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US Dollar Index Losses Continue after Breaking Key Support

US Dollar Index Losses Continue after Breaking Key Support

2011-05-26 22:07:00
Michael Boutros, Technical Strategist
Share:
US_Dollar_Index_Losses_Continue_after_Breaking_Key_Support_body_Picture_2.png, US Dollar Index Losses Continue after Breaking Key SupportUS_Dollar_Index_Losses_Continue_after_Breaking_Key_Support_body_Picture_3.png, US Dollar Index Losses Continue after Breaking Key Support

1Q annualized GDP data and jobless claims out of the US today came in weaker than expected, sending equities and the greenback lower early in North American trade. While stocks were able to climb back into the black, the dollar was unable to gain any traction closing lower against all the majors save the loonie. The S&P 500 and the NASDAQ posted advances of 0.40% and 0.78% respectively, while the Dow ended the session marginally higher by 0.07%. The Dow Jones FXCM US dollar index saw a break of key support at the lower bound trendline of the ascending channel that has held the greenback since the start of the month. The index posted a loss of 0.76% before encountering interim support at the 9630 level.

A report that China was looking to invest large amounts into the Asia Pacific region as well as buying bailout funds for debt stricken Portugal eased sovereign debt concerns in the interim, with the euro and risk currencies advancing throughout US trade. The dollar’s losses were exacerbated by the unwinding of bearish bets against the euro and other growth linked currencies as today’s disappointing data prints continued to weigh on the greenback. The dollar’s decline may carry over into the close of the week as traders scale back positions ahead of the long holiday weekend.

US_Dollar_Index_Losses_Continue_after_Breaking_Key_Support_body_Picture_4.png, US Dollar Index Losses Continue after Breaking Key Support

The dollar closed below the 50-Day moving average, with stronger support now eyed at the convergence of the 20-day moving average and the 23.6% Fibonacci retracement taken from the November decline at 9590. Subsequent floors rest lower at 9520 and 9450. Topside resistance is eyed at the previous support level at 9660, followed by 9740 and the 6.4% Fib extension (Ghosted) taken from the 2009 and 2010 crests around 9815.

US_Dollar_Index_Losses_Continue_after_Breaking_Key_Support_body_Picture_5.png, US Dollar Index Losses Continue after Breaking Key Support

A look at the component currencies attests to the dollars losses today. The aussie was the best performer of the lot, closing the session higher by 1.03% against the greenback, while the yen moved 130.37% of its daily average true range to post a gain of 0.76%. The euro saw the smallest gains as concerns of a possible Greek debt restructuring saw traders reluctant to push the single currency too high, too fast.

Event risk tomorrow may see exaggerated moves on thin liquidity ahead of the long weekend. The calendar starts at 8:30am ET with April personal income, spending consumption data, followed by the University of Michigan confidence survey. The week trails off with the April pending home sales report, with estimates calling for a decline of 1.0% m/m, down from a previous gain of 5.1% m/m. With the dollar on the defensive thought US trade today, a weak string of data has the potential to accelerate the greenback’s losses as we close out the month.

GMT

Importance

Release

Expected

Prior

12:30

MEDIUM

Personal Income (APR)

0.4%

0.5%

12:30

MEDIUM

Personal Spending (APR)

0.5%

0.6%

12:30

MEDIUM

Personal Consumption Expenditure Core (MoM) (APR)

0.2%

0.1%

12:30

MEDIUM

Personal Consumption Expenditure Core (YoY) (APR)

1.0%

0.9%

12:30

MEDIUM

Personal Consumption Expenditure Deflator (YoY) (APR)

2.2%

1.8%

13:55

LOW

U. of Michigan Confidence (MAY F)

72.4

72.4

14:00

MEDIUM

Pending Home Sales (MoM) (APR)

-1.0%

5.1%

14:00

MEDIUM

Pending Home Sales (YoY) (APR)

-

-11.5%

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report or subscribe to their daily analysis, please send inquiries to:mboutros@dailyfx.com

You can also follow Michael on Twitter @MBForex

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

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