Low Rates Trigger Dollar Selloff

NEW YORK (TheStreet) -- The currency market overall went mainly in one direction, and that direction was up.

Since the Sunday session open, the dollar index was sold at a continuous pace, losing 80 ticks, or a little more than 1%. This happened after officials present at the G-20 meeting pledged to maintain interest rates at low levels, something that will allow outflows from the U.S. economy and devalue the greenback. The gains seen during the overnight session were very strong and now most pairs are trading way above the daily average trading range. The only exception is the yen, which barely moved in Monday trade.

Dollar Index Technical View: TheLFB Member Charts.

Four-hour chart: Mixed. Main price points: 74.95 and 76.82. Looking for: Reaction around 74.95 support.

The dollar index is trading significantly lower, with the current prices just around 30 ticks above the yearly lows. As such, looking at the chart, the black wave ii flat correction that we were looking for the last few days, may get invalidated soon as wave ii must not retrace more than 100% of the wave i distance.

If the break of the 74.95 low appears in the near term, we will be looking for an alternative wave count with a new downside target around the 74.20 area. If the alternative wave count is correct then an ending diagonal shown on our daily chart review is not done yet.

The euro (Eur/Usd 1.4995) is currently trading just below TheLFB R3 (1.5005) and at the same time near to the 1.5000 benchmark level. The market very rarely hits TheLFB R3 or S3 areas, but lately this is happening more and more often as the market is shifting rapidly from range-bound to volatile trading.