After Days of Freefall, What Is Boosting the US Dollar Index Today?

Following a two-week freefall, the US dollar index has experienced a rebound of some sorts, following a slight recovery in the US Dollar across several major currencies. This recovery comes despite data showing that the coronavirus infection rates in the US states continue to climb. 

On Monday the Florida Department of Health declared an increase in the number of confirmed coronavirus cases in the state by 4752. As reported by Reuters news agency, this takes the total number of coronavirus cases in Florida to a total of 491,884. Deaths related to the coronavirus rose by 73 to bring the total number of coronavirus-associated deaths in the state to 7279. 

Despite the grim numbers, investors decided to focus more on the greenback’s recovery, which can be said to be as a result of profit-taking across several forex pairs as well as a slight improvement in market fundamentals. The greenback was boosted by improved business conditions around the manufacturing sector as reported this afternoon by the Institute of supply management. Data showed an increase in the ISM Manufacturing PMI to 54.2, which was higher than June’s figure of 52.6.

The US dollar index is currently up 0.7% on the day. 

Technical Outlook for DXY

The rebound in the US Dollar on the day is manifesting itself in the bullish day the US Dollar Index is having. Today’s bullish outside day candle is an extension of the bullish engulfing price action staged by the candles of Thursday and Friday last week.

The DXY currently trades at 93.64, having touched intraday highs at 93.99. Today’s candle has therefore mounted a challenge against the 93.80 resistance, and only a break of this level would allow the DXY to attain the 94.62 upside target just north of this price level. 95.03 and 95.19 constitute further resistance levels further north of price action. 

On the flip side, it is possible that rallies could represent renewed selling opportunities. If price fails to rally past the current resistance, a run to the 93.17 or 92.50 support targets cannot be ruled out.

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USD Index Daily Chart

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