The US Dollar Index (DXY) finally managed to break key resistance, trading up 0.72% vs. a trade-weighted basket of currencies. The dollar cleared the stubbornly resistant 130-day moving average for the first time since last summer, eventually stalling at the December 21st and 23rd highs at 80.820. Now only a move back below the 130-day moving average at 80.223 will dampen the outlook for further gains towards the November 30th peak and 200-day moving average between 81.485/81.704.
The Euro was a broad loser on the day, following renewed debt concerns. Eurozone periphery yield spreads vs. the German benchmark widened out to two-week highs, triggering a -0.87% loss for the single currency. The EUR/USD broke below a series of upward sloping trendlines to close below 1.3079, the half-way mark of the entire 2010 rally off the crisis lows. This bearish development exposes the 1.2950/1.2968 region next, where the November low and the 78.6% retracement of the August to November rally are situated. Meanwhile, the Euro Index has broken below the November/December low, creating a temporary divergence. The trade-weighted index will attempt to re-test the August/September lows while capped by the recent lows in the low 105 region