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US Dollar Index regains traction near 99.60, focus remains on China

  • DXY reverses Friday’s pullback and retakes the 99.60 area.
  • Renewed coronavirus fears trigger risk-off sentiment on Monday.
  • US Chicago Fed index, Dallas Fed index, Fedspeak next on the docket.

The greenback, when measured by the US Dollar Index (DXY), has started the week on a positive footing and is now challenging session tops in the proximity of 99.60.

US Dollar Index bid on coronavirus fears

The index has managed to leave behind Friday’s moderate pullback after hitting fresh YTD highs in levels just shy of the psychological triple-digit resistance (Thursday), all in response to some profit taking mood and amidst the broad-based recovery in several of the dollar’s rivals.

In the meantime, the risk-off sentiment has returned to the markets and is encouraging investors to stay cautious at the beginning of the week following coronavirus cases in Italy and the UK. In China, on the other side, efforts to return to normalcy in work and some other sectors remain on the rise despite latest figures showed new cases of the COVID-19 have been reported in the country.

Later on Monday, the Chicago Fed National Activity Index and the Dalas Fed Manufacturing Business Index are due along with the speech by Cleveland Fed L.Mester (voter, hawkish) at the NABE Conference.

What to look for around USD

The index has extended the march north to new 2020 highs just below 100.00 the figure on Thursday, where some solid resistance appears to have turned up. Investors are expected to keep looking to the performance of US fundamentals and the broader risk appetite trends for direction as well as any fresh developments from the COVID-19. In the meantime, the outlook on the dollar remains constructive and bolstered by the current “appropriate” monetary stance from the Fed (once again confirmed at the FOMC minutes on Wednesday) vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.

US Dollar Index relevant levels

At the moment, the index is gaining 0.24% at 99.58 and a breakout of 99.91 (2020 high Feb.20) would aim for 100.00 (psychological barrier) and finally 101.34 (monthly high Apr.10 2017). On the flip side, immediate contention emerges at 99.23 (low Feb.21) seconded by 99.09 (23.6% Fibo retracement of the 2020 rally) and then 98.54 (monthly high Nov.29 2019).

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