The greenback could stay within the current bearish trend in the longer run
The dollar index struggles for direction around the 90.00 support despite risk aversion dominates global financial markets on Friday. Investor sentiment turned sour amid the pandemic-related developments in China as virus cases continue to rise in the world’s second-largest economy, fueling concerns over the economic recovery. Besides, there are reports that the UK considers a full closure of its borders amid surging cases, adding to the downbeat tone in the markets.
USD index alternates gains with losses just above the 90.00 figure during the European session amid the renewed decline in the US 10-year Treasury yields. EURUSD bounced from lows around 1.2150 and was nearing the key 20-DMA at the time of writing. The pair surged on Thursday after the European Central Bank kept monetary policy unchanged while the language from Lagarde appeared quite well in line with investor expectations. On the data front, Eurozone Manufacturing PMI arrived at 54.7 in January versus 54.6 expected while services PMI stood at 45.0, in line with expectations. Fairly positive results added to the bullish pressure surrounding the common currency.
As for the dollar itself, it could stay within the current bearish trend in the longer run as Biden’s stimulus plan will likely continue to dent its appeal as a safe-haven currency. The price continues to navigate inside the descending channel, and the index could easily slip back to yearly lows in the medium term amid loose monetary policy conditions and the additional fiscal stimulus support.
The USD index lost upside steam around 91.00 earlier in the week and has been struggling to regain a solid upside impetus since then. If the 90.00 support fails to withstand the pressure, the prices could suffer further losses next week should risk sentiment improve. A bounce from this level is also possible, however, bullish attempts will likely be shallow.