US Dollar Index recedes from yearly peaks, back near 99.80

DXY gives away some gains and stabilizes around 99.80.
Coronavirus fears re-emerged and dragged US yields lower.
Advanced PMIs, Existing Home Sales, Fedspeak next on tap.

Pablo Piovano FXStreet

The greenback, when measured by the US Dollar Index (DXY), is trading on the defensive near 99.80 following three consecutive daily advances.

US Dollar Index upside stalled just ahead of 100.00

The index is shedding part of the strong gains posted recently and is returning to the 99.80 region at the end of the week, all following Thursday’s new yearly highs just below the psychological 100.00 mark.

In the meantime, fears around the Chinese coronavirus have re-emerged on Thursday, putting US yields under extra downside pressure and keeping the buck well bid in the upper end of the multi-month range.

The offered bias in the dollar is also following a knee-jerk in USD/JPY after speculations that the Japanese economy can slip into recession (in the short-term) sponsored a sharp sell-off in the currency to fresh 10-month lows vs. the greenback.

In the US data space, flash manufacturing and services PMIs are due along with Existing Home Sales. In addition, Dallas Fed R.Kaplan will speak in Dallas, FOMC’s L.Brainard (permanent voter, dovish) and Atlanta Fed R.Bostic (2021 voter, centrist) will participate in a Panel Policy Forum and FOMC’s R.Clarida (permanent voter, dovish) and Cleveland Fed L.Mester (voter, hawkish) will discuss Monetary Policy in a Panel.

What to look for around USD

The index has extended the march north to new 2020 highs just below 100.00 the figure on Thursday, keeping the bid bias well in place for the time being. Investors are expected to keep looking to the performance of US fundamentals and the broader risk appetite trends for direction as well as any fresh developments from the COVID-19. In the meantime, the outlook on the dollar remains constructive and bolstered by the current “appropriate” monetary stance from the Fed (once again confirmed at the FOMC minutes on Wednesday) vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.

US Dollar Index relevant levels

At the moment, the index is retreating 0.08% at 99.80 and faces the next support at 98.94 (23.6% Fibo retracement of the 2020 rally) seconded by 98.54 (monthly high Nov.29 2019) and then 98.46 (38.2% Fibo retracement of the 2020 rally). On the other hand, a break above 99.91 (2020 high Feb.20) would aim for 100.00 (psychological barrier) and finally 101.34 (monthly high Apr.10 2017).

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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