US Dollar Index struggles for direction near 97.00, focus on data

• DXY puts the 97.00 support to the test on Thursday.
• Fed’s Powell reiterated the US recovery faces rising uncertainty.
• Initial Claims, Philly Fed index next of relevance in the docket.

The US Dollar Index (DXY), which gauges the buck vs. a basket of its main rivals, is gyrating without a clear direction around the 97.00 area in the second half of the week.

US Dollar Index now looks to data

The index alternates gains with losses in the 97.00 neighbourhood on Thursday against the backdrop of the generalized cautious tone in the global markets.

In fact, the recent pick up in coronavirus cases around the world coupled with the relentless uptick in cases in the US have undermined the upbeat sentiment in the risk-associated space, lending some extra oxygen to the buck in past sessions.

On the opposite side, recent better-than-expected results in key US indicators plus auspicious news on a COVID-19 treatment developed in the UK have bolstered the risk-on trade.

Also collaborating with the mixed tone among market participants, Chief Powell reiterated the US economic recovery faces a great degree of uncertainty and that the labour market will remain in the centre of the debate.

Moving forward, the focus of attention will once again be on the weekly Claims seconded by the Philly Fed manufacturing gauge.

What to look for around USD

The index has managed to reclaim the 97.00 level this week, bolstered by renewed safe haven demand in response to the re-emergence of coronavirus jitters. Other than that, and as usual in past weeks, price action around DXY is expected to track the performance of the broad risk appetite trends, US-China trade developments and the developments from the re-opening of the economy. 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.

US Dollar Index relevant levels

At the moment, the index is losing 0.07% at 97.01 and faces initial contention at 95.72 (monthly low Jun.10) followed by 95.03 (2019 low Jan.10) and then 94.65 (2020 low Mar.9). On the flip side, a break above 97.45 (high Jun.12) would aim for 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 98.39 (200-day SMA).

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