The buck suffered another day of setbacks on Friday as solid German IFO results and rising equities kept the pressure on. Early in the European session Germany’s closely watched IFO continued to climb to fresh record highs, lifting sentiment and the euro. Ahead of the US equity open GE and Google both beat earnings expectations, GE in fine form, lifting US stocks early in the session at the expense of the buck. In the over-night session the buck managed to register modest gains against most major currencies amid consolidation of last week’s losses and ahead of Euro-zone PMI readings due later.
After last weeks sharp losses on three of the five days of trade the dollar index is now well below the 79.00 support level which essentially opens the door for a retrace to 2010 lows posted in November below 76.00. If this move lower is to be sustained we favour a period of consolidation since the drop from the 81.00 region has taken only two-weeks and is beginning to look over-done. If the drop does continue apace then we may favour fading the move since it will likely be unsustainable dropping so far so fast, however, we will wait and see how things play out before issuing recommendations.