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USD INDEX: Vulnerable Below 80

Published 04/15/2014, 02:16 AM
Updated 07/09/2023, 06:31 AM

Asia trading saw the Greenback hold onto the gains of the previous 2 session, but take note these gains were achieved on lower volumes.

The Dollar Index

Yesterday’s gains were aided by corporate earnings and better than expected retail sales. However the lower volume (inset) makes me suspect gains may have been fuelled more by short covering as opposed to new buyers. The key level to monitor is the 80.00 mark, but allows for some market noise here as we can see the levels are not as precise as we'd like.

Due to the lower volume at this stage I am favouring for this to be a corrective move and for a revisit down to the lows around 79.30. 

Tonight there are several drivers that should affect the Greenback including Lady Yellen speaking and CPI/Core CPI m/m. If Yellen is more Dovish and talks down her previous clues to rate increases then this could be bearish for the Greenback, particularly if CPI reading also fall short. 

On the bullish side there are reversal patterns have been appearing across Majors on the daily charts in the Greenback's favour. 

- USD/JPY: Morning star reversal (bullish)
- USD/CHF: Morning star reversal (bullish)
- GBP/USD: Evening Star Reversal (bearish for GBP)
- EUR/USD: Bearish Rikshaw Man Doji followed by Gap down and continued sell-off on Monday
- AUD/USD: Shooting Star Reversal below 0.945 and followed by Hanging Man. 

However keep in mind that with Candlestick reversals then do not necessarily mean reversal, but can also just mean sideways trading/correction. 

80.80 is my line in the sand in which if broken above, adds further weight to the reversal patterns mentioned above. Until then my bias is for a revisit to the 79.30 lows.

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