USD_to_Offer_Long_Entries_Lower_as_Index_Pulls_Away_from_2012_High_body_Picture_4.png, USD to Offer Long Entries Lower as Index Pulls Away from 2012 HighUSD_to_Offer_Long_Entries_Lower_as_Index_Pulls_Away_from_2012_High_body_Picture_3.png, USD to Offer Long Entries Lower as Index Pulls Away from 2012 High

The greenback is softer at the close of North American trade with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) off by 0.15% on the session after moving nearly 113% of its daily average true range. The losses come amid a strong rebound in broader risk assets with the Dow and the S&P snapping a six-day losing streak for a gain of 1.09% and 1.60% respectfully. The NASDAQ posted the largest advance with a gain of 2.46% on the session. We view the recent rally in risk as a technical bounce with further weakness expected as tensions in Europe continue to rise amid expectations of an inevitable euro-Greek decoupling. That said, we remain neutral at these levels with the index likely to offer more favorable long-entries lower.

The dollar closed just below the confluence of trendline resistance dating back to October and the 78.6% Fibonacci extension taken form the August 1st and October 27th troughs at 10,084. A break below this level risks further dollar losses with daily support eyed lower at the 50-day moving average at 9970, and the 61.8% extension at 9945. Resistance remains at the October highs at 10,134 with long-term targets eyed at the 78.6% extension at 10,255. Note that last week’s RSI breach above the 70-threshold was the first since early October and greenback may remain on the defensive in the near-term with pullback’s offering favorable long entries around the 10,000 mark.

USD_to_Offer_Long_Entries_Lower_as_Index_Pulls_Away_from_2012_High_body_Picture_2.png, USD to Offer Long Entries Lower as Index Pulls Away from 2012 High

An hourly chart shows the index trading within the confines of a newly formed descending channel formation with the greenback closing just above interim support at the 23.6$ Fibonacci retracement taken from the early May advance at 10,073. A break below this level eyes soft support at 10,050 and the 38.2% retracement at 10, 024. Interim topside resistance stands at 10,125 and is backed by channel resistance and the 2012-high made last week at 10,154.

USD_to_Offer_Long_Entries_Lower_as_Index_Pulls_Away_from_2012_High_body_Picture_1.png, USD to Offer Long Entries Lower as Index Pulls Away from 2012 High

The greenback declined against three of the four component currencies highlighted by a 0.72% decline against the Australian dollar. A rebound in risk saw haven flows reverse with the AUD/USD mounting a counter-offensive off fresh 2012 lows below 9800. Look for the aussie to remain well supported in the short-term as markets push higher amid a lack of headlines out of Europe. The Japanese yen is the weakest performer of the lot with a loss of 0.40% on the session as traders jettisoned the low yielder in favor of risk. For a complete breakdown and detailed scalp levels on the NZDUSD and the USDJPY, refer to today’s Winners/Losers report. Look for the dollar to remain under pressure in the interim with a shift back into risk aversion likely to see the index make another run at the 2012-highs made last week.

---Written by Michael Boutros, Currency Strategist with

Join Michael on Tuesday morning for a Live Scalping Webinar at 1400GMT (10ET)

To contact Michael email or follow him on Twitter @MBForex for the latest charts and commentary

To be added to Michael’s distribution list, send an email with the subject line “Distribution List”