would open the door to 93.53 (100-day SMA) and finally 94.30 (monthly high Nov.4).

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