US Dollar Index (DXY) Falls Below Psychological 100.00 Support
New York (Mar 21) A recovery in the US dollar index on Monday was short-lived as steady selling from the Asian session has not only erased yesterday’s losses but has also taken DXY below the psychological 100.00 level.
Last week’s Fed meeting has been the main catalyst for the decline in the greenback while a stronger euro and British pound today have renewed downside momentum in the index.
Sterling advanced to three-week highs versus the dollar after a better than expected CPI reading. The British pound is the top performer for the day thus far and trades higher by about 120 points or 1% against the greenback.
EUR/USD broke above a flag pattern that has played out since this week’s open and rallied through a declining trendline that connects December highs with highs posted in February. The pair trades at fresh six-week highs.
The Japanese yen is the third best performer among the majors at the European close. USD/JPY trades lower by 0.55% and is seen testing a trendline that connects early February lows with lows posted later in the month.
Fed members will have a chance to readjust market expectations this week as several are scheduled to speak. Fed member Evans provided an optimistic outlook for monetary policy tightening in 2017, but failed to provide sustained dollar support. Evans, who is a known dove, expected two more rate hikes this year and was open to a fourth increase.
Fed member Dudley spoke earlier today regarding the banking industry but did not discuss monetary policy. Fed member Mester will speak next and is scheduled at 12:00 EST.
The technical outlook for the US dollar index has been titled to the downside and there is little indication of recovery potential. DXY broke below a rising channel last week and since this week’s open has broken through two notable levels. Horizontal support at 100.18 is considered important as it held the index lower in 2015 on two attempts. A further drop today below 100.00 has accompanied strong downside momentum, and while below the level, DXY remains at risk for further declines.
The next level of downside interest falls at 99.43. It not only marks a spike low from December but it is also the neckline of a head and shoulders pattern that has formed since the middle of November. The level is critical for DXY as a break could accompany a rapid move to measured move targets which fall around the 95.00 handle.
Source: EconomicCalendar
