- The US dollar index (DXY) is rising today as traders wait for the first estimate of US Q3 GDP.
- Analysts expect the data to show that the US economy expanded by more than 30%.
- It is also reacting to the rising number of Covid-19 cases in Europe and the US.
The US dollar index (DXY) is up slightly as traders react to the surging number of Covid-19 cases in the US and Europe. The index is trading at $93.43, which is substantially higher than this week’s low of $92.47.
Covid-19 cases surge
The US dollar is both the American currency and the world reserve currency. As a result, investors tend to rush to its safety when there are risks in the market. The present risk is that the number of Covid-19 cases in the United States and Europe is surging.
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In the United States, the government confirmed more than 74k cases yesterday. This brought the total number of infected Americans to more than 8.93 million. If the current trend continues, it means that the country will reach more than 10 million cases in November. Also, the country confirmed more than 800 deaths, bringing the total to more than 228k.
The same trend is happening in Europe. In France, the government confirmed more than 33k cases, bringing the total number of cases to more than 1.2 million. More than 35k people have died. In Germany, the government reported more 14,900 cases, the highest daily figure. Other European countries like Spain, Italy, and Belgium have also reported more cases.
As a result, these countries have added more restrictions. Yesterday, Angela Merkel reached a deal to close most non-essential businesses like restaurants and cafes until the end of November. In exchange, the government will provide them with €10 billion euros. In France, Emmanuel Macron’s government has also put in place several restrictions to halt the spread.
US GDP data ahead
The dollar index is also rising ahead of the first reading of third-quarter GDP data from the US. Analysts expect the data to show that the economy bounced back in Q3 after dropping by more than 30% in the second quarter.
According to Yahoo, economists expect that the economy grew by 32% in the quarter. This will be driven by a 38.2% increase in personal consumption and a 2.9% increase in the GDP pruce index. Also, Daniel Silver, an economist at JP Morgan expects the data to come in at 36.7%, which would be the biggest quarterly increase on record.
Still, the US faces two main challenges. First, as mentioned above, the number of Covid cases is rising, which risks pushing it back to a recession. Second, congress has failed to reach a stimulus, which analysts believe is necessary to cushion the economy.
The dollar index will also react to the latest jobless claims data. Analysts believe that more than 775k people signed for unemployment benefits last week. That will be the lowest figure on record.
US dollar index technical outlook
On the four-hour chart, we see that the US dollar index is trading at $93.38 as yesterday’s rally pauses. It is slightly above the 25-day and 15-day exponential moving averages. Also, it is forming a bullish pennant pattern, which is usually a continuation pattern. Therefore, I expect that the index will continue rising as bulls aim for the next resistance level at $93.80. Get started with forex with our free trading courses.