The DXY’s (US Dollar Index) recovery completed the initial correction target before reversing course. The late October highs were tested before bearish diverging hourly studies took hold. This triggered a reversal that wiped out most of the day’s gains, leaving a daily doji hammer formation. However, since it took only 4 days to match the previous 6-day decline, there is a high probability of forming a higher low within the next few days. While previous 20-day moving average resistance is the most likely candidate of support, a deeper retracement cannot be ruled out. In the process of completing a bear campaign of this magnitude, it is not uncommon to retrace a major portion of the corrective recovery. Thus, key proportions to watch are the 25%, 38.2%, 50%, 61.8% & 78.6% retracements of the latest 4-day range.
The USD/JPY rebounded to test the 50-day moving average. A higher low on top of previous range resistance near the 82 handle would be an encouraging development for dollar bulls. Meanwhile, a daily close below the formerly resistant 20-day moving average would be bearish.
Treasury market developments took center stage in late afternoon trade, as the 30-year bond auction fuelled a short-covering rally along the entire curve. This in turn dragged down yield differentials which added steam to the US Dollar's bearish reversal. While price-action for US yields was decisively bearish today, further consolidation is favored in the medium-term.
