USD Graphic Rewind: Dollar Races Higher on Confluence of Events
The dollar index rose for the third time in four days on Thursday as numerous events conspired to help lift the buck against almost all its major trading partners. While the Swiss franc and Japanese yen certainly benefited from the risk averse climate the buck outperformed. Early on the buck was decently bid on the back of the unexpected Chinese trade deficit posted early in the Asian session, early in Europe; Spain was downgraded by Moody’s getting European equities off to a poor start and knocking the euro. In the US session, global equities extended their losses on the back of a widening US trade gap and weaker than expected weekly jobless numbers, lifting the buck yet higher. Late in the day, near to the US close, reports started to circulate that shots had been fired in Saudi Arabia during a protest, sparking fears that the recent bout of turmoil that has hit the MENA region could spread further. Oil futures spiked higher on the news and the buck was propelled to the highest levels since late February.
Over-night, many currencies have been consolidating their heavy losses from yesterday and as a result the index has dropped back a touch, however, the bid tone has been underpinned by yet more risk negative data out of China in the form of higher than forecast inflation in February. Prompting concerns that Beijing will have to enact further measures to tamp down inflationary pressures. The worries being that the administration will adopt draconian measures to bring inflation under control, denting Chinese growth which could have serious ramifications for global growth.
Despite the very healthy gains made by the buck yesterday the index still hasn’t cleared this falling trend line off 2011 highs, until we break and close above this trend line downside pressure will remain. However, despite this technical outlook, we believe, considering the aforementioned events, that the buck will continue its northern journey today after a period of consolidation.
Turning for a moment to look at the weekly chart, if the index can manage to move higher later in the day and post highs above 77.40 (last week’s high) then the index will register a bullish outside week which should certainly help the buck get off on the right foot next week and could open the door for a more meaningful topside move.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.