US Dollar Index tumbles further near 92.60

DXY remains unable to gather upside traction near 92.60.
Stimulus talks keep the dollar under further pressure on Wednesday.
FOMC’s Lael Brainard said US recovery remains uncertain and uneven.

Pablo Piovano FXStreet

The greenback loses further ground and approaches the 92.60 zone when tracked by the US Dollar Index (DXY) on Wednesday.

US Dollar Index offered on risk-on trade

The index faces extra downside pressure and drops to levels last seen in early September in the 92.65/60 band on Wednesday.

In fact, investors’ hopes that US policymakers could finally clinch a deal to unlock extra fiscal stimulus before the November elections keep sustaining the better mood in the risk complex in detriment of the buck. On this, House Speaker N.Pelosi and Treasury Secretary S.Mnuchin are expected to resume discussions at some point later in the evening.

Earlier in the session, FOMC’s permanent voter and dovish member L.Brainard stressed that further fiscal stimulus is needed, adding that the US recovery is seen as highly uncertain and uneven. Brainard also predicts inflation to remain in sub-2% levels in the next few years.

Moving forward, Cleveland Fed L.Mester (voter, hawkish) is due to speak ahead of the EIA’s weekly report on US crude oil stockpiles.

What to look for around USD

The index has finally broken below the solid contention around monthly lows in the 93.00 region. The move lower comes in tandem with increasing hopes of extra stimulus and rising bets of a “blue wave” win at the presidential elections. This view is reinforced by the “lower for longer” stance from the Federal Reserve and hopes of a strong recovery in the global economy despite the second wave of the pandemic threatens to put this idea to the test.

US Dollar Index relevant levels

At the moment, the index is losing 0.39% at 92.71 and faces immediate contention at 92.64 (monthly low Oct.21) 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 break above 93.90 (weekly high Oct.15) would expose 94.20 (38.2% Fibo retracement of the 2017-2018 drop) and finally 94.74 (monthly high Sep.25).

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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