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17 Mar 2020

US Dollar Index eases from 3-week highs near 99.60

  • DXY regains the 99.00 mark and above on Tuesday.
  • US Retail Sales disappointed estimates in February.
  • Funding stress around the dollar boost the index.

The greenback, in terms of the US Dollar Index (DXY), has resumed the upside on Tuesday well above the 99.00 mark.

US Dollar Index boosted by funding stress

The index has almost fully reversed the late February sell-off to new YTD lows in the 94.60 region, managing to regain the 99.00 mark and above so far today and opening the door at the same time to another visit to 2020 highs in the 99.90 region (and even a test of the key triple-digit hurdle).

DXY quickly reversed Monday’s pullback, helped by increasing funding stress around the buck and heightened weakness in rivals such as the euro, the yen and the sterling.

In the docket, the dollar practically ignored the data after advanced Retail Sales contracted more than expected during February and the Capacity Utilization eased a tad during the same period. On the brighter side, the Industrial Production expanded 0.6% MoM and JOLTs Job Openings surpassed consensus at 6.963M in January.

What to look for around USD

DXY rapidly left behind the pessimism at the beginning of the week and regained the constructive outlook, particularly after surpassing the key 200-day SMA in the 97.80 region. In the meantime, markets’ focus remains on the developments from the COVID-19 and its impact on the global economy amidst (now) looser monetary policy conditions. While market participants continue to adjust to the recent measures by the Federal Reserve (and major central banks), signs of rising stress around USD funding are also lending extra legs to the sharp recovery.

US Dollar Index relevant levels

At the moment, the index is gaining 1.42% at 99.39 and a breakout of 99.57 (weekly high Mar.17) would open the door to 99.67 (monthly high Oct.1 2019) and finally 99.91 (2020 high Feb.20). On the flip side, immediate contention is seen at 97.82 (200-day SMA) seconded by 97.45 (low Mar.16) and then 97.26 (50% Fibo of the 2017-2018 drop).

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