Dollar suffers steep selling today but it’s trying to regain some ground at mid-US session. Currently it’s trading as the second weakest currency, together with Canadian Dollar. Yen is the worst performing one as fresh selling is seen in US session even against Dollar. On the other hand, New Zealand Dollar was boosted by strongest quarterly GDP growth in two years and is the strongest one. Sterling was lifted by strong retail sales data even though there is no breakthrough in Brexit negotiation in the informal EU summit. Euro follows as the third strongest as German 10 year bund yield once breached 0.50%. But it’s now back at 0.47, thus limiting the strength of Euro.
In other markets, DOW and S&P 500 make record highs today while NASDAQ lags behind. US treasury yield is having a notable pull back after this week’s strong rally. It remains to be seen if 10 year yield could eventually breaks 3.115 key resistance. Major European indices ended in black with FTSE up 0.49%, DAX up 0.88% and CAC even stronger and up 1.07%. Gold is back above 1200 but struggles to ride on Dollar selloff to push through 1214.30 resistance.
An important point to note is that Dollar is now at a rather critical juncture. EUR/USD is pressing 38.2% retracement of 1.2555 to 1.1300 at 1.1779. GBP/USD is also in proximity to 38.2% retracement of 1.4376 to 1.2661 at 1.3316. We’ve pointed out before that 1.1300 in EUR/USD and 1.2661 in GBP/USD are both medium term bottoms, considering bullish convergence condition in daily MACD. Subsequent rebounds are viewed as corrective in nature.
Ideally, we should see strong resistance from 1.1779 and 1.3316 fibonacci level to limit upside, at least on first attempts. This will firmly keep medium term outlook bearish. And then based on the structure of the subsequent fall, we could be able to the possible depth of the next down moves. However, firm break of these two fibonacci levels would open up the cases of trend reversals. Even though the chance of bullish reversal in the pair is still slim in that case, technical forecasts would become more difficult.
