Is the US dollar pain over yet?

Trade USD
Daily DXY chart

The US dollar basket index (DXY) has been in a consolidation pattern for most of the year and the current momentum continues to push for further downside. The recent market volatility from sluggish global growth and reduced inflation expectations has spurred debate within the FED whether to hike this year or postpone into 2016. This uncertainty should continue to weight on the greenback in the short term. The weak retail sales released today is further casting doubt about a rate hike in 2015.

At the same time other central banks such as the BoC, RBA and RBNZ have temporarily paused their easing initiatives, which should support the short-term recovery of their respective currencies (USDCAD, AUDUSD, NZDUSD).  Over the long run, however, the macro picture continues to favor the greenback.

Currently the IG client base is still heavily long the greenback (69% short EURUSD, 70% long USDJPY, 70% long USDCAD, 61% short AUDUSD), thus, a further rebalancing might be in the cards.

EURUSD (long) support 1.1340, résistance 1.1490

AUDUSD (long)support 0.7200, résistance 0.7380

NZDUSD support 0.6610, résistance 0.6780

USDCAD support 1.2900, résistance 1.3080


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