DXY rebounds from fresh 3-year lows and erases losses

• US dollar recovers ground despite government shutdown fears. 
• US Bond yields remain at multi-year highs. 
• DXY rebounds from 3-year lows, still under pressure. 

The greenback gained momentum after the beginning of the American session and trimmed losses. The rebound took place despised increasing fears about a US government shutdown. 

Bill McBride, from Calculated Risk, warns that if the government shuts down, “we will miss the New Home sales and GDP reports next week.  The following week, the January employment report will be delayed.  Flying blind is just one of the many impacts of a shutdown.” Markets have been relatively quiet during the last hours. 

The dollar held steady even after the release of the University of Michigan Consumer Sentiment Index that fell from 95.9 to 94.4, against market consensus of an increase to 97.0. 

The US Dollar Index bottomed on European hours at 90.15, the lowest in three years. Afterward rebounded and it has been moving with a bullish bias since then, rising at a modest pace. At the moment, it trades at daily highs at 90.61, up 0.10%. 

Despite today’s recovery, the DXY is still headed toward the fifth weekly decline in-a-row. A positive for the greenback, from a technical perspective, is that it moved off lows and the slide slowdown. Those details could signal some consolidation ahead for the coming sessions. 

Dollar Index Technical Levels

To the upside, immediate resistance might be seen at 90.80 (Jan 16 & 16 high), followed by the 91.00 area and 91.20. On the downside, support levels could be located at 90.40, 90.15 (Jan 19 low) and 90.00 (psychological).