​Oversold USD Puts a Rally on Track

Although the US government had pleaded with the public to stay home on Thanksgiving, a few Americans still ignored warnings and traveled outside. As a result, the Covid-19 kept raging the US, amid which the latest spate of economic data signaled a turn for the worse. The November unemployment rate dropped from 6.9% to 6.7%. Nonetheless, the Non-Farm Payrolls missed the expectation, down from 610k to 245k, sending the US economy into an abrupt nosedive.

With Christmas and New Year's just over two weeks away, few Americans are heeding warnings. They believe the upcoming vaccines will secure their domestic Christmas trips. Financial markets become increasingly worried in this case. Once the coronavirus spreads wider and thereby hitting the US economy, traders will turn bearish about the greenback. Under the worsening pandemic, the Fed scheduled the rate meeting next Wednesday (Dec. 16). Financial markets overwhelmingly bet on Powell's post-meeting dovish statement amid the economic downturn. By this account, the dollar will see its weakness lasting till the end of the year.

Technically speaking, the DXY has slipped to 26.95 regarding the 14-day Relative Strength Index (RSI), reflecting the seriously oversold USD. The DXY may embrace a drastic rally after seeing a breach below 20 on the 14-day RSI, while a break below the psychological barrier of 90 will instead pave the way for a downtrend.