Tuesday, January 11, 2011
Daily DXY Roundup - 1/11
The US Dollar Index (DXY) traded marginally lower, closing near key support. The 80.820 level was the previous range peak and the immediate trend is up while price-action remains near or above this pivot on a closing basis. While the current counter-trend movement remains in correction territory, closing just below 80.820 serves as a warning for further corrective measures. As such, the next possible region of support resides between 80.340/80.670, the 38.2% and 25% retracement levels of the current advance. Further weakness would then expose the key 130-day moving average. In the meantime, if the 81 figure is cleared to the upside, then the 81.444 peak and the 200-day moving average are next targeted.
The euro rose by 0.31% against a trade-weighted basket of currencies, following Japan's plans to buy euro zone debt. After forming a small base on Monday, the EUR/USD consolidated recent weakness for the second straight day. A late-day advance could hint of a test of the 1.3013/1.3083 region, where the 25% & 38.2% retracements lie. However, this pair remains bearish at the moment, especially while weak counter-trend price-action is capped by the 1.3055/1.3079 area on a closing basis. A breakout of the latest hourly RSI triangle formation should provide a clue to near-term direction. Meanwhile, short positions are still recommended at any of the aforementioned levels, if accommodated by bearish diverging hourly studies.
The Australian Dollar underperformed a trade-weighted basket of currencies by -0.67%, as the disastrous flood continues to ravage the region. The AUD/USD fell below long-term trendline support and subsequently bearishly rejected off it, despite renewed risk appetite. This bearish development suggests a downward test of .9811, a key Fibonacci retracement. If, however, the pair is able to clear a cluster of resistance (in the form of former trendline support, downward-sloping trendline resistance and the .9886 pivot), then a counter-trend relief rally towards parity would be in the cards.
SELL EUR/USD at 1.3013, targeting 1.2970 1st, risking 1.3068