U.S Dollar Stays Firm Over Growing Concerns Of Delta Variants

During the fourth trading session of the week, the dollar was supported by cautious risk sentiment due to concerns over the Delta variant, while the euro waited for the European Central Bank’s policy decision later in the day.

On Wednesday, the dollar index was at 92.7, rising for the third consecutive day as U.S. stocks stepped back as fears about the strength of the economy undermined their high valuations.

A three-week-old resistance line has now been crossed by Momentum, sending the benchmark greenback gauge to its highest level since August 19.

DXY bulls, however, are taking a breather before reaching another important level, namely the 200-Simple Moving Average band of 92.65 at the latest.

Even so, the quote stays above an ascending support line from July 30 while holding onto the previous day’s breakout.

As risk sentiment rose slightly on Wednesday, influential New York Fed Bank President John Williams said that the labor market needs more progress before the central bank can reduce its stimulus.

The Fed’s comments Friday, however, did not come as a surprise to anyone after surprisingly soft U.S. payroll figures effectively eliminated any possibility of tapering this month.

On the other hand, the European Central Bank is expected to unwind emergency economic aid it gave the country during the pandemic on Thursday.

Euro fell to $1.1819 from $1.1909 on Friday, maintaining its retreat from a two-month high.

Analysts predict the purchase of emergency supplies under the pandemic plan (PEPP) will decline from 80 billion euros a month to 60 billion euros a month by the end of the year, before falling again early next year.

Nevertheless, even after PEPP expires, the European Central Bank is expected to show ample support.

The ECB board will make sure that it will continue to purchase conventional assets if it is seeking to reduce its bond-purchase under the pandemic emergency purchase program.

That being said, the DXY will be redirected to the broader support line around 92.10 should the previous resistance line near 92.35 be broken.