US dollar retreats from overnight gains
The dollar index spiked higher overnight, testing resistance at 91.00 before falling back to finish the session almost unchanged at 90.75. In Asia, the index has eased to 90.68 in subdued trading. The 50-day moving average (DMA) at 91.00 capped gains precisely, and this morning resides at 90.93. A daily close now above 91.00 will initially set the scene for further dollar gains targeting the 92.00 area. Support remains distant at 90.00.
Among the majors, EUR/USD continues to edge lower, trading at 1.2097 this morning, having broken out of its uptrend in the early part of last week. The charts suggest that EUR/USD could extend its fall to near 1.1900 and the 100-DMA over the next week. Similar formations are evident on fellow currency darlings, the AUD/USD and NZD/USD although both have risen 0.35% to 0.7710 and 0.7135 today on a stimulus tailwind.
GBP/USD has traced out an impressive multi-day resistance zone at 1.3700. Sterling fell 80 points at one stage to 1.3520, before regaining all of those losses to finish the day at 1.3585. It has crept higher to 1.3605 in Asia, but a loss of its rising support line, today at 1.3530, presages deeper losses targeting the 1.3200 regions, long-term support and also the 100-DMA.
Asian currencies are modestly stronger across the board today on the US stimulus narrative. The US dollar has unwound its overnight rally just as quickly as it began in overnight trading. Notably, the Malaysian ringgit has failed to join in regional strength seen today, USD/MYR anchored near its overnight highs as it trades at 4.0490 this morning. With the odds of Bank Negara easing this week rising, the ringgit is set to underperform its regional neighbours this week, and USD/MYR could rally to 4.0850 if BNM cuts.
The abrupt rise and equally steep fall of the US dollar overnight is suggestive of stop-loss price action in a US holiday-thinned market. For all the noise though, the greenback is broadly only back to where it started trading yesterday versus most currencies. That suggests that a higher dollar is still the weaker side in the near-term.
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