Greenback recovers

The greenback was firmer at the close of North American trade with the Dow Jones FXCM Dollar Index (Ticker:USDollar) advancing 0.19% on the session. Stronger-than-expected housing and jobless claims data saw equity markets open largely flat in early morning trade before a sharp afternoon sell-off saw the major indices slide substantially with the Dow, the S&P, and the NASDAQ plummeting 1.13%, 1.68%, and 1.96% respectively. The S&P 500 closed below key support at 1225 with the Dow testing 2-week lows before pulling back above the 11,700-level. The dollar pared early losses as risk sentiment quickly shifted with the index recovering from a 0.2% decline an hour into US trade. All eyes remain fixated on Europe as yields on French and Spanish debt continue to rise with investors demanding higher returns for holding government paper.

The greenback held above the 9833 mark cited in yesterday’s USD Trading report, as heightened risk-off flows continued to see traders favor the safety of the reserve currency. Despite today’s gains, daily relative strength continues to hold below interim RSI resistance at the 57-mark, with a break here supporting further dollar advances to the 9900-level. Ultimately we look for the dollar to test the 23.6% Fibonacci extension taken from the June 2010 and November 2010 crests at 9970. Looking ahead over the next 24-hours, the greenback may pare some of the recent gains as investors look to unwind haven flows ahead of the weekend.

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:
www.DailyFX.com

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.

Twitter: @MBForex
WEB: www.DailyFX.com

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