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U.S. Dollar Index Halts Three-Day Advance, Major Trends Remain In Tact

U.S. Dollar Index Halts Three-Day Advance, Major Trends Remain In Tact

2011-05-06 14:55:00
David Song, Currency Strategist

DJ FXCM Dollar Index





Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index






The near-term correction in the greenback was certainly short-lived as the 244K rise in U.S. Non-Farm Payrolls spurred a rebound in market sentiment, and the dollar is likely to further retrace the advance from earlier this week as risk trends continue to dictate price action in the foreign exchange market. The DJ-FXCM U.S. Dollar index shed 0.46% on Friday, with the gauge falling back from a high of 9544.50, and the USD should continue to consolidate in the week ahead as it maintains the downward trend against its major counterparts.

U.S._Dollar_Index_Halts_Three-Day_Advance_Major_Trends_Remain_In_Tact_body_ScreenShot007.png, U.S. Dollar Index Halts Three-Day Advance, Major Trends Remain In Tact

Indeed, the Australian dollar surged higher during the North American trade, rallying 1.87% on the day after moving 190% of its average true range, while the British Pound maintained the overnight advance to add 0.23% from the open. However, the euro struggled to hold its ground as European Central Bank President Jean-Claude Trichet continued to soften his outlook for monetary policy, but the recent weakness in the single-currency could be short lived as the EUR/USD maintains the upward trend from earlier this year. As the EUR/USD holds above the 78.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.4430-50, it seems as though we will continue to see higher prices exchange rates going forward, and the euro-dollar may work its way back towards 1.5000 as the ECB pledges to take the appropriate steps when needed. However, the EUR/USD may face range-bound throughout the remainder of the month as the Governing Council is scheduled to release their updated forecast for growth and inflation in June, and the central bank head may look to reestablish its exit strategy in the second-half of the year as the Governing Council maintains its one and only mandate to ensure price stability.

Join us to discuss the outlook for the major currencies on the DailyFXForums

To discuss this report contact David Song, Currency Analyst: dsong@dailyfx.com

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