Forex Focus on NFP
The US dollar index (DXY) turned lower today as investors remain wary of the surging coronavirus cases in the United States and other countries. The rising cases mean that the likelihood of the Federal Reserve implementing negative rates are high. The DXY fell even as US stocks, including the Dow Jones and S&P 500 rose sharply.
The US has confirmed the most coronavirus cases in the world. According to Worldometer, the country has confirmed more than 2.5 million patients and more than 122k deaths. Unfortunately, the number of cases in more than half of states is rising.
For example, in California, the number of new hospitalizations jumped to the highest levels during the weekend. In total, the US confirmed more than 26,000 cases yesterday.
Worse, analysts see the numbers rising in the coming weeks because of the recent protests and rallies. In these protests, most people were not wearing masks, which raises the likelihood of infections. Even those who were wearing masks were vulnerable because the virus can spread through the eyes.
The US is not the only country seeing more infections. Countries like Germany, Brazil, China, and South Africa have seen their cases jump.
The biggest risk is that the new cases could lead to new lockdowns. With lockdowns, the Federal Reserve could be forced to offer more stimulus, including pushing interest rates negative.
In the US dollar index, the biggest gainer was the Swedish krone, which rose by 0.70%. It was followed by the euro, which rose by 0.45%. The British pound rose by 0.40% while the Swiss franc rose by 0.25 while the Japanese yen was little changed.
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The US dollar index is trading at 97.32. On the daily chart, the price is below the 50-day and 100-day exponential moving averages. It is also slightly below the 61.8% Fibonacci retracement level at 97.78. Also, the price seems to be forming an extended bearish flag pattern. This means that the index will likely breakout lower as bears attempt to move below the next support at 97.00.
On the other hand, a move above 98.00 will see the index continue rising. This price is an important psychological level and also above the 61.8% Fibonacci retracement level