Dollar Holds Above Key Support as Risk Appetite Dampens

The greenback rebounded on Thursday, amid fears that a resurgence in the coronavirus could slow a global economic recovery. Meanwhile, US/China tensions remain elevated, with murmurs that a new Cold War is emerging between the superpowers.

The hard hit United States has exceeded 3.5 million total COVID-19 infections and recorded over 137,000 deaths. On Monday, WHO Director-General Tedros Adhanom Ghebreyesus pointed a finger at world leaders, stating; “The virus remains public enemy No. 1, but the actions of many governments and people do not reflect this” adding that “mixed messages from leaders are undermining the most critical ingredient of any response: trust.”

On Thursday, Facebook CEO Mark Zuckerberg joined the criticism of political leaders – in his case pointing a finger at the Trump Administration’s response to the COVID-19 pandemic. During a live-streamed chat with Dr. Anthony Fauci, Zuckerberg stated: “At this point, it is clear that the trajectory in the U.S. is significantly worse than many other countries and that our government and this administration have been considerably less effective in handling this.”

Fears over the negative economic impact of a return to lockdowns has boosted the safe haven dollar. Geopolitical uncertainty, in particular the disharmony between the US and China has also cut risk appetite among investors, in turn supporting safe haven assets.

On Monday, Secretary of State Mike Pompeo said that China’s maritime claims across most of the South China Sea were “completely unlawful.” Tensions were further elevated on Thursday after the US Senate unanimously passed legislation to impose sanctions on Chinese officials trying to suppress political dissent in Hong Kong.

Looking at the US Dollar Index (DXY) chart we can see that price is holding above the key support level of 95.70. Technical analysts were quick to point out the bearish death cross pattern (50 period moving average crossing below the 200 period moving average) that formed on the daily chart earler in July. A break below 95.70 would bring the 94.65 level into view for the bears.