It was a rough 2020 for the Greenback. After an epic COVID-19 inspired rally in March, values consistently trended south over the subsequent nine months. However, the US dollar is showing signs of life to open 2021. Prices of March USD Index futures are back above the 90.000 handle ― can the dollar hold the line and move higher?

From a fundamental perspective, the answer to that question is a solid no. A dovish FED and more government stimulus are likely to depress the dollar for some time. Conversely, one factor that may boost the USD is more COVID-19 uncertainty. Last March, the US dollar became the world’s premier safe-haven as the coronavirus forced unprecedented economic shutdowns. Media outlets are reporting a few stories that may pose a similar scenario in the coming months:

• South African Variant: A COVID-19 variant from South Africa is getting considerable media attention to open the week. Known as B.1.351., the strain is reportedly more resistant to the Moderna coronavirus vaccine. Subsequently, the Biden administration has shut down travel to South Africa.
• Lockdowns: The Biden White House has been aggressive in addressing the spread of COVID-19. Mask mandates on Federal lands and vaccine distributions are two early moves made by Biden. Make no mistake, sweeping regional or national US lockdowns are possible “if the science dictates.”

Ultimately, COVID-19 and the USD Index are joined at the hip. Thus far in 2021, it looks like any progress on the coronavirus front, as well as a dollar bounceback, is going to take time.

USD Index Challenges 38% Fibby

The weekly chart for March USD Index futures gives us a good look at where the Greenback stands. Prices remain beneath the 38% Current Wave Retracement (91.105), confirming that the current downtrend is valid.

Overview: Right now, the key number in this market is 91.105. If we see the March USD Index close the week north of this resistance level, an intermediate-term recovery may be underway.