Dollar advances as FX volatility surges

The Canadian dollar is the top performer mid-day in New York with an advance of 0.64% against a stronger greenback. The morning has been dominated by violent swings in FX pairs with the loonie managing to stay ahead despite moderate advances in the greenback. The USD/CAD pair continues to range between the 50% Fibonacci extension taken from the October 17th and 25th troughs at 1.0090 and the 76.4% extension at 1.0143. Interims support rests at the 50% extension with a break below eyeing subsequent floors at the 38.2% extension at 1.0065, 1.0040, and the October 25th low at 0.9990. We favor topside scalps on the loonie should risk aversion flows persist, with a break above 1.0143 eyeing topside targets at 1.0170, the 100% extension at 1.0190, and 1.0235. For complete scalp details on this trade setup Click Here.

With no data on tap from Canada, investors will continue to eye developments out of Europe with regards to the rescue package which is expected to be announced at some point today. If the plan fails to satisfy markets, look for the USD/CAD to move higher as higher yielding risk currencies come under pressure, with traders favoring lower yielding haven plays into the dollar, the yen, and the swissie.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

77.98

50-Day SMA

76.78

20-Day SMA

76.70

2011 JPY High

75.79

The Australian dollar is the worst performing currency with a decline of more than 0.70% against the greenback. Investors have started to unwind risk trades ahead of the EU announcement today with the AUD/USD pair breaking below key support at the 61.8% Fibonacci extension taken from the October 12th and 18th troughs at 1.0427. Interim support now rests at 1.0340 with subsequent support targets eyed at the 38.2% extension at 1.0310 and 1.0275. Topside resistance holds at the 50% extension at 1.0368 backed by the 1.04-figure, and the 61.8% extension at 1.0427. Our bias for the pair remains weighted to the downside on account of diminishing interest rate expectations from the Reserve Bank of Australia and concerns over the European crisis and whether officials will be able formulate a package ambitious enough to stem fears of further debt contagion in the region. For complete scalp details on this trade setup, Click Here.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

0.8209

50-Day SMA

0.8075

20-Day SMA

0.7833

2011 NZD High

0.8842

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB:
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About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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