The USD Index is ending the week on a strong note as risk aversion intensifies demand for safe-haven assets. The US Dollar and the Japanese Yen are regarded as safe-haven assets, as are the Swiss Franc and gold. Strengthening of the US Dollar in late Friday trading is propping up the DXY, as it edges higher by 0.07% to trade at 97.46 as at the time of writing.
The US saw a record diagnosis of new coronavirus cases on Thursday, with Florida reporting a spike in new cases by 7.8% to take its 7-day average higher by 4.1%. Texas Governor Abbott has ordered the closing of bars and a reduction in restaurant capacity by 50% in an attempt to contain the state’s rising coronavirus infection rate.
US Commerce Secretary Wilbur Ross provided a guarded response when questioned about the situation on Fox Business Network, stating that the state of Texas had to do what was best to stop the pandemic. He also expects a strong uplift in the US economy for the second half of 2020.
The daily chart of the DXY shows a rejection of the breakout move from the rising wedge on Tuesday, with a bounce that has dovetailed into a 3-day winning streak for the USD Index. Today’s candle shows that the upside push terminated in the intraday high that registered at the 97.71 support line, where the 38.2% Fibonacci retracement from the 24 April high to the 10 June low is located.
If price can break this resistance level, the pathway towards 98.19 will be opened. However, headwinds persist and come in the form of the 200-day simple moving average, which aligns with the resistance at 98.32 (50% Fibonacci retracement). 98.60 and 98.93 (61.8% Fibonacci retracement) could become available as new targets if price crosses above the 200-SMA.
Conversely, a rejection at 97.71 could force a resumption of the near-term downtrend, with 97.16 and 96.94 being the immediate targets. 96.46 and 95.72 remain potential downside targets.