The dollar index extended its declines to a third consecutive day on Thursday and posted lows below 74.00 for the first time since August 2008. As the euro and Aussie juggernaut’s continued their inexorable climbs higher against the buck dollar bashing remained the name of the game. The index managed to pare some of its losses in the US session as some players pared down positions and took profit on recent moves ahead of what is expected to be a quiet day of trade on Good Friday. With the US out today for Good Friday trade is likely to remain subdued and currencies will consolidate their recent moves and traders will take stock of the market which could lead to an interesting open come Monday should they feel moves are beginning to be overdone.
As things stand there is little hope for the buck at present and today’s pause and consolidation could provide a good platform for further USD selling early next week. If this theme does continue into next week then we could see players start to gun for the dollar index all time low which rests just below 71.00. While this level is still some distance away moves in recent days have been very sharp and it would be foolhardy to rule out the possibility no matter how remote.
On the other side of the coin, for those USD bulls looking for a grain of hope; Monday’s break of the rising trend-line in Eur/Usd still should not be ignored and price action in this pair has been pretty standard. Whereby a pair breaks below trend-line support then rebounds for one final push higher, often taking out previous highs, before breaking down once and for all. We therefore continue to pay attention to this possibility even though USD weakness may prevent it from playing out exactly like this, it remains a possibility at this point. Additionally price action becomes the most violent right before a capitulation, price action has certainly had added volatility in recent days and USD bulls can remain hopeful(ish) that a breakdown could be on the horizon. We need to see some form of break back toward the trend line today or in the early week next week to confirm.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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