As we thought, the dollar saw profit taking against the euro but not before setting a higher high of 1.3030. That level was then rejected and the dollar gained 200 pips to trade as low as 1.2835. The sterling may be ready to roll over after rejecting 1.5470, retesting 1.5150, which we pointed out yesterday was a 61.8% retracement level from the recent move higher. We are cautious on this dollar move and the bullish outlook we spoke about yesterday may be questionable as several other factors aren't matching up.
The equity markets are still consolidating as traders continue to retest the 10K level for the DOW. If we see strong equity markets this week, the dollar rally may be in danger. So keep an eye on economic data and worse than expected figures will most likely lead to risk aversion and a stronger dollar, coinciding with the bullish dollar we spoke about yesterday. Stay tuned.
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