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Why is the US Dollar Index Still Struggling to Climb Above 94.00?

The US Dollar index gained massively yesterday following the release of the FOMC minutes. However, this gain was short-lived, and the USD Index finds itself under pressure once more. The USD Index has struggled to break above the 94.00 zone, which constitutes its monthly highs. 

Attempts by the DXY to extend Wednesday’s bounce off its 2020 lows located close to the 92.00 mark met a brick wall on Thursday, and the index has resumed its slump towards the lows last seen in May 2018. 

So why is the DXY dropping once more? This has to do with the initial jobless claims data, which has climbed back above the 1-million mark, indicating a slowing in the labour market’s recovery. The market had hoped for the numbers to drop from last week’s 963K to 930K, but this was not to be. Furthermore, the Philly Fed Index dropped from 24.1 to 17.2, in a fall which exceeded the market’s expectations of 21.0. 

Both data were underwhelming for the US Dollar, causing the USD Index to resume its bearish trend. The DXY presently trades at 92.82. 

Technical Outlook for DXY

The index is trending downwards and could be on a collision path with the 92.50 support target. This target stands between the DXY and the 91.91 support level, and a breakdown of 92.50 actualizes this move. 90.97 is queuing up to stand as a new support target if the weakness of the greenback persists.

On the flip side, a bounce on 92.50 allows for a retest of the 93.17 resistance, with 93.80 and 94.62 presenting themselves as new targets to the north; attainable only on recovery of bullish USD sentiment. As long as bearish sentiment persists, any ongoing rebounds are probably corrective moves from oversold conditions and real improvement only comes when 93.80, a price resistance tested at least four times in the last month without a successful break, finally gives way. 

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US Dollar Index Daily Chart

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