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USDOLLAR Index Components Diverge - Here’s What to Trade

USDOLLAR Index Components Diverge - Here’s What to Trade

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- EURUSD driving force behind USDOLLAR Index breakdown.

- AUDUSD yet to break resistance, USDJPY yet to break support.

- See the DailyFX economic calendar for Thursday, June 4, 2015.

Depending on your USD bias, there are some pairs better suited for bulls versus bears. We can surmise this by breaking down the components of the USDOLLAR Index, which reveals that the EURUSD rally is the main catalyst for the recent turn lower in the USDOLLAR Index; whereas AUD and JPY have made little to no progress against the USD.

The Euro may be in a world of its own right now, after the ECB more or less granted clearance for yields to rise in the Euro-Zone again: the ECB said that the rise of yields (and the appearance of volatility) should be expected as HICP inflation rebounds. With inflation outperforming expectations in the short-run, there appears to be little motivation within the ECB to meaningfully expand its QE program ahead of the summer months.

See the above video for technical considerations in EURUSD, EURAUD, USDJPY, and AUDUSD.

Read more: Euro Catching a Bid as CPI Beats, Greek Negotiations Advance

--- Written by Christopher Vecchio, Currency Strategist

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.