US Dollar Index catch leg up from ECB
Yesterday’s dovish ECB managed to have a profound effect upon the US Dollar Index, which saw a major move higher yesterday. The Dollar Index comprises of six weighted currencies against the US dollar, yet the weighting is heavily towards the euro, which makes up 57.6% of the index. This explains the size of this move yesterday and the fact that euro volatility will heavily affect this market. Thus as the PMI readings come out this morning, we are likely to see movement with strong readings treated as Dollar Index negative while weak readings would boost the index.
We have since seen the index drift lower in a flag formation, and as such I expect to see another leg higher soon. Downside support is provided by the Fibonacci levels of 23.6% ($96.40) and 38.2% ($96.19).
We may have to wait for the PMI readings to all be announced, but ultimately I expect a resolution towards the upside, with a move back to $96.89.