The US Dollar Index (DXY) has reached a fresh yearly low as a result of Wednesday’s FOMC meeting. This week’s consolidation triangle breakdown has fueled dollar bears through key long-term trendline support. Once a trendline of this magnitude is broken, typically it is retested before resuming in the direction of the trend. A retest of the 76.100 region level cannot be ruled out, given possible diverging daily studies. Meanwhile, a capitulation-type move towards the 2009 low is possible while price-action remains capped by the October 15th swing low at 76.144.
The euro continues to be one of the main beneficiaries of dollar weakness. The Euro Index (EXY) has touched 112, reaching fresh 6-month highs. The EUR/USD is now firmly within the fifth wave of impulsive strength off the June lows. While bearish daily divergence hints of a pullback, the short-term uptrend remains intact while price-action remains above last week’s high at 1.4080.
The USD/JPY failed to clear the 20-day MA once again, but remains relatively steady above the psychological 80 level. If dollar weakness persists, this key level should be challenged. In the event of a marginal test, however, a false-break rebound similar to this week’s move is entirely possible. Meanwhile, the bearish campaign will remain intact until the 20-day MA is cleared.
The GBP/USD continues to extend gains and now seems destined to retest the 1.64 handle. This coincides with the 2010 high and a confluence of Fibonacci levels. While the sterling’s wave count is not as bullish as the euro, the uptrend is firmly intact while price-action remains above 1.61.
