USD Recovers Further As Risk Appetite Also Bounces Back
XM Group | Oct 20, 2014 04:27AM ET
The US Dollar as well as high-yielding currencies such as the Australian dollar and the New Zealand dollar did well at the start of the week, helped by positive risk sentiment. Following strong economic data out of the United States – such as University of Michigan consumer confidence – the US stock market posted sharp gains on Friday and index futures were also up this morning.
The yen fell, as USD/JPY climbed to a high of 107.38 before backing down a little to 107.25. News that the government pension investment fund could boost its holdings of foreign securities sent the Japanese currency lower. Japanese stocks were up sharply as the benchmark Nikkei 225 was up nearly 4% by the day’s unofficial close – an indication of the strength of the rebound.
The dollar also held and extended slightly most of its gains against the euro, as it drove the EUR/USD exchange rate back down to 1.2745 on the market’s assessment that the US economy was holding up relatively well.
The dollar steadied against the Swiss franc, pausing its decline from the October 6 high of 0.9685 but is at risk for a further decline back towards the key 0.9300 level. The tenkan-sen line has just crossed below the kijun-sen line, which is a bearish signal. RSI has been falling since the October 6 high although is resting on the 50 line currently. MACD has turned back down, indicating bearishness.
Prices are hovering at 0.9454 – which is the 23.6% Fibonacci retracement level of the May 8 low – October 6 high. If this support level fails and there is a daily close below this level, it would give more strength to the bears. This would open the way for prices to target 0.9300 – the 38.2 Fibonacci retracement level.
Alternatively a move back from 0.9454 is considered bullish and opens up 0.9685 again. We would wait for more bullish signals.
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