DXY: US dollar index rallies as AstraZeneca pauses covid-19 vaccine trial

The US dollar index is up for the seventh straight day as traders react to the news that AstraZeneca has paused its COVID-19 vaccine trial. The currency is also reacting to recent positive data from the United States and the rising geopolitical risks. The EUR/USD and GBP/USD pairs have risen by about 0.05% each.

AstraZeneca pauses COVID-19 vaccine trial

The dollar index is rising today after AstraZeneca and Oxford University paused a trial of their COVID-19 vaccine after a participant got an unexplained illness. The firm said that the decision will allow an independent committee to review the vaccine and its safety. In a statement, it said:

“This is a routine action which has to happen whenever there is a potentially unexplained illness in one of the trials, while it is investigated, ensuring we maintain the integrity of the trials. In large trials, illnesses will happen by chance but must be independently reviewed to check this carefully.”

The decision is a major setback since AstraZeneca is the leading firm developing the vaccine. The company has already received orders worth billions of dollars. For example, the US government has already placed an order of 300 million doses. Also, the government has given the company more than $1.2 billion to speed the development.

Analysts believe that a coronavirus vaccine will play an important role in fighting the pandemic. To date, according to the World Health Organisation (WHO), more than 100 companies are at various stages of developing av vaccine.

Indeed, hopes of a new vaccine has helped push global stocks to multi-year highs. It has also helped push the dollar index lower in the past four months. That is because investors tend to rush to the safety of the currency in times of crisis.

Positive US data and geopolitical risks

The dollar index is also rising because of the recent strong economic data from the United States. Last week, nonfarm payrolls datashowed that the economy added more than $1.3 million jobs as the unemployment rate fell to 8.4%. This means that the economy has added more than 10 million jobs in the past three months. Equally, data from the Labour Department showed that the number of initial jobless claims fell to 840,000 in the previous week.

Other numbers from the US were relatively strong too. For example, according to ISM, the manufacturing PMI rose to 54 while the non-manufacturing PMI rose to 56.0 in the same month. Durable goods orders also rose, leading many to predict that the economy will have a V-shaped recovery.

However, there are still risks in the market, which also tend to be positive for the dollar index. For example, tensions between the United States and China have continued in recent weeks. In a statement on Monday, Donald Trump raised the possibility of the country decoupling from China. The administration has ordered TikTok to sell its American business. It is also considering adding the biggest Chinese chip maker into an entity list.

US dollar index technical analysis

The daily chart shows that the dollar index has been in a strong upward trend this month. In this period, the index has moved from a low of $91.71 to the current level of $93.50. It has also moved above the 25-day and 14-day exponential moving averages while the RSI has moved from the oversold level of 17 to 53. Therefore, there is a likelihood that the upward trend will continue as bears target the next psychological level of $94.00.