In the face of an unprecedented spike in pandemic cases across several US states, bolstering view that the economy might require another phase of forced lockdown measures, the US Dollar had faltered on Wednesday, while prospects of improving economic growth in other regions such as EU had phased out the safe-haven bid for the American currency, signalling a downward spiral over a longer-term outlook.
Aside from that, on the day’s FX market closure, the US Dollar index (DXY) measured against a basket of six major currencies had faltered as much as 0.51 per cent to 96.39, while as of Wednesday’s market closure, the American Dollar index has been 6 per cent below from its recent highs.
Notably, the net bets against the US Dollar in the futures’ market have been harbouring near their highest level since 2018.
US Dollar sets off a technical “Death Cross” formation
Aside from that, adding further strains to the American currency, analysts at Bank of American Global Research were quoted saying on the day’s FX market wind down that the US Dollar had entered into a technical “Death Cross” formation earlier in the week, which happens when the 50-day moving average of a currency falls below its 200-day moving average, a critical indicator widely seen as a sign of further downturn in a medium- to longer-term outlook.
On top of that, the analysts at Bank of America Global Research had also added that eight out of the nine previous occurrences when the US Dollar had entered into a technical death cross formation since 1980s, had witnessed long-term weakening of the currency as it has been happening now.
Citing statistics, on Wednesday’s FX market round off, the US Dollar shed 0.53 per cent against the bloc’s common currency to $1.1331, while the British Pound added 0.51 per cent against its American peer to wrap up the day at $1.2611.
Meanwhile, as the latest leg of weakness of the American currency comes over the heels of a growing criticisms on Trump Administration over its handling of the pandemic outbreak alongside a protest over racial inequality that appeared to be rubbing out supports for the US President Donald Trump ahead of the November 3 US 2020 Presidential election, a Chief Market strategist at Cambridge Global Payments, Karl Schamotta said later on the day, “If we look at the idea of American exceptionalism, that has dimmed dramatically during this crisis. Growth differentials are tilting against the United States, putting the dollar on the defensive”.