USD Graphic Rewind: Dollar Index All Set to Take Out 2010 Lows at 75.60
The dollar index closed sharply lower Thursday after it was unable to retake the ground it lose early in Europe after strong auction results from Spain’s debt sale boosted the euro to fresh 2011 highs. A rally in global equities kept the greenback on the back foot throughout the rest of the day as players bought back into riskier assets. Appetite for risk has grown further over-night after some positive reports out of Japan regarding its developing nuclear crisis and the UN approved a no-fly zone over Libya and back air strikes against Gadaffi’s forces.
Over-night, however, price action took on a different note as trade was entirely dominated by the confirmation by the G7 that they will coordinate intervention to weaken the yen. The yen weakened across the board on the news, clearly visible above in the huge spike higher. The buck has been largely unable to hold much of its gains and trades only modestly higher on the day as the greenback remains largely unwanted despite further signs yesterday that the US economy continues its recovery at a healthy pace with consumer prices rising and weekly jobless claims falling.
As euro bulls now focus on November 2010 highs at 1.4280 it reasons that a move in Eur/Usd back to these levels will see the index break through its Nov. 2010 lows, which the indexes low from yesterday is only 20-points above. As such we have started to look lower to 2009 lows which come in just above 74.00 as the potential downside target and even 2008 and record lows below that in the 71.00 region. While these lows are still some way off the lack of favour for the buck at present leaves us little choice but to look lower, for now.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.