USD Index Breaks Through Key Fibonacci Support- 9900 Now Critical

By Michael Boutros, Currency Strategist

The greenback is markedly weaker at the closeof North American trade with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR ) off by 0.57% on the session, marking the fourthlargest single day decline this year. The losses come on the backof a substantial rally in risk assets that saw stocks rally for asecond consecutive session as remarks made by Fed members Yellenand Dudley fueled speculation for further central bank easing.Weaker-than-expected weekly jobless claims data further reinforcedsoftness in the labor market after Friday’s disappointing NFPprint re-ignited the QE debate. Compounding the bullish sentimentwere ongoing rumors regarding tonight’s China GDP print withwhispers of a read as strong as 9% easing concerns over a slowdownin the world’s second largest economy. While it’sunlikely the data will come in quite that strong, markets ralliedthroughout the session as risk sentiment continued to gather paceon the back of yesterday’s advance. Stocks closed at sessionhighs with the Dow, the S&P, and NASDAQ surging 1.41%, 1.38%,and 1.30% respectively.

The dollar broke through key daily support the confluence of the 61.8% Fibonacci extension taken from the August 1st and October 27th troughs and channel support at 9945 before closing just ahead of the 100-day moving average at 9910. Daily support now rests at 9900 backed by the 50% extension at 9850 with only a break back above 9945 alleviating further downside pressure for the reserve currency. Note that today’s decline was confirmed by an RSI break below trendline support and suggests that the greenback may yet see further losses.

An hourly chart shows the index breaking belowa descending channel formation dating back to April 4 th with the dollar closing just above interimsupport at 9900. As noted in yesterday’s USD Trading Report , the break below 9945 now negates our interimbullish bias with subsequent intra-day support targets seen at 9875and the 50% extension at 9850. Interim resistance now stands at9945 backed by 9975and the psychological 10,000-mark.

The greenback declined against all fourcomponent currencies highlighted by a 1.30% decline against theAustralian dollar. Stronger-than-expected employment data out ofAustralia in overnight trade fueled a massive rally in the highyielder which broke through key daily resistance targets in earlyUS trade. The Japanese yen was the weakest performer of the lotwith an advance of just 0.01% despite broad-based dollar losses.For complete analysis and scalp targets on the AUDUSD and USDJPY,refer to today’s Winners/Losers Report .

Tomorrow’s economic docket is highlighted by the March CPI print and the University of Michigan confidence surveys. Consensus estimates call for inflation to ease to an annual rate of 2.7%, down from a previous read of 2.9% y/y with core prices seen holding steady at 2.2% y/y. While the headline print is expected to soften, stickiness in core prices may limit the Fed’s scope to embark on further easing measures as the rate continues to hold above the 2% target set forth by the central bank in January. Ahead of these key data prints lies the Chinese GDP release tonight at 10pm ET (02:00 GMT). Investors will be closely eyeing the data amid ongoing concerns of a hard landing with a stronger print likely to further support the recent rally in risk at the expense of the greenback.

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

4/13

12:30

MEDIUM

Consumer Price Index (MoM) (MAR)

0.3%

0.4%

4/13

12:30

HIGH

Consumer Price Index (YoY) (MAR)

2.7%

2.9%

4/13

12:30

MEDIUM

Consumer Price Index Ex Food & Energy (MoM) (MAR)

0.2%

0.1%

4/13

12:30

HIGH

Consumer Price Index Ex Food & Energy (YoY) (MAR)

2.2%

2.2%

4/13

12:30

LOW

Consumer Price Index n.s.a. (MAR)

229.352

227.663

4/13

12:30

LOW

Consumer Price Index Core Index s.a. (MAR)

-

227.907

4/13

13:55

HIGH

U. of Michigan Confidence (APR P)

76.5

76.2

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

Join Michael on Tuesday morning for a Live ScalpingWebinar at 1230GMT (8:30ET)

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/2012/04/12/USD_Index_Breaks_Through_Key_Fibonacci_Support-_9900_Now_Critical.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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