The dollar index is currently sitting between 100 and 90 around 94.30 at the time of writing. The recent USD strength is likely to be limited and the DXY should be more inclined to reach 90 before 100. Much of the recent Dollar strength has been around two things. Firstly, on US election uncertainties. With President Trump not agreeing to a peaceful transition and a tight run race, this has resulted in US strength. Secondly, rising COVID-19 cases in Europe have dragged the EURUSD lower. Technically the EURUSD is being pushed back down into a large downtrend from 2008. See the chart above.

Once the election tensions fade then the EURUSD will be driven by the fact that the Fed’s stimulus is greater than the ECB’s. Therefore, the DXY is more likely to make a move down towards 90 before 100. Remember that EURUSD weakness = DXY strength and vice versa due to their tight negative correlation.

US elections are close and tense. The ‘sell everything’ feel has definitely been here with heavy global stock selling and Covid-19 cases have been rising sharply in Europe. So, this current market mood feels like a repeat of March’s price action when the virus cases started rising for the first time. One area worth looking at closely is for a recovery in the stock markets. If we see this it should be a key catalyst for the dollar Index to continue its falls.