The US Dollar Index (DXY) has been consolidating around the 97.50 mark for the past month.
Meanwhile, coronavirus remains the main topic for all discussions, which was once again confirmed by Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin joint testament yesterday. Powell tried to brighten the overall negative picture, noting that the US economy managed to recover to current levels faster than expected. However, he also added that its future prospects will depend on how quickly the US economy can defeat the pandemic. Since Powell did not announce a new package of financial aid, dollar buyers received another chance to resist the bears who had expected that injecting more liquidity in the national financial system would inevitably lead to higher inflation and a subsequent devaluation of the US currency.
Powell's comments that the US economy remains on the growth trajectory are also confirmed by statistical data. Conference Board Consumer Confidence Index rose to 98.1 in June from 85.9 in May. Durable goods orders and Personal spending data, released last week, supported market optimism about continuing economic recovery in the United States.
Deterioration of the epidemiological situation around the world is another argument in favor of further dollar growth. The increasing number of new coronavirus cases in Florida, Texas, California, and Arizona has led some analysts to fear that the government might re-impose coronavirus restrictions which in turn could slow down the US economic recovery. The daily number of confirmed COVID-19 cases in the United States exceeds 40 thousand. Experts are concerned that this figure may reach 100 thousand.
Continuing tensions in the U.S.-China relations in the context of the upcoming US presidential election, as well as strained trade relations between Europe and the United States, that could pose another threat to the prospects of global economic recovery support the demand for safe-haven assets. With that said, we recommend maintaining DXY purchases, expecting the index to hold above 98.00.
DXY BuyLimit 97.30 TP 98.50 SL 96.90