USD Graphic Rewind: Dollar Index Climbs, May be Forming Short-Term Base
The dollar index posted a second consecutive day of gains for the first time in almost 10-days as the euro lost ground amid growing concerns of an impending Portugal bailout. The failure of former PM Socrates to pass the latest round of austerity measures in Portugal has caused renewed fears that the heavily debt burdened nation will need to request a bailout from the EU in order to meet its debt obligations. As the EU summit gets underway today much uncertainty still remains about the outlook of the EMU and despite speculation of imminent rate hikes from the ECB and euro is under relative pressure as the fundamental outlook and growth prospects once again come under the microscope.
On the daily charts we see the possibility of a base forming in the dollar index and a third day of gains on Thursday will certainly go a long way to help solidify this outlook. While this may not mitigate the medium-term outlook for the index which remains skewed to the downside at present it may give the buck some relief in coming days. If the focus on EMU fundamentals starts to outweigh the clamor about rate hikes then we may see a more meaningful shift in structure in the index since, as we have mentioned repeatedly, the US growth outlook is significantly better then the EMU’s.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.