Dollar keeps weaker on the more positive risk mood
And the technical signs for the dollar aren’t looking good as we kick start the new week.
The greenback is lower alongside the yen as stocks are rallying, with EUR/USD on the verge of testing 1.1900 as it looks to hold above its 21 October high @ 1.1881:
Break above the figure level and buyers will see added momentum to chase a potential move towards 1.2000 next.
Meanwhile, USD/CHF is also flirting with a slippery slope as price trades below 0.9000 at its lowest levels since January 2015:
Elsewhere, you have GBP/USD trading to a two-month high near 1.3200, USD/CAD easing towards the key 1.3000 handle, AUD/USD trading to a seven-week high close to 0.7300, and NZD/USD trading above 0.6800 at levels last seen since March 2019.
Looking at the dollar index chart itself:
The momentum is seeing the currency dragged towards a test of its 100-month MA (red line), although this chart is arguably a reflection of the EUR/USD. I’d much rather look at the Bloomberg dollar index chart but the story is the same:
The index shows that the dollar has fallen to its weakest level since May 2018 and is on the verge of testing its 100-month MA (red line) for the first time since 2014.
In other words, the dollar is really being challenged now across the board and is meeting a key technical point where buyers will have to show their mettle or it is going to be a painful drop for the greenback if these levels give way.
Although the election spelled out a Biden victory and the dollar trade for that can be seen as the ‘anti-Trump’ in some ways, the risk rally is arguably what is pinning the dollar lower over the past few days and pushing it to the edge now.
In the bigger picture, the election matters little and the dollar is arguably still on track for a multi-year decline. However, is this what tips the currency over and solidifies that momentum over the next few years?
We are still barely over, or perhaps still in the middle, of the election euphoria so it could be too early to draw any real conclusions from price action; with the narrative slowly shifting back towards the battle between the virus crisis and easy money.
If easy money is really that powerful and drives the market forward over the next few years, it is going to be rocky and rough time for the dollar for the most part.