The US Dollar Index (DXY) managed to recover earlier losses in overall thin trading conditions. Bullish hourly diverging studies (MACD & RSI) triggered a rebound just above the December 17th low in the mid-79 region. Not only does this potentially mark platform support, but it also represents a failure to break daily (9-period) RSI trendline support. A daily close above the resistant 130-day moving average at 80.48 is now required to confirm an upside break-out towards the 200-day moving average. Meanwhile, only a daily close below the 30-day exponential moving average will shift focus back to the Fibonacci retracement at 79.223.
The EUR/USD was the underperformer on the day after rejecting at the 25-day exponential moving average. Bearish hourly diverging studies also triggered a failure to clear the daily (9-period) downward sloping trendline. Moreover, price-action has confirmed a bearish daily spinning top formation that now refocuses euro bears back to the key 1.3080 region. A break below this important 50% retracement level would then suggest a re-test of the 1.2970 swing low. In the meantime, only above RSI trendline resistance and the 25-day exponential moving average (now at 1.3264) will shift expectations higher.
The Swiss Franc continues to be an outperformer, trading up nearly a percent against a trade-weighted basket of currencies. The Swiss currency reached fresh all-time highs vs. the US Dollar and British Pound, while continuing to hover above last week’s all-time high vs. the euro. Further upside, however, could be hampered by thin holiday trade and possible daily bearish diverging studies. As such, overbought hourly technical indications seem to be a more appropriate strategy to short the EUR/CHF, GBP/CHF and USD/CHF.
The British Pound finished the day relatively unchanged. In addition to marking a fresh all-time low vs. the Swiss Franc, a new cycle low was reached vs. the Australian Dollar. The GBP/USD failed to clear the 1.5484 former swing low, triggering a sharp relapse to last week’s swing low near 1.5350. Possible daily bullish diverging studies and the persistent probe of the 200-day moving average suggest that the Cable could consolidate until the bulk of traders return to the market next week.
The USD/JPY broke below the 50-day moving average and 50% retracement level at 82.45 following strong Japanese economic data and renewed selling pressure in Asian equity markets. The pair found support, however, near the 61.8% retracement at 81.86 to form a daily bullish hammer. Dollar bulls will now look to reclaim the formerly supportive 50-day moving average at 82.70 to avoid a re-test of the Fibonacci pivot at 81.86.
