USD Graphic Rewind: Outlook Remains Constructive for Dollar Index, For Now
Created using Bloomberg
The dollar index was weaker for a second day on Wednesday as consolidation continues to dominate proceedings. Commodities and equities both put in modest rebounds after multi-day losses and higher yielding FX also climbed after having been beaten down in recent days. Although momentum for USD gains seems to be waning a tad we believe that the USD bull run still has some legs on it yet.
There is some cause for concern for USD bulls as sentiment seems to be shifting once again off the EMU periphery problems, which could mean that the euro’s period of relative weakness is coming to an add. However, it is far too early to make any such calls and we remain committed to our analysis that trade is consolidative in nature, for now. If the dollar index moves back below 9600, the previous round of consolidation’s lows, this will give reason for a re-think of near-term direction. As long as the index remains above this level then things look constructive for the index. Also worth watching is the 1.4000 level in Eur/Usd and the 100-day SMA that lies below, these two levels have provided formidable support for the euro so far and unless they are breached soon we could see a short-term base being carved.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.