The dollar index managed to put in a higher close after failing to extend 2011 lows early in the session. The buck climbed away from an early dip lower that looked set to test 2011 lows posted early in February to post its first higher close in three days. The buck's gains were held back by a healthy rise in US equities after several days of rather brutal declines amid turmoil in Libya and surging oil prices. Over-night the buck started well bid and looked to extend its gains on the back of news that China will be pursuing slower growth through 2015 to try and tackle inflationary pressures, but has since reverse lower as regional equities put in a late recovery lifting riskier, higher yielding assets.
If the index can manage to either close higher on the day, or at least not extend its declines past Friday's lows then we may be able to forecast a double-bottom forming on daily charts. Which should then be followed by a measured move higher back toward 79.00 before encountering any real resistance. However, all eyes are on the ECB this week and what their language is going to be regarding inflation in the euro-region, if it turns out as many suspect that the central bank toughens its language and even hints to rate hikes then its likely that the index will suffer further setbacks below current 2011 lows as investors buy into the euro.
Written by Jonathan Granby, DailyFX Research Team