We were right: “Irrespective of the short-term movements, I stick to my view that the dollar will correct in the medium term” (MC #171)
The CPI print yesterday was actually close to expectations, but a very small downward deviation caused a big reaction. US bonds experienced a rally which brought yields down considerably and the equity markets celebrated. As a result, the Dollar Index (=DXY) closed the day over 1.5% lower. The upward trend observed since mid-July should therefore be over. Smaller counter-movements are of course possible, but these should not go beyond the 104.85/105.00 resistance zone.
EURUSD -- 1.0853
The currency pair left the 200 dma behind yesterday with a thick green candle. I would not fade that move although the euro reached slightly overbought levels. Euro bulls are looking for a dip back to the 1.0800 threshold. In the bigger picture of the annual 1.0600/1.1000 trading range (yearly low 1.0483 / high 1.1276), a move towards the psychological important 1.1000 level now seems likely.
GBPUSD -- 1.2456
Like the euro, the pound also broke above the 200-day line yesterday. Although this morning's weaker CPIs have put some pressure on the pound, the bullish scenario remains valid above the 1.2440/30 support. The next possible resistance zone I can guess in the chart is around 1.2600/50. Before reaching this level, I would stay away from shorts. Better to look for longs.
AUDUSD -- 0.6511
Aussie bulls have not had it easy in recent weeks. Although the stock market had already started to recover, the Aussie remained under pressure. Even yesterday's rally was not enough to lift the currency pair above the 0.6500 mark. Nevertheless, the upside looks weak and a decent short squeeze could be on the cards.
Good luck,
Sebbo