US Dollar Index Might Surge on Stagnating COVID-19 Relief Bill Discussion

COVID-19 RELIEF BILL, DXY, US DOLLAR INDEX – KEY POINTS

  • COVID-19 relief bill discussion might highlight the haven-linked U Dollar before the Senate breaks for the summer recess.
  • DXY, which is the US Dollar index, seems likely to fall further after it sliced through the key 9-year support.
  • Nevertheless, overbought conditions might lead to a short-term correction in the US Dollar index.

ASIA-PACIFIC SUMMARY

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The ASX 200 rose higher at the Asia pacific trading session, shrugging off the latest developments in Victoria, which is the 2nd most populated state in Australia. On the other hand, Daniel Andrews, who is Australia’s prime minister, announced a state of emergency as he responded to the increased number of coronavirus cases.

The haven linked Japanese Yen and the US Dollar surged as tensions between China and the United States dragged on the trader sentiment. Also, the Trump administration is still expected to widen their measures on china owned software entities.

Also, the Gold dipped back under $1,975/oz after rising to the fresh record high earlier in the previous trading session.

A closer look ahead, the latest US manufacturing PMI data might prove to be what the market has been waiting for as traders monitor the COVID-19 relief bill discussion.

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STAGNATING NEGOTIATIONS MIGHT UNDERPIN THE US DOLLAR

Ideological differences have affected COVID-19 relief package talks, as the lawmakers continue discussing the suggested $400 reduction in the weekly jobless benefits.

With the democrats having unified in their support for the government to continue with the $600 per week program, Mark Meadows, who is also the white house chief of staff is not positive that there would be long-lasting solutions in the short term.

The chief of staff’s lack of optimism is quite justified with Steven Mnuchin’s statement indicating improved payments might result in more people refusing to get back to work.

With the cases of coronavirus increasing towards the 5 million mark, the pressure seems to intensify on the parliament to successfully approve the suggested $1 trillion HEALS Act before the Senate breaks for recession on 7th August.

In this regard, lack of enough progress before the 7th August deadline might put a ceiling below the USD, with negative manufacturing data, possibly driving the haven inflows and highlighting the dollar against its major peers.

USD Index (DXY) Chart

The US Dollar seems to have taken a hit since it surged to the 19-year highs back in march, plunging over 14 percent against its major peers and falling through the 2011 upside trend support.

More losses might be on the line for the US Dollar as the RSI snaps the constructive trend, diving under the neutral midpoint with US Dollar Index Remains Under Strong Bearish Pressure After US PPI.

Furthermore, the haven-linked world’s reserve currency seems to follow the 8-year rotation, proposing that the dollar might be getting into a cyclical downtrend.

Technically speaking, the plunge back in 2002 occurred after the USD broke the upside trend extending from 1996 low that fueled a 40 percent sell-off, as the dollar ultimately bottomed in 2008.

USD Index (DXY) Chart

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