US Dollar Index remains under pressure below 97.00

• DXY fails to extend the rebound above the 97.00 mark.
• Coronavirus pandemic and impact on economy dominate sentiment.
• EIA’s weekly report, FOMC’s Bostic next in the docket.

The greenback has given away part of Tuesday’s gains and has returned to the area below the key 97.00 mark when tracked by the US Dollar Index (DXY) on Wednesday.

US Dollar Index focused on COVID-19, data

The index is fading part of Tuesday’s advance to the area above 97.00 the figure amidst a modest pick-up in the sentiment towards the riskier assets.

Indeed, the dollar gathered traction on Tuesday following rumours that the White House could limit further stimulus to fight the pandemic at around $1 trillion as the time when several FOMC officials showed concern over the pace of the recovery and the persistent rise in infected cases.

Further out, the broader risk appetite trends remain largely directionless as investors continue to gauge the risks of a deeper re-opening of the US economy vs. the unremitting advance of the coronavirus pandemic.

Later in the US docket, the only release of note will be the weekly report on US crude oil stockpiles by the EIA followed by a speech by Atlanta Fed R.Bostic (2021 voter, centrist).

What to look for around USD

The progress of the COVID-19 in the US remains in the centre of the debate amidst efforts to keep the re-opening of the economy well in place. As always, the broad risk appetite trends emerge as the main driver for the dollar in the short-term coupled with omnipresent US-China trade and geopolitical effervescence. On the constructive stance around the buck, bouts of risk aversion should support the investors’ preference for the greenback as a safe haven along with its status of global reserve currency and store of value. Playing against this, the ongoing (and potentially extra) stimulus packages by the Federal Reserve could limit the dollar’s upside.

US Dollar Index relevant levels

At the moment, the index is losing 0.11% at 96.86 and faces the next contention at 96.57 (weekly low Jul.6) seconded by 96.39 (weekly low Jun.23) and finally 96.03 (50% Fibo of the 2017-2018 drop). On the other hand, a break above 97.80 (weekly high Jun.30) would aim for 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 98.29 (200-day SMA).

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