A wave of optimism swept through equity markets on Monday following reports that US President Donald Trump’s health was improving after testing positive for COVID-19.
Such encouraging news has injected investors with a fresh dosage of confidence, consequently renewing appetite for risk at the expense of safe-haven currencies like the Dollar and Japanese Yen.
Our currency spotlight this week will be the Greenback which was practically bullied by G10 majors last quarter.
However, the Dollar’s initial performance over the past few weeks suggested that bulls were gearing for a return. Risk aversion triggered by rising coronavirus cases across the globe, political uncertainty ahead of November’s presidential elections and concerns over the global economy sent investors rushing towards the world’s most liquid currency in September.
Focusing on today, Dollar bulls are nowhere to be found on the daily charts with the DXY trading around 93.50 as of speaking. There seems to be resistance around the 94.00 level while prices have cut below the 20 Simple Moving Average. Sustained weakness below 94.00 could trigger a decline towards 92.70 and 90.00, respectively.
Zooming out to the weekly charts, the next key level of interest can be found around 90.00. This level could be challenged if 92.00 proves to be unreliable support. However, if prices are able to secure a weekly close above 94.00, then bulls could test 94.65 and 96.00, respectively.
All in all, where the Dollar Index concludes this week will not only be influenced by developments revolving around Trump but key economic data in the form of PMI’s, FOMC minutes, speeches from Fed officials and overall sentiment.
Although the Dollar Index is under pressure below 94.00, King Dollar could still make a return in Q4 if risk aversion remains a dominant theme across markets.
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