US Dollar Index struggles for direction near 94.20 ahead of data, debate

  • DXY gyrates around the 94.20 region on turnaround Tuesday.
  • Investors’ attention stays on data and Trump-Biden first debate.
  • Advanced Trade Balance, S&P/Case-Shiller, Fedspeak next on tap.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, alternates gains with losses ahead of the opening bell in Europe on Tuesday.

US Dollar Index focused on data, politics

The index trades without a clear direction in the low-94.00s on Tuesday following the negative price action and the rejection from the 94.70 region seen at the beginning of the week. It is worth noting that in this area is located the 6-month resistance line, which keeps capping the upside for the time being.

In the meantime, market chatter keeps gyrating around another probable stimulus package amidst the unabated advance of the coronavirus pandemic, while the pace of the economic recovery appears to have lost some traction in past weeks.

Later in the session, the US political scenario will take centre stage as President Trump and Democrat nominee Joe Biden will participate in the first presidential debate in Cleveland, where the pandemic and the economic outlook are expected to be on top of the agenda.

In the US data space, advanced Trade Balance results are due seconded by the S&P/Case-Shiller Index and speeches by New York Fed John Williams (permanent voter, centrist) and Philadelphia Fed Patrick Harker (voter, hawkish).

What to look for around USD

The index started the week on a weak note, although it manages well to keep the trade above the 94.00 yardstick for the time being. It seems the dollar met an important hurdle at the 94.70 region, where coincide a 6-month resistance line. Occasional bullish attempts in DXY are (still) seen as temporary, however, 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 political uncertainty ahead of the November elections and over further monetary/fiscal stimulus.

US Dollar Index relevant levels

At the moment, the index is retreating 0.06% at 94.22 and faces the next support at 93.55 (55-day SMA) followed by 92.70 (weekly low Sep.10) and then 91.92 (23.6% Fibo of the 2017-2018 drop). On the flip side, a break above 94.74 (monthly high Sep.25) would open the door to 95.42 (100-day SMA) and finally 96.03 (50% Fibo of the 2017-2018 drop).

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