US Dollar Index recovery attempt from 96.80 stalls below 97.35

• Dollar Index recovery from 96.80 has been limited below 97.35
• The dollar remains on the backfoot amid hopes of a quick economic recovery.
• The DXY has depreciated about 0.5% in the last two weeks. 

Greenback's rebound from one-week lows at 96.80 is lacking follow-through above the 97.00 level and the Index has stalled below 97.35. The USD recovery witnessed earlier on Friday has lost steam during a quiet American session, with the US equity markets closed for the Independence Day bank holiday.

Post-pandemic recovery hopes are holding the USD down

The US dollar opened the day on a strong footing, fuelled by a moderate risk-off sentiment during the Asian and European sessions. The record increase of coronavirus cases in the US revived fears of a second wave of lockdowns that would curb economic recovery and eased investors’ optimism after Thursday’s upbeat US Non-Farm payrolls data and the bright Chinese services sector activity seen earlier today.

On a longer-term perspective, however, the US dollar remains in a steady downtrend after peaking at 103.00 in mid-March. Investors’ hopes on a quick economic recovery, reflected on the equity markets’ rally, have curbed demand for the safe-haven USD, in favor of riskier assets. In this backdrop, the dollar is set for the second negative week in a row against a basket of the most traded currencies.

Key technical levels

On the upside, above 97.35 session highs, the pair might aim towards 97.70 (Jun. 21, 30 highs) and 98.15 (50% Fibonacci retracement of the May-June decline. On the downside, immediate support lies at 96.80 (Jul. 2 low) and below here, 96.40 (Jun. 26 low) and 95.70 (Jun. 10 low).