Dollar Index (DXY) Recovery Rally Fades Below 94.00 – ING

The US dollar index (DXY) is in the green for the third consecutive day as traders waited for the nonfarm payrolls numbers that will come out on Friday. If the index ends in the green, it will be its longest winning streak since June this year.

The US dollar is up against the Japanese yen, Swedish krona, British pound, and the Canadian dollar. It has nonetheless fallen slightly against the Swiss franc.

The number of coronavirus cases in the US has fallen in the past few days. Data compiled by Worldometer shows that the country confirmed more than 48,000 new cases yesterday. That was after it confirmed almost 50,000 new cases on the previous day. Still, these numbers remain elevated compared to other countries.

Meanwhile, the US dollar is gaining as a financial crisis continues to gain steam in the US. Democrats and Republicans in congress have struggled to reach an agreement on how to extend the $600 a week unemployment cheque.

On the one hand, Democrats have suggested that the enhanced payment of $600 should continue while Republicans have proposed cutting the cheque to $200. In a statement yesterday, Nancy Pelosi said that Democrats were ready to make concessions, such as tying the amount to the unemployment rate.

The US dollar index is up by 0.11% and is trading at 93.61. Even with the gains, analysts at ING are not convinced that the index will cross 94. They wrote:

“It looks like investors can take a glass-half-full view of the world. 94.00 may have been the corrective high for DXY this week and we expect a sell dollar rally mentality to dominate in tight ranges.”

DXY technical outlook

The daily chart shows that the US dollar index has gained for the past three consecutive days. The price remains sharply below the 50-day and 100-day moving averages. Also, the bullish candle is struggling to move above the yesterday’s high of 93.97, which could mean that the momentum is easing.

Therefore, I seem to agree with what the analysts at ING wrote. As such, it is possible that the DXY will resume falling as bears seek to retest last week’s low of 92.60.

On the flip side, a move above 95.00 will invalidate this thesis. This price is an important psychological level.

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US dollar index forecast

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