US dollar index remains under pressure around monthly low below 96.00 amid firmer returns and covid woes

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  • DXY is struggling to overcome the four week low reached the previous day.
  • US 7-year bond auction, concerns over the Fed’s rate hike have joined negative US data to favor bears of late.
  • Hopes of less serious concerns for Omicron and the liquidity crisis at the end of the year add filters to the downside.
  • Unemployment claims in the United States, the Chicago PMI in the eyes, the risk catalyst are key.

The US dollar index (DXY) heals its wounds around 95.90 Thursday morning, after falling to a monthly low the day before.

The greenback’s gauge fell the most in more than a week after a surge in US Treasury yields joined disappointing US data. However, growing fears of the South African variant of covid, namely Omicron, appear to be defying DXY bears in recent times.

US Treasury yields rose the most in three weeks the day before after a seven-week US Treasury bond auction showed disappointing demand for government securities during the holiday season. “The seven-year bonds sold for a high yield of 1.48%, about two basis points higher than where they traded before the auction,” Reuters said.

That said, 10-year US Treasury yields remain firmer around the monthly high, near 1.55% at time of release, while the S&P 500 Futures show small losses at the latest.

In addition to the festive mood, gloomy US real estate and trade figures are also supporting the lack of demand for bonds. On Wednesday, pending US home sales for November fell below forecast by + 0.5% to -2.2% month-on-month, as the healthy trade balance hit a record deficit of 97, 8 billion dollars against -83.2 billion dollars previously.

It should be noted, however, that a sustained increase in coronavirus cases around the world and the refusal of policymakers to introduce heavy lockdown measures are probing the greenback’s bears. On the same line, the odds of a Fed rate hike earlier in 2022 are intensifying. A surge in inflation expectations in the United States, as shown by the 10-year breakeven inflation figures from the Federal Reserve Bank of St. Louis (FRED) which back the Fed on the woes of the rate hike . The inflation gauge updated the monthly high to 2.53% at the latest.

Amid these games, the greenback’s gauge is an inch closer to the negative monthly impression but remains positive on a year-over-year basis amid the hawkish Fed.

Next, the US Weekly Jobless Claims and Chicago Purchasing Managers’ Index for December, expected at 205K and 62 versus 205K and 61.8 respectively, will decorate the calendar and should be watched for new indices. However, special attention will be paid to the risk catalyst for clear direction.

Technical analysis

In addition to the sustained trading of the quote below 21-DMA, a sharp downward breakout of the monthly support line, around 96.10 and 96.20 respectively, also directs the DXY towards the 50-DMA level of 95.52.


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