US Dollar Index plummets to 4-week lows near 97.50

  • DXY drops further to the 95.50/45 band.
  • US ADP report missed forecasts in November.
  • US ISM Non-Manufacturing coming up next.

The greenback loses further momentum on Wednesday and is now testing the area of 4-week lows in the 98.50 region when measured by the US Dollar Index (DXY).

US Dollar Index (much) weaker ahead of ISM

The index has accelerated the leg lower following the breakdown of the critical support at the 200-day SMA around 97.60, all in response to the miserable reading from the ADP report.

Indeed, the ADP informed that the US private sector created 67K jobs during November, missing consensus and coming down from October’s 121K, which was also revised lower from 125K.

The poor print from the ADP add to the recently published disappointing results from the ISM Manufacturing, showing at the same time that a slowdown in the labour market could be finally materializing along with the generalized loss of momentum in the US economy.

Later in the session, Markit will release its final Services PMI for the month of November ahead of the key ISM Non-Manufacturing for the same period.

What to look for around USD

DXY remains under pressure although the ongoing retracement met solid contention around the 200-day SMA near 97.60 for the time being. The deterioration in the US-China trade front hurt US yields and the sentiment around the buck, sponsoring at the same time another ‘fly-to-safety’ from investors, with bonds and the Japanese yen as main beneficiaries. On the broader view, however, the outlook on the greenback still looks constructive on the back of the ‘wait-and-see’ stance from the Fed vs. the broad-based dovish view from its G10 peers, the ‘good shape’ of the US economy, the dollar’s safe haven appeal and its status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is retreating 0.21% at 97.52 and faces the next support at 97.11 (monthly low Nov.1) seconded by 97.03 (monthly low Aug.19) and then 96.67 (low Jul.18). On the flip side, a break above 98.12 (100-day SMA) would aim for 98.54 (monthly high Nov.29) and finally 99.25 (high Oct.8).

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