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17 Sep 2013
DXY bounces off possible support at 81.01 post-Fed / Summers news
FXstreet.com (Barcelona) - The US Dollar Index (DXY) gapped lower on the breaking news that Larry Summers has formally withdrawn his name from consideration for the Fed Chairmanship. The drop stopped right at 81.01 – a possible “correction support” level.
Data in addition to Fed news to dominate trading the remainder of the week
By now, everyone is familiar with the bullish reaction to the perceived Yellen for Summers switch as Fed Chairman front-runners. The initial euphoric reaction (in the form of lower interest rates and DXY) clearly lost some of its luster, however, once the 81.01 level was tested (and once it successfully held up as support).
Commentators are assigning responsibility for the mid-session turnaround (higher in rates and DXY and lower in risk assets) to a trading glitch in the options arena. They may be overlooking the fact that Obama’s speech / political jabbing mid-day probably didn’t help. Finally, they are clearly overlooking the possibility that the rally was fool’s gold to begin with since almost nobody is going to be more dovish than Bernanke – and tapering is set to begin under his watch anyway.
Tuesday, those with an interest in DXY will be watching the policy meeting minutes out of the Reserve Bank of Australia, British inflation data, EuroZone Economic Sentiment and the US CPI data.
Technical outlook for DXY
The DXY ended up finding a floor down at potential “correction support”at 81.01. If that level holds up, technicians say we could see a rally up to at least 82.69 and possibly up to the 83.35 – 83.75 level. Any break and close below 81.01 will lead to a test of 80.50 and maybe even down to 79.00.
Data in addition to Fed news to dominate trading the remainder of the week
By now, everyone is familiar with the bullish reaction to the perceived Yellen for Summers switch as Fed Chairman front-runners. The initial euphoric reaction (in the form of lower interest rates and DXY) clearly lost some of its luster, however, once the 81.01 level was tested (and once it successfully held up as support).
Commentators are assigning responsibility for the mid-session turnaround (higher in rates and DXY and lower in risk assets) to a trading glitch in the options arena. They may be overlooking the fact that Obama’s speech / political jabbing mid-day probably didn’t help. Finally, they are clearly overlooking the possibility that the rally was fool’s gold to begin with since almost nobody is going to be more dovish than Bernanke – and tapering is set to begin under his watch anyway.
Tuesday, those with an interest in DXY will be watching the policy meeting minutes out of the Reserve Bank of Australia, British inflation data, EuroZone Economic Sentiment and the US CPI data.
Technical outlook for DXY
The DXY ended up finding a floor down at potential “correction support”at 81.01. If that level holds up, technicians say we could see a rally up to at least 82.69 and possibly up to the 83.35 – 83.75 level. Any break and close below 81.01 will lead to a test of 80.50 and maybe even down to 79.00.