US Dollar Index holding on to 99.00, focus stays on COVID-19

• DXY trades near 2-week lows in the 99.00 region on Wednesday.
•  Markets’ attention remains on coronavirus fears and economic impact.
• US New Home Sales, EIA weekly report next on the docket.

The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main competitors, is treading water around the 99.00 mark ahead of the opening bell in Euroland on Wednesday.

US Dollar Index focused on Chinese coronavirus, Fed

After breaching the key support at 99.00 the figure on Tuesday the index managed to regain some poise amidst declining US yields and rising speculations that the Fed could reduce rates further to offset negative effects of the Chinese coronavirus on the economy.

Indeed, US stocks sold off for the second session in a row on Tuesday, while yields of the key us 10-year note dropped to fresh record low, all on the back of increasing concerns around the fast-spreading COVID-19 and latest news citing new cases outside China.

Later in the NA session, New Home Sales for the month of January is due seconded by the weekly report on US crude oil stockpiles by the EIA.

What to look for around USD

The index has come under renewed downside pressure as fears around the COVID-19 dragged yields to record lows and triggered speculations of extra easing by the Federal Reserve. While further correction is not ruled out in the greenback, its outlook appears constructive and bolstered by the current “appropriate” monetary stance from the Fed (once again confirmed at the FOMC minutes last week) vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.

US Dollar Index relevant levels

At the moment, the index is gaining 0.05% at 99.04 and a breakout of 99.91 (2020 high Feb.20) would aim for 100.00 (psychological barrier) and finally 101.34 (monthly high Apr.10 2017). On the flip side, immediate contention emerges at 98.88 (weekly low Feb.25) seconded by 98.58 (38.2% Fibo retracement of the 2020 rally) and then 98.54 (monthly high Nov.29 2019).