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US Dollar Index drops below 102.00 on Fed easing

  • DXY recedes further and breaches the 102.00 support.
  • The Fed announced open-ended purchases of Ts and MBS.
  • The Chicago Fed index improves to 0.16 in February.

The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main competitors, has come under renewed downside pressure and returns to the sub-102.00 region.

US Dollar Index offered on Fed’s package

The index gave away initial gains and is trading in the negative territory at the time of writing after the Federal Reserve announced an open-ended purchase programme of Treasuries and MBS.

The new measures add to the reduction in the FFTR, the return of the Commercial Paper Funding Facility and extra swap lines with major central banks, all announced in past days.

In the docket, the Chicago Fed index ticked higher to 0.16 for the month of February, while Markit will publish its preliminary manufacturing and services gauges on Tuesday, Durable Goods Orders are next on Wednesday, another revision of the Q4 GDP on Thursday and inflation figures tracked by the PCE on Friday.

What to look for around USD

DXY keeps the buying interest well and sound at the beginning of another week and trades close to 3-year highs in the vicinity of the 103.00 mark. The recent sharp upside momentum in the dollar has been sustained by firm demand on the back of funding concerns, while easing monetary conditions by central banks other than the Fed have been also collaborating with the upbeat sentiment around the greenback. In the meantime, the progress of the fast-spreading COVID-19 are expected to keep driving the global sentiment for the time being.

US Dollar Index relevant levels

At the moment, the index is gaining 0.18% at 102.13 and a breakout of 102.99 (2020 high Mar.20) would open the door to 103.65 (monthly high December 2016) and finally 103.82 (monthly high January 2017). On the downside, the next support emerges at 100.49 (78.6% Fibo of the 2017-2018 drop) followed by 99.91 (monthly high Feb.20) and then 98.28 (55-day SMA).

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