Never miss a story from Christopher Vecchio

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Christopher Vecchio

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points:

- Breakthrough in coalition talks to form new German government send EUR/USD to its highest rate in three years.

- Bearish momentum in the DXY Index remains firm, now eyes a test of the 2017 low set on September 8 at 91.01.

- Retail trader sentiment continues to suggest weakness among the major USD-pairs.

Upcoming Webinars for Week of January 14 to 19, 2018

Monday at 7:30 EST/12:30 GMT: FX Week Ahead: Strategy for Major Event Risk

Wednesday at 6:00 EST/11:00 GMT: Mid-week Trading Q&A

Thursday at 7:30 EST/12:30 GMT: Central Bank Weekly

See the full DailyFX Webinar Calendar for other upcoming strategy sessions

Amid news that German Chancellor Angela Merkel would finally be able to cobble together a coalition government, the EUR/USD has found itself shaking off whatever political risk that it's carried since the September elections. EUR/USD break above 1.2100 today signals not only a fresh high for 2018, but its highest exchange rate in three years.

To no surprise, given that the Euro is 57.6% of the DXY Index, the aggregate gauge of the US Dollar has been slammed lower today, taking out not only the yearly low but the low from the September 20 FOMC meeting day as well. Now that this bullish outside engulfing bar's support has been broken, there is little standing in the way of the DXY Index taking a trip down to the 2017 low at 91.01.

Early price action in 2018 suggests that, for now, a bearish outlook for the US Dollar remains appropriate. On the daily timeframe, MACD and Stochastics continue to trend lower in bearish territory, while price holds below the daily 8-, 13-, and 21-EMAs.

A closer look reveals that during the early-2018 rally by the US Dollar, the DXY Index never crossed the daily 21-EMA; until we see a close back above this moving average, there is no reason to think that this current stretch of weakness for the greenback is finished.

See the above video for technical considerations in the DXY Index, EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, NZD/USD, and US Treasury yields.

Read more: Central Bank Weekly: USD Ignores Rising Odds; CAD Eyes Hike Next Week

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form