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US Dollar Index trades in near 2-year highs as EUR/USD, EUR/GBP slide

The US Dollar Index trades in 23-month highs while EUR/USD and EUR/GBP continue to sell off amid depreciating Euro.

EUR/USD drops towards the $1.0806 March low

EUR/USD is seen sliding for its sixth consecutive day towards the $1.0806 early March low as the US Dollar continues to appreciate following the publication of the March Federal Open Market Committee (FOMC) minutes which confirmed the Federal Reserve's (Fed) hawkish stance and rapid balance sheet unwind.

In view of the speed of the current decline, it is expected that the $1.0806 low will soon be slid through with the February 2020 low at $1.0778 representing the next downside target. Further down sits the $1.0727 April 2020 low. The late March low at $1.0945 and breached one-month downtrend line at $1.102 should now act as resistance, if revisited at all.

Major resistance remains to be seen between the January low and March high at $1.1122 to $1.1185. While the cross stays below this area, the long term downtrend remains intact.

​EUR/GBP’s swift decline nears support zone

EUR/GBP’s drop through the one-month support line at £0.838 has taken it close to the £0.8305 to £0.8286 support area as traders assess the impact additional sanctions on Russia may have on European economies.

The £0.8305 to £0.8286 support area contains several daily lows made in January, February and on the 23 March and as such is expected to withstand the first test. If not, one would have to allow for the March trough at £0.8203 to be back in focus.

Minor resistance is seen along the 55-day simple moving average (SMA) at £0.8369 and also along the breached one-month support line, now resistance line, at £0.838. Further up sit the 16 and 25 February highs at £0.8402 to £0.8408.

The US Dollar Basket remains in 23-month highs

Since yesterday the US Dollar Index (DXY) is trading in near 2-year highs as bonds dropped aggressively and equites sold off in the wake of the US Fed Vice Chair-elect Lael Brainard comments which put the reduction in Fed’s balance sheet back at the centre of the monetary policy discussion.

The psychological 100.00 mark is within reach, now that a break out of the one-month consolidation phase has taken place. For the past month or so the index has been capped by the 99.29 to 99.45 resistance area but repeatedly bounced off the 97.78 to 97.69 support zone.

Slips may find support between the 4 and 28 March highs at 99.33 to 99.29. Further down sits the 22 March high at 98.94 which may also offer support, if revisited at all.

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