- The US dollar index (DXY) is down today as focus shifts to the upcoming Jackson Hole symposium.
- The index is also reacting to news that the US has authorised a new coronavirus treatment.
- Also, investors are focusing on the stalled stimulus talks in Washington.
The US dollar index (DXY) is down by more than 0.30% today as investors react to positive economic data from the US. The market is also waiting for direction from Jerome Powell, who will address central bankers. The index is trading at $92.95, which is below the Friday’s high of $93.46.
US dollar index waits for the Fed
The US dollar index is down against most currencies that constitute the index. It is down by 0.55% against the Swedish krona, 0.25% against the Swiss franc, 0.20% against the Canadian dollar, 0.30% against the British pound, and by 0.30% against the pound. The decline today is a reversal from the significant gainsit made on Friday last week.
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There is no major release in the economic calendar today. Instead, investors are reacting to the deadlock in Washington about a new stimulus package. In recent months, Democrats and Republicans in Washington have disagreed on how to provide more fiscal stimulus to the country.
And last week, Republicans voted for a skinny package that provides some stimulus. However, there is no indication that Democrats will vote for the deal. The continued delay poses significant risks to the US economy, according to the Federal Reserve.
Meanwhile, the market is focusing on the upcoming Jackson Hole summit in Wyoming. This is an annual symposium where global central bankers gather to talk about monetary policy. On Thursday, Jerome Powell will deliver his keynote and possibly address his assessment of the US economy. Analysts expect him to remain committed to helping the economy during the pandemic. They also expect him to put more pressure on congress to pass a relief bill.
US data supportive
On Friday, the US dollar index rallied after data from the US painted a picture of an economy that is recovering. For example, data from Markit showed that the manufacturing PMI rose to 53.6 in August from the previous 50.9. Another data showed that the services PMI rose from 50.0 to 54.8. Subsequently, the composite PMI rose to 54.7.
Another data from the US showed that existing home sales numbers rose by 24.7% in July after rising by 20.2% in the previous month. Other numbers like new home sales, employment, and industrial production have been relatively positive.
Meanwhile, the dollar index is reacting to news that the US has authorised a plasma treatment for the coronavirus. The Food and Drug Administration (FDA) authorised the use of plasma from healed patients to treat the virus. The procedure has already been applied to more than 70,000 people.
US dollar index forecast
The daily chart below shows that the US dollar index is under pressure today. It is trading below the 50-day and 100-day exponential moving averages. Also, it has formed a descending triangle pattern. The Average True Range (ATR) has dropped sharply, sending a signal that volatility has been down. Therefore, I suspect that the index will remain under pressure until Thursday, when Jerome Powell will deliver a speech.