The US Dollar Index (DXY) continues to struggle to clear the 130-day moving average, losing nearly one percent after rejecting near this key resistance overnight. As a result, dollar bears were redirected towards newly formed platform support at 79.58, leaving a downside breach of daily (9-period) RSI trendline support. Further weakness will expose 78.82/79.22, between the December 14th swing low and the key 38.2% retracement. Overcoming downward sloping trendline resistance near 80.20 is now necessary to regain the medium-term bullish tone.
The Japanese Yen was the broad winner on the day, increasing 0.70% vs. a trade-weighted basket of currencies. The GBP/JPY marked a fresh 2-year low, but managed to recover following a weak test of Tuesday's fresh low. The USD/JPY failed to regain the 50-day moving average and saw follow-through selling pressure following a bid in the treasury market. Oversold daily studies and possible bullish hourly diverging studies hint of possible consolidation going into thin end-of-year trade. Meanwhile, the yen exchange-rated index (Bloomberg: CEERJN:IND) continues to ascend towards the late October all-time high.
The AUD/USD re-tested the November peak, marking a fresh year-to-date high. Due to the recent outperformance, the Aussie now looks overvalued at current levels according to daily overbought readings vs. a variety of currencies. The Australian currency, however, is expected to outperform in the new year given robust risk appetite in global equity markets and should be accumulated on any oversold dips.
