The US Dollar Index (DXY) initially retreated before finding support at a key 38.2% retracement near the 78 handle. Irish budget concerns fueled risk aversion, allowing the dollar to recover overnight losses. Bullish diverging hourly studies triggered a rebound that tested 78.88, near the 61.8% retracement of the November 16th/22nd dip. While the 50-day moving average continues to support on a closing basis, a move towards the key 50% retracement level at 79.587 is favored.
The Powershares US Dollar Index ETF (UUP) has inched closer to key resistance at 23. If this level is cleared, history suggests that the dollar should appreciate significantly. Follow-through strength would target the 24 region.
The EUR/USD briefly probed a key Fibonacci retracement at 1.3760 before Irish headlines hit the tape. The pair quickly gave back over half of last week's short-term double bottom recovery.
Price-action eventually found a foothold above 1.3570, maintaining the possibility of forming an inverse head & shoulders base. Meanwhile, losing 1.3570 could expose the 1.3440 pivot, which coincides with the 50% retracement of the move up from August.
The GBP/USD once again rejected near the 50% retracement at 1.6068. Subsequent weakness confirmed a secondary top or lower high. As such, losing 50-day moving average support could shift focus to the 1.5730 region.
