USD Graphic Rewind: 2011 Lows Will Be Tested If Trend-Line Support Gives Way
The dollar index dropped through and closed below a key internal support level at 77.50 yesterday opening the door to test 2011 lows at 76.85 in coming sessions. Early in the day the index flirted with this support level but didn’t make a clean break lower until the US equity open and as stocks sold off for a second day investors sought safety in the Swiss franc, not the US dollar, heaping further pressure on the buck and pushing it lower. Although the index attempted an immediate rebound it was unable to re-take the support level and resumed its intraday decline to close well below the 77.50 level. Over-night losses have continued to rack up and despite ongoing weakness among global equities and buck can hardly catch a bid as the franc appears to be the safe haven asset of choice at present.
With this internal support level now breached bears will be looking lower to initially test the 2011 lows and will even eye a drop back to 2010 lows at 75.60. As we see above there is a rising trend line of higher lows off these 2010 lows which may offer some support today but over-night losses in the index already are putting this level under pressure. If the index can bounce of this support level we will look for a measured move back above recent range highs by 79.00 to alleviate short-term pressure and will lead to a shift in our outlook for the index, as is we remain in the bearish camp for 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.