- The DXY index extends the decline below key support at the 93.00 level.
- Mortgage applications, speeches by Fed members and the EIA report are prominent on today’s American calendar.
The US Dollar DXY Index, which measures the strength of the dollar against a basket of major currencies, remains on the defensive and extends decline below key support at 93.00 level.
The US Dollar DXY index is affected by politics and risk appetite
The DXY index extends downward movement for the fourth day in a row on Wednesday after the rejection from near the 94.00 level (October 16) and particularly after breaking below the 55-day SMA at the 93.30 region.
The DXY index remains negative and flirts with multi-week lows near 92.70 in an unfavorable context for the dollar, with additional fiscal stimulus and a Biden victory in the November election in the spotlight and fueling risk appetite sentiment.
Regarding US data, MBA mortgage applications, the Fed’s Beige Book and the weekly report on US crude oil inventories will be released today.
Also, L. Brainard of the FOMC and L. Mester, governor of the Cleveland Fed, have speeches scheduled.
What can we expect around the USD?
The DXY index has finally broken below the solid support around monthly lows in the 93.00 region. The downward movement comes alongside rising hopes for additional US fiscal stimulus and mounting stakes for a “blue wave” victory in the presidential election. Occasional bullish attempts are considered temporary as the underlying sentiment towards the dollar remains cautious. This view is reinforced by the Federal Reserve’s “low-for-longer” rate stance, hopes for a strong recovery in the world economy despite the second wave of the pandemic.
Relevant levels of the US dollar index DXY
At the time of writing, the DXY index is down 0.41% on the day, trading at 92.70. Immediate support is at 91.92 (23.6% Fibonacci retracement of the 2017-2018 dip), followed by 91.80 (May 2018 low) and 89.23 (April 2018 low). On the other hand, a break above 93.90 (October 15 high), would expose 94.20 (38.2% Fibonacci retracement from the 2017-2018 drop) and finally 94.74 (September 25 high).
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Credits: Forex Street
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