Thursday, January 20, 2011
Daily DXY Roundup: 1/20
The US Dollar Index (DXY) finished the day modestly higher after giving up a bulk of earlier gains. The greenback broke above 9-day trendline resistance but failed to materially follow-through. The (9-period) 4-hourly RSI midpoint rejected strength once again, but could be breached in the following sessions given bullish intraday studies and the formation of a small-base in price-action. Moreover, the inability to close below the key 50% at 78.538 is also an encouraging sign for dollar bulls. Meanwhile, if the current corrective phase fails to reach 79.543 (the 38.2% retracement of recent weakness), then focus shifts back towards 78.538. A daily close below this important pivot could produce a selling capitulation towards long-term trendline support below the 77 handle.
The Japanese Yen was the weakest performer on the day, following a warning from a government report concerning the potential worsening debt problem for Japan. The currency fell more than 1% vs. a trade-weighted basket, as the USD/JPY broke out of a 10-day falling wedge. The pair then rallied 50 pips, settling right below a key downward sloping trendline. A break above resistance just above 83Y would expose the recent highs in the 84.34/84.51 region.