Greenback Softer Ahead of FOMC– Upward Trajectory Holds
The US Dollar was marginally weaker at the close of North American trade today. Poor economic data out of the US gave lift to the greenback early in the session as a flurry of weaker than expected reports had traders flocking into the safety of the dollar. A mid-day reversal saw the dollar surrendering early gains to end the day off just 0.03%.
The ascending channel that has held the index since April 28th remains intact, noting interim support at 9630 backed by the convergence of the lower bound trend line and the 23.6% Fibonacci retracement taken from November 30th decline at 9590.
Topside resistance is eyed at the 50-day moving average at 9676 with subsequent ceilings eyed at the 38.2% Fib retracement at 9728 and 9815. Note that daily relative strength continues to flatten but remains beneath overbought levels while the MACD spread also suggests further room for the index to advance in the medium-to-short term.
A look at relative performance sees the Yen sliding 0.70% against the dollar as comments made by Bank of Japan Governor Masaaki Shirakawa about the “severe” state of the domestic economy continue to weigh on markets. The euro, sterling, and aussie advanced against the greenback on a mid-day reversal in risk appetite, sending the equally weighted Dow Jones FXCM Dollar Index lower.
Traders will be eyeing the FOMC minutes released tomorrow at 2PM ET for insight as to the Fed’s outlook on interest rates as the $600B quantitative easing program is set to expire next month. Minutes from the Bank of England will also have a pronounced affect on the index as investors eagerly await the tally of the MPC vote to hold rates earlier this month. A tightening of the spread to a 5-4 vote will undoubtedly see interest rate expectations for the BoE rise, further supporting the sterling. However if the vote holds at 6-3, traders may turn on the pound as the MPC’s most vocal hawk Andrew Sentence steps down later this month.
Written by Michael Boutros, Currency Analyst for DailyFX.com
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