Sluggish US Economic Recovery Hampers DXY’s Rally

WikiFX News (15 Dec.) - Recently, obstacles in the DXY rally have brought about wild swings. Despite the boost from risk aversion, the US dollar sees downside pressures amid the sluggish economy.

Progress on a new stimulus bill continues to be slow as the two parties remain sharply divided over details.

While enough Pfizer vaccine is expected to be available in Q2 2021, questions remain around whether Americans will receive it and how much is the vaccine coverage. These factors have dampened risk-on dynamics, sending a rebound to the DXY.

Nonetheless, the US Non-Farm Payrolls added only 245K in November, the lowest level since May. Besides, the ISM Service PMI has declined for three consecutive months, coupled with some losses in the Manufacturing PMI. In this case, the Fed could keep its loose policies for a more sustained period, which will bring downside pressures to the DXY.

Technically speaking, the DXY has found its rally a weak one after several failed attempts of breaking 91. Now that support at 90.50 is faltering, chances are a breach below the level will pave the way for further drops.

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Chart: Trend of the DXY