US Dollar Index edges lower and approaches 93.40

• DXY extends the downside to the 93.40 region on Friday.
• Discussions over extra fiscal stimulus appear to have resurfaced.
• Wholesale Inventories only due in the US docket later in the session.

The greenback remains on the defensive and approaches the 93.40 region when tracked by the US Dollar Index (DXY) on Friday.

US Dollar Index focused on politics

The index trades with losses for the third session in a row at the end of the week, as renewed chat regarding a potential stimulus package seems to have re-emerged in the US political scenario, particularly in the wake of discussions between Nancy Pelosi and Steve Mnuchin on Thursday.

Amidst the prevailing risk-on mood, the dollar seems to have also lost traction in response to the correction lower in yields of the US 10-year benchmark, which receded from 4-month tops in the 0.80% area (October 8).

In addition, further selling pressure hurt the buck after weekly results from Initial Claims showed the labour market still looks stagnant.

Nothing worth mentioning data wise in the US calendar on Friday, with only the monthly release of Wholesale Inventories scheduled for later in the NA session.

What to look for around USD

The index appears to be moving into a consolidative phase, always below the key 94.00 barrier. Occasional bullish attempts in DXY, however, are (still) seen as temporary, as the underlying sentiment towards the greenback remains cautious-to-bearish. This view is reinforced by the “lower for longer” stance from the Federal Reserve, hopes of a strong recovery in the global economy, the negative position in the speculative community and political uncertainty ahead of the November elections. The resumption of market chatter surrounding another stimulus package is also weighing on the dollar.

US Dollar Index relevant levels

At the moment, the index is losing 0.11% at 93.47 and faces the next contention at 93.34 (monthly low Oct.6) followed by 92.70 (weekly low Sep.10) and then 91.92 (23.6% Fibo of the 2017-2018 drop). On the other hand, a break above 94.20 (38.2% Fibo retracement of the 2017-2018 drop) would aim for 94.74 (monthly high Sep.25) and finally 94.93 (100-day SMA).