The US Dollar Index (DXY) fell across the board, losing nearly 1% vs. a trade-weighted basket of currencies. The boost in risk appetite for equities triggered the loss of support in the 80.820, allowing the greenback to wipe-out half of the recent gains. Often, when counter-trend reversals of this magnitude close at the low of the day, the dramatic sell-off tends to exhaust most or all of the sellers temporarily. Thus, it would not be surprising to see the latest decline consolidate in the short-term, considering extreme oversold hourly conditions and the close proximity of the key 50% retracement. However, if follow-through weakness ensues, the 61.8% retracement at 79.745 should serve as support. Meanwhile, dollar bulls will need to reclaim Wednesday's former intra-day low at 80.454 to stabilize the latest bout of selling pressure.
The euro was the big winner of the day, following a successful Portuguese debt auction. The single currency appreciated by 0.64% vs. a trade-weighted basket of currencies. The Euro Index (EXY) has enjoyed a solid recovery since completing a 5-wave impulsive decline earlier in the week. The latest up-move nearly reached the 105.00 swing low, which marks the base of the previous 4th-wave. While this key pivot could temporarily cap strength, the previous corrections project a 2 point correction off the recent lows. This equates to a move to the 105.54 region measured from Monday's 103.54 reaction low.