Daily DXY Roundup - 1/14

The US Dollar Index (DXY) was modestly lower, consolidating losses over the past few days. Platform support at 78.820 was tested for third time before moderating the remainder of the day. The next test of obvious support would be important since the forth test carries the highest probability of breaking through. As such, a 1-4 day corrective pullback is anticipated before dollar bears reassert. A sustained loss of platform support would also confirm a 6-week double top formation and would project a 2.5 point measured move downwards. The initial downside target, however, lies between 77.853/78.535, the 61.8% & 50% retracement levels of the entire late-October to December advance. Meanwhile, a move back above 79.764 (38.2% correction) is now needed to suggest a period of base building for the greenback.

The Australian Dollar was the weakest performer on the day, following a surprise reserve requirement rate rise by the PBOC. The Aussie was down 0.80% vs. a trade-weighted basket of currencies as the GBP/AUD & EUR/AUD pairs gained 1.22% each. The Australia exchange-rated index is now testing the bottom bollinger band once again. In both previous oversold instances, the currency managed to rebound and went on to reach fresh lifetime highs soon afterwards. An inability to form a bottom here, however, would suggest something more sinister is at play. As such, a re-test of the 101.40/102.50 region (October/November lows) cannot be ruled out.