The US Dollar Index (DXY) was modestly higher after bullish diverging hourly studies triggered a recovery off the intraday lows. The ensuing recovery then stalled near Monday’s peak of 79.527, highlighting another inside day within last Friday’s range. Above 79.527 confirms an hourly higher low and would expose last Thursday’s peak at 79.771, where trendline resistance lies. However, a loss of platform support near 78.800 would lead dollar bears towards 77.960/78.538, between the November 23rd low and the 50% retracement.
The British Pound was the strongest currency of the day, following better-than-expected UK manufacturing and borrowing data. The Sterling was up almost 1% vs. a trade-weighted basket of currencies, as the GBP/CHF gained nearly 2.5% on the day. The GBP/AUD advanced 1.70%, retracing more than half of late December’s losses. The explosive nature of these two pairs suggest an overdue correction has taken place, which could potentially last through the middle of next week. Meanwhile, the GBP/USD continues to bump-up against a downward-sloping trendline off the November highs and the 50% retracement level of the November/December decline. As such, above 1.5630 resistance will immediately focus 1.5670/1.5698, between the latest high and the 61.8% retracement. Losing near-term trendline support in the 1.55 region, however, will direct the market back towards the 200-day moving average.
The Australian Dollar and the Swiss Franc were the two biggest losers of the day, falling 0.87% and 1.15% respectively vs. a trade-weighted basket of currencies. The two strongest performers of late-2010 fell victim to profit-taking, mostly at the hands of the British Pound. While both continue to be bullish long-term plays, both are expected to correct further. As such, hourly oversold dips in GBP/AUD, GBP/CHF, EUR/AUD and EUR/CHF are recommended to be accumulated and held until early next week.
The British Pound was the strongest currency of the day, following better-than-expected UK manufacturing and borrowing data. The Sterling was up almost 1% vs. a trade-weighted basket of currencies, as the GBP/CHF gained nearly 2.5% on the day. The GBP/AUD advanced 1.70%, retracing more than half of late December’s losses. The explosive nature of these two pairs suggest an overdue correction has taken place, which could potentially last through the middle of next week. Meanwhile, the GBP/USD continues to bump-up against a downward-sloping trendline off the November highs and the 50% retracement level of the November/December decline. As such, above 1.5630 resistance will immediately focus 1.5670/1.5698, between the latest high and the 61.8% retracement. Losing near-term trendline support in the 1.55 region, however, will direct the market back towards the 200-day moving average.
The Australian Dollar and the Swiss Franc were the two biggest losers of the day, falling 0.87% and 1.15% respectively vs. a trade-weighted basket of currencies. The two strongest performers of late-2010 fell victim to profit-taking, mostly at the hands of the British Pound. While both continue to be bullish long-term plays, both are expected to correct further. As such, hourly oversold dips in GBP/AUD, GBP/CHF, EUR/AUD and EUR/CHF are recommended to be accumulated and held until early next week.
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