DJ FXCM Dollar Index
Daily Change (%)
Daily Range (% of ATR)
DJ-FXCM Dollar Index
The greenback regained its footing on Wednesday, with the Dow Jones-FXCM U.S. Dollar index bouncing back from a fresh yearly low of 9331.87, and the reserve currency may continue to gain ground over the next 24-hours of trading should the shift away from risk-taking behavior gather pace. The USD is now 0.22% higher on the day after moving 90% of its average true range, and the index may work its way back towards the 9450.00 zone following the false break of the downward trending channel. However, as the 30-minute relative strength index crosses into overbought territory, we may see the greenback consolidate ahead of the overnight trade, but Fed's Beige Book could sap demands for the reserve currency should it highlight a weakening outlook for the world's largest economy.
In light of the slowing recovery, the Fed is likely to retain a dovish tone for monetary policy, and the central bank may endorse a zero interest rate policy for the remainder of the year as it aims to balance the risks for the region. In turn, the Fed's economic survey could spark a bearish reaction in the USD, and the rebound could be short-lived as the fundamental outlook remains clouded with high uncertainty. However, the drop in risk appetite should help to prop up the greenback, and we may see a bullish dollar reaction to the survey as the reserve currency benefits from safe-haven flows. In turn, the USD may continue to recoup the losses from earlier this month, which should open up the broad range between 9331.87-9764.97.
Three of the four components lost ground on Wednesday, led by a 0.94% decline in the euro, and the single-currency is likely to face additional headwinds over the near-term as the unanswered questions regarding the new bailout package for Greece weighs on market sentiment. As German Finance Minister Wolfgang Schaeuble set the tone to limit the European Financial Stability Facility's participation in the secondary market, market participants appear to be unconvinced that the renewed efforts will address the heightening risk for contagion, and the relief rally in the euro may give out as European policy makers struggle to restore investor confidence.