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5 Mar 2020

US Dollar Index loses the grip below 97.00

  • DXY accelerates the downside to the sub-97.00 area.
  • Safe haven demand drag US 10-year yields below 0.95%.
  • US January’s Factory Orders coming up next on the docket.

The US Dollar Index (DXY), which gauges the buck vs. a basket of its main rivals, is losing further ground and testing the area below the 97.00 mark on Thursday.

US Dollar Index softer on risk aversion, yields

The index has resumed the downside in the second half of the week, quickly leaving behind Wednesday’s positive performance and re-shifting the attention to the sub-97.00 zone.

The persistent risk aversion mood has been weighing heavily on the greenback via lower US yields and solid preference for the safe haven JPY. Indeed, USD/JPY tumbled to fresh YTD lows in the 106.70 region, while yields of the key US 10-year reference are navigating below the 0.95% level.

In the US docket, the data did not help the buck either, as Non-farm Productivity and Unit Labor Costs came in below expectations in Q4 and weekly Claims rose more than forecasted. Later in the NA session, Factory Orders for the month of January will close the calendar.

What to look for around USD

The index remains well on the defensive in sub-97.00 levels on Thursday. Following the breach of the 200-day SMA (today at 97.82), the outlook on the dollar has now shifted to bearish and further pullbacks should not be ruled out. In the meantime, developments from the coronavirus continue to drive the sentiment in the global markets, while investors’ attention is now on the upcoming FOMC meeting (March 17-18) and the probability of extra easing after Tuesday’s exceptional 50 bps interest rate cut.

US Dollar Index relevant levels

At the moment, the index is losing 0.41% at 96.97 and faces the next support at 96.90 (weekly/monthly low Mar.5) seconded by 96.74 (low Dec.12 2019) and then 96.53 (monthly low Dec.31 2019). On the upside, a break above 97.82 (200-day SMA) would aim for 98.54 (monthly high Nov.29 2019) and finally 99.09 (23.6% Fibo retracement of the 2020 rally).

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