With the break of 112 yesterday, the Dollar-Index (DXY) quickly moved lower. At time of writing the DXY is already trading at the next bigger support zone above the 110 treshold. These October lows (110.09/05) have to hold, otherwise even the biggest Dollar bulls should start to ponder. There could be a brief rebound in the Dollar from here, but I think lower levels are the likely scenario over the medium term. I see a correction potential up to the 105/103 range.
Main driver of the recent Dollar weakness is apparently improved risk sentiment reflected in rising stocks. Slightly rising bond prices and thus falling interest rates are of course also helping the Dollar bears, but a real improvement in risk sentiment looks different. As such, one must remain cautious and seek quick profits rather than taking the big swing trade.
EURUSD -- 1.0014
“Above this resistance zone bears can hope for the parity to hold but I wouldn't want to rely on that” (#109). The red descending trend line and the 50 ema are history now and the former parity resistance could become support today if the currency pair can hold 1.000 into the close.
The original resistance zone has held for a long time. In this respect, I think it is likely that the Euro will continue to recover. Appropriate targets are marked on the chart by the red dotted lines. Above that there is only the 200 dma along with the psychologically interesting 1.05 level. Below the 50 ema, however, the bullish scenario is over for the time being.
GBPUSD -- 1.1558
Sterling has recovered well and who would have thought at the end of September that the pound would be trading nearly 12 percent higher from the lows today. If I were long, I would cash in here and wait and see how sustainable the movement above the 1.1500 treshold is. Of course, there is plenty of room up towards the 200-day moving average, but five big figures since the Friday’s low should make you cautious.
Good luck,
Sebbo