US dollar correction continues

Safe-haven dollar dips as risk sentiment rises

With risk sentiment soaring in US equity markets overnight, the US dollar bull market correction continued unabated, with losses versus the DM and EM space overnight. The dollar index closed 0.68% lower at 106.68 overnight, easing another 0.15% to 106.53 in Asia. but traded in a very choppy 115-point range between 106.90 and 108.05. The index traced out a double bottom at 106.40 overnight, and this marks initial support. Failure allows a test of 105.85 and then 105.00. Above, resistance is at 107.60, the overnight high, and then 108.70. A neutral relative strength index allows the US dollar correction to continue for some time yet.

EUR/USD rallied through 1.0200 yesterday, finishing 0.80% higher at 1.0225. Asia has edged higher to 1.0245. ​ The technical picture still suggests only a sustained break above 1.0360 would suggest a longer-term low is in place. EUR/USD has support at 1.0120 and 1.0000. The single currency faces serious event risk in the latter half of the week, firstly from the ECB policy decision, and secondly, from Russian natural gas flows which are due to resume after pipeline maintenance.

USD/JPY is holding steady at 138.00, where it remains in Asia. 139.40 is initial resistance, followed by 140.00. Support is at 137.40 and 136.00. The former was tested again overnight, and failure now signals a much deeper correction lower.

AUD/USD and NZD/USD rallied strongly overnight, breaking higher out of their falling wedge formations, implying more gains are likely in the near term. Having broken higher through 0.6850, AUD/USD is trading at 0.6920 today and the technical picture suggests a move through 0.7000 is likely. Similarly, the rise through 0.6150 by NZD/USD suggests that further gains above 0.6300 are possible.

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