USD Index in Focus: Is There An End to the US Dollar Selloff?

USDSEK
USDSEK

The USD continues to face pressure from several fronts, and these have led to a further decline in the USD Index on the day. One of the factors impeding any progress on the USD is the domestic coronavirus situation in the US. Tuesday’s data from Arizona’s health department as reported by Reuters indicates 3,500 more confirmed coronavirus cases in the state, which brings the total to 148,683. The death toll has also risen to 2,918.

The story is not much different in Florida, where the Department of Health declared an increase in coronavirus cases by 9,440 to a total of 369,834. The death toll has hit 5,319, up by 136 on the day with 9,443 hospitalizations due to the coronavirus. 

The continued downside momentum also follows a surge in risky sentiment, which is sending investment money away from safe-haven assets such as the USD and into riskier assets such as the commodity currencies, copper and crude oil. Potentials for a coronavirus vaccine are also high, adding to the risk-on sentiment and putting the greenback on offer. The selloff in the USD looks like it still has some room to operate. 

Technical Outlook for DXY

Today’s slump in the USD Index now brings it into a direct challenge with the support at 95.19. A test has been made today, with a slight bounce. However, this support level will continue to face pressure as long as the bearish sentiment on the USD exists. A breakdown of this support sends the USD Index towards the next support at 95.03, with the 9 March low at 94.62 waiting for a slip-up. 

Conversely, a bounce in the USD Index may allow for recovery to 95.72 or 96.07, with further resistance targets seen at 96.46 and 97.16. However, these may only serve as possible areas for selling on rallies, as long as bearish sentiment on the USD exists.

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