US Dollar Index extends the drop to the 90.30 area, focus on US politics

The US Dollar Index (DXY), which gauges the greenback vs. its main competitors, remains on the back footing so far this week and slips back to the 90.  |  20/01/2021 09:10
  • The index loses further ground and tests the 90.30/25 band.
  • Focus is expected to remain on Biden’s inauguration day.
  • MBA’s Mortgage Applications, NAHB Index. API next in the docket.

The US Dollar Index (DXY), which gauges the greenback vs. its main competitors, remains on the back footing so far this week and slips back to the 90.30/25 band.

US Dollar Index looks to Inauguration Day

The index adds to Tuesday’s losses and trades in 3-day lows in the 90.30 region on the back of the improved tone in the risk complex.

In the meantime, the softer tone in the buck comes in line with the retracement of yields of the US 10-year reference, which drop to the area below the 1.10% mark in early trade on Wednesday.

On the political front, the salient event will be the Inauguration Day, as Joe Biden will become the 46th US President.

Later in the US calendar, weekly Mortgage Applications by MBA are due in the first turn seconded by the NAHB Index and the report on US crude oil stockpiles by the API.

What to look for around USD

DXY’s upside run out of steam in the 91.00 region on Monday and sparked a corrective move to the 90.30 zone so far. Occasional bullish attempts in the dollar, however, are expected to be short-live amidst the fragile outlook for the greenback in the short/medium-term, and always amidst the massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Federal Reserve and prospects of a strong recovery in the global economy.

US Dollar Index relevant levels

At the moment, the index is losing 0.10% at 90.40 and faces the next support at 89.20 (2021 low Jan.6) followed by 88.94 (monthly low March 2018) and the 88.25 (monthly low February 2018). On the other hand, a breakout of 91.01 (weekly high Dec.21) would open the door to 91.03 (55-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop).

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