US Dollar Outlook in Focus as Virus Deaths Rose, S&P 500 Erased Gap

US Dollar, S&P 500, Dow Jones, Australian Dollar, Coronavirus – Asia Pacific Market Open

US Dollar Weakens Despite Pessimistic Shift on Wall Street

The haven-linked US Dollar was the worst-performing major currency on Tuesday despite a pessimistic shift in markets into the end of the session. The Greenback lost most of its ground during Asia Pacific and European hours as sentiment broadly improved. This may have been fueled by what seemed to be stabilizing coronavirus cases in Europe and in the United States as local policymakers hinted at further fiscal support.

Despite the Dow Jones and S&P 500 gapping 3.7% and 2.9% higher and then trading cautiously higher, they closed -0.12% and -0.16% respectively. While new infection rates slowed in New York State, both it and New Jersey reported their largest single-day rise in fatalities since the onset of the pandemic. The United Kingdom also saw its biggest increase in COVID-19 deaths.

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This may have poured cold water on rising speculation that parts of the West could be readying to reopen in the near term. White House Economic Adviser Larry Kudlow said that he is hoping that the nation is “only a few weeks away” from reopening the economy. The shift in market tone paused the drop in the US Dollar as the sentiment-linked Australian Dollar found resistance. Crude oil prices traded cautiously lower as some skepticism about the impact of production cuts from major producers lingered.

Wednesday’s Asia Pacific Trading Session

S&P 500 futures are pointing cautiously lower heading into Wednesday’s Asia Pacific trading session. A lack of key economic event risk places the focus for foreign exchange markets on risk trends. If regional equities trade lower, the US Dollar could regain some of its lost ground. This may come at the expense of the Australian Dollar. As China lifts the lockdown in Wuhan, all eyes will be watching on the rates of reported new cases.

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US Dollar Technical Analysis

My majors based US Dollar index – which averages it against EUR, JPY, GBP and AUD – may be at risk to extending losses however. The Greenback has taken out another layer of rising support from the front end of March – red lines below. This is as falling resistance from last month’s top guides the USD lower – blue lines. That may spell cautious weakness to come from the Dollar on average in the medium term.