USD Index Finds Bids As Stocks Post 3 Day Losing Streak

By Michael Boutros, Currency Strategist

The greenback is fractionally higher at theclose of North American trade with the Dow Jones FXCM DollarIndex (Ticker: USDOLLAR ) advancing just 0.02% on the session. The daywas marked by broad-based losses in equities after weaker thanexpected Chinese manufacturing data showed contraction in thesector, fueling ongoing concerns about a slower growth in theworld’s second largest economy. Eurozone PMI data followedwith the composite, services, and manufacturing components allmissing estimates, posting deeper contractions than expected. USStocks closed weaker across the board for a third consecutivesession with the Dow, the S&P, and NASDAQ off by 0.60%, 0.72%,and .39% respectively. While the dollar was relatively unchanged onthe session,

The dollar held a rather tight range throughout the session after failing a second attempt at a breach above trendline resistance dating back to the October 4th highs. The move suggests that the greenback may look to pull back to the convergence of channel support and he 61.8% Fibonacci extension taken from the August 1st and October 27th troughs at 9945. This level remains paramount with only a break below negating our bullish bias. Note that the daily relative strength index seems to be flattening out, offering little in the way of conviction for our directional bias.

An hourly chart shows the index continuing to trade within the confines of a newly formed ascending channel formation with the dollar closing just above the psychological 10,000 mark. A break below this formation eyes subsequent support targets at 9975, the 61.8% extension at 9945 and 9900. Topside resistance stands at 10,030 backed by 10055, and the 78.6% extension tested last week at 10,080. Look for the index to remain in consolidation heading into Asia Pacific trade with a breach above channel resistance offering further conviction for dollar advances.

The greenback advanced against three of thefour component currencies highlighted by a 0.71% advance againstthe aussie. The high yielder has come under substantial pressure asfears of a slowdown in Australia’s largest trading partner,China continue to weigh on demand for the aussie. For completeanalysis on the AUDUSD and detailed scalp targets refer to thisweek’s Scalp Report . The Japanese yen is the top performer againstthe dollar today with an advance of 1.08% on the session aftermoving a full 140% of its daily average true range. Classic havenflows have continued to back both the dollar and the yen as tradersjettison risk assets in favor of lower yielding “haven”assets. Although our medium-term bias on the USDJPY remainsweighted to the topside, the recent pullback may still have yet togo with move likely to offer favorable long entries. For completescalp targets on the USDJPY refer to today’s Winners/Losers report .

Tomorrow’s economic docket is rather light with only the February new home sales on tap. Consensus estimates call for the pace of sales to increase by 1.3% m/m, up from a previous drawdown of 0.9% m/m. Investors will be closely eyeing the data after existing home sales saw a decline of -0.9% m/m yesterday, missing calls for a positive read of 0.9% m/m. With the housing sector still under pressure, the Fed will remain reluctant to normalize policy and the dollar may come under pressure should the print miss expectations.

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

3/23

14:00

MEDIUM

New Home Sales

325K

321K

3/23

14:00

MEDIUM

New Home Sales (MoM)

1.3%

-0.9%

---Written by Michael Boutros, Currency Strategist with DailyFX.com

To contact Michael email mboutros@dailyfx.com or follow him on Twitter @MBForex for the latest charts and commentary

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DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/us_dollar_index/usd_trading_today/2012/03/22/USD_Index_Finds_Bids_as_Stocks_Post_3_Day_Losing_Streak.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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