It is another good day for the dollar and as we said it seems to be its time for now! The dollar continues to enjoy a positive run with the index stable above 80.00 levels and aiming higher, with eyes at the 85 areas in the coming period!
The market is not on a risk anything now, and risk aversion on the euro is not the case. The euro is week, sterling on the other hand is strong, and the yen was pressured by the BoJ and accordingly commodities surrendered the gains to the strong greenback.
All is on the merit, the euro was hammered with the confirmed technical recession in Italy, ongoing debt problems that are turning to Spain, and lingering weak economic performance that will confirm the recession into the first quarter opposed to positive data across the Atlantic.
So why is the euro weak, it is not only about a euro-dollar merit and sentiment anymore, it is data, and the United States economy is providing the positive tone for now!
The EUR/USD slipped to the intraday low of $1.3052 today then rebounded above slightly but still trades bearishly around $1.3085 after setting the high of $1.3194. The pair is trading below 1.3110 and that is keeping the downside bias intact. The negativity on momentum indicators and on Stochastic is powering the bears for now and that will likely keep the downside bias intact as a breach of 1.3080 will clear the way now towards 1.3025-05 and the stability below the strong and psychological 1.30 areas will then extend the downside move towards 1.2975 the next support.
As for sterling, the royal pound is defying the tide with stronger data. The trade gap shrank more than expected. Although the deficit widened on the month, the exports rise is helping sustain the gains for sterling on the outlook for recovery of growth as they explore markets to replace frail demand in the debt laden euro area.
Sterling is also powered by the signs of recovery in the property market as the RICS house price index rose to a 19-month high in February.
The GBP/USD is trading positively around the session high at 1.5694 rebounding from the earlier low of 1.5621. The dollar remains strong and that might limit the upside momentum, where if the pair fails to hold above 1.5680 areas the bullishness will start to weaken and the negative momentum might again take the pair towards the session lows.
The volatility will remain into the session now as the heads turn to the FOMC that might even extend the gains for greenback. The dollar regained the positive momentum with the 1.1% rebound in retail sales that builds on the recent positive data from the United States and makes more of a case for the feds to keep the monetary policy intact today.
We see that the Feds statement might have the power to extend the dollar gains if it confirms the ongoing recovery across districts and downplays the possibility for more stimulus for now, a push the greenback needs for us to eye 85 areas for the index. The USDIX is currently hovering around 80.52 and recorded so far the high of 80.80 and the low of 80.10.