USD Graphic Rewind: Buck Breaks Out of Rising Trend; Bearish Outside Week Set-Up
The dollar index fell Thursday as global equities rose and optimism over the global recovery helped lift higher yielding assets, at the cost of the buck. While some solid data in the form of rising consumer prices and the Philly Fed at a near 7-year high accompanied by supportive comments by Fed Hoenig helped slow losses early in the US session the damage had already been done and the index couldn’t shake these losses. Over-night the greenback caught some bids on late reports that Egypt has official received a request from Iran to allow two of its warships to pass through the Suez canal, action which has already elicited a strongly-worded response from Israel. This is just the latest development as turmoil rocks the entire region as pro-democracy protests are ongoing from Libya to Bahrain, any deterioration of the situation will likely see safe haven flow into the buck.
Yesterday’s close lower was of some importance because it broke out of the recent rising trend off lows posted in the beginning of February. While we were looking for this rising trend to take the index back to 80.00 yesterday’s breakout is reason enough for a re-think. If losses today really get moving and we break below 77.50, last weeks lows, a bearish outside week pattern will be formed and suddenly we are looking at the possibility of a resumption of the early year declines. Deeper setbacks could see the index heading back to test 2011 lows lying just below 77.00 and even onto 2010 lows below 76.00.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.