US Dollar Sell-Off Continues as Risk Markets Remain Buoyant
US Dollar Price, News and Analysis:
- US dollar basket back below 91.00
- US equity markets continue to hit record highs.
The US dollar is on the back foot again today as investors continue to push risk markets higher ahead of the proposed USD1.9 trillion US stimulus plan. The main US indices continue to print fresh highs, while European bourses play catch-up due to a lagging covid-19 vaccination program. Last week’s US non-farm payroll print was weaker-than-expected and further fueled belief that the Fed will continue to keep monetary policy looser-for-longer until the employment market rebounds to near pre-pandemic levels.
The US dollar basket (DXY) had shown some signs of bottoming out this year after trading sub-90 level at the start of January. A combination of supportive moving averages and the completion of an inverted head and shoulders formation pushed DXY higher, but the fundamental outlook for the US dollar is turning negative again. In the short-term, sub-90 prices may be hard to justify from a technical point of view, but any rebound in DXY is likely to run into selling pressure. A period of sideways/range trading is more likely than not until the US stimulus bill is passed before the market then starts to look further ahead and begins to factor in the effect of this latest monetary splurge on inflation. The latest look at US price pressures on Wednesday should show inflation unchanged on balance in January. For all market-moving economic data and events, see the DailyFX Calendar.
US Dollar Basket (DXY) Daily Price Chart (June 2020 – February 9, 2021)
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