USD Graphic Rewind: Dollar Index Rises in Quiet Trade, Global Equities Pause
The dollar index posted it first day of gains in four as the euro failed to extend its gain and closed the day lower amid fresh concerns that the EMU debt crisis will linger. The dollar index may be starting to base out as Eur/Usd gains start to slow as it approaches the 1.4280 upside target (yesterday’s high was 1.4243). While some players will look even lower down toward the 74.15 region and the 2009 lows we believe that recent losses in the index have been severe and a period of consolidation is called for before any potential further drops. However, any consolidation or attempt to move higher may well be short-lived as the market continues to price in the potential interest rate differentials from imminent Bank of England and ECB rate hikes which are likely to keep the dollar under relative pressure in the near-term.
Looking ahead, the market remains relatively quiet early Wednesday as players adopt a wait-and-see position regarding tensions in the Middle East, military operations in North Africa and increased chatter of further debt problems in Ireland. As global equities take a pause after a multi-day rally the buck can expect to continue to catch some bids but any turn around in risk appetite may but the index back on the backfoot.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.