Dollar index hits fresh 3-year low below 89.00

• USD sell-off continues on Mnuchin's comments.
• Fears of trade war also hurt US dollar.

The dollar index (DXY), which tracks the value of the greenback vs. the basket of currencies, fell to a fresh 3-year low of 88.95 in Asia as Trump team at Davos backed US dollar.

Treasury Secretary Mnuchin went on the offensive yesterday, declaring a weaker dollar is good for American trade. The FT report quotes Brown Brothers Harriman's Marc Chandler as saying that Mnuchin's comments indicate a deviation from the strong dollar mantra followed by Treasury Secretaries since Robert Rubin.

Clearly, Trump administration favors further depreciation. Hence, the greenback is being dumped across the board.

Also, hurting the USD are fears of a full-blown trade war between the US and China. Commerce Secretary Wilbur Ross said yesterday the US would fight harder to protect its exporters. It remains to be seen how China and other major nations respond to the US.

For the time being, USD bears are ruling the roost and could push the greenback to fresh multi-year lows if ECB's Draghi sounds less dovish than expected.

Dollar Index Technical Levels

A convincing break below 89.00 could yield a drop to 88.45 (Jun. 2010 high), under which a major support is seen at 88.00 (Jan. 2006 low). On the other hand, a move above 89.17 (March 2009 high) may open doors for a corrective rally to 90.11 (previous day's high) and 90.59 (Jan. 23 high).