USD Graphic Rewind: Dollar Index Tumbles on ECB Bini-Smaghi Comments
The dollar index lost ground for a third consecutive day Friday after ECB member Bini Smaghi said in an interview with Bloomberg that the central bank may have to raise interest rates as global inflation pressures mount. He went on to say that keeping inflation expectations in check may require pre-emptive actions, the euro shot up after the comments were published.
The setbacks on Friday were expected after we spoke early on Friday of the index having broken out of its recent rising trend on Thursday which opened the door to drop back to early February lows around 77.00 or even below. Players should not think that this downward trend will be negated because of a few days of higher closes for we see the possibility of a head & shoulders formation taking shape on daily charts, which is also likely to keep the pressure on the index.
In what should be a risk averse climate with rising tensions in the Middle East, a PBOC reserve-ratio-requirement hike Friday and a weak Chinese PMI flash reading over-night the buck can hardly catch a firm bid which keep us firmly in the bearish camp for the buck in the near-term.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.