Sterling staged a strong broad based rebound overnight as traders pared short positions ahead of year end. Momentum in Sterling continues today which saw it staying firmly above 1.6 level against the greenback while EUR/GBP is also trading below 0.895 level. Dollar's recovery fades as gold rebounds back to above 1100 level. The development argues that dollar's consolidation is still in progress and would remain soft on the last trading day of the year.

Looking at the dollar index, the recovery from 77.33 failed below 78.45 resistance and weakens sharply today. Consolidations from 78.54 is likely still in progress and should have just started another falling leg to 77.33 support and possibly below. Nevertheless, we'd still expect downside to be contained by 38.2% retracement of 74.19 to 78.45 at 76.82 and bring rally resumption.