- DXY erodes previous earnings and returns to the red territory.
- The ECB strengthened its recovery program and lent its support to the EUR.
- Initial requests have increased by almost 1.9 million over the past week.
The greenback reversed its initial optimism and has now returned to negative ground near the 97.20 region when measured by the US dollar index ((DXY).
US Dollar Index offered after the ECB, data
The previous upside attempt by the 97.60 / 65 band was not followed and ended up turning into a resumption of the downward trend of the index, opening at the same time the door to a deeper retracement.
Meanwhile, the appetite for riskier assets seems to prevail among market players despite the break on Thursday. The optimistic atmosphere of the riskiest assets was further strengthened today by the ECB’s decision to extend its purchasing program by 600 billion euros. This program (PEPP) should continue until June 2021.
In the US data space, initial claims showed that nearly 1.9 million Americans had filed for unemployment benefits last week (up from 1.8 million expected). Despite the numbers, the trend has weakened since the record highs seen in early March.
Additional data saw the trade deficit widen to $ 49.4 billion in April and nonagricultural productivity at 5.1% QoQ between January and March. Earlier, Challenger Job Cuts fell to 397,016,000 in May (from 671,129,000).
What to Look for around the USD
The greenback remained under strong pressure at the start of the month, extending the bearish trend well below the 98.00 mark and still in the context of the strong sense of risk on the world markets. In the meantime, the dollar remains vigilant on the American-Chinese trade front, the gradual return to a kind of normalcy in the American economy and the broader tendencies of risk appetite as the main drivers of the action of the price. On the constructive position around the male, the episodes of risk aversion should support investors’ preference for the greenback as a safe haven, as well as its status as a global reserve currency and a store of value.
Relevant levels of the US dollar index
Currently, the index is losing 0.14% to 97.17 and faces immediate contention at 97.10 (June 4 monthly low), followed by 97.09 (January 16 low) and finally 96.33 (December 31, 2019 monthly low). On the upside, a break of 98.49 (200 day SMA) would target 99.04 (100 day SMA) and finally 99.98 (May 25 high).