The dollar index lost a significant portion of its risk-averse driven Friday gains in the early week and worked to negate the above 9600 close from Friday. The quiet nature of trade in Europe allowed for some consolidation which led to early euro gains, but the flurry of M&A related activity in the US helped accelerate greenback declines as risk appetite picked up. Not even a mutli-notch downgrade by S&P of Greece’s credit rating could stave of further declines. The index was allowed some mild respite in the lead up to Chinese CPI, which came in bang on target, as investors continued to fret about a slowdown in Chinese growth. The as expected reading negated this risk averse sentiment and the buck has resumed its declines into the Asia close and European open.
While we certainly expected some resistance around the 9600 level the move higher and subsequent reversal has been rather volatile in nature which leads us a tad uneasy about suggesting that a move back above 9600 is imminent. This higher low that was carved out around the 9450 level could be in jeopardy if index losses accelerate today and the 9500 level is taken out. However, so long as the downside remains contained above the 9500 level we continue to look at the index with a constructive outlook and see a sustained topside break back toward the 9760 region in coming days and weeks.
Written by Jonathan Granby, DailyFX Research Team
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