USD closing in on its decade high record

It was a quite big surprise that the Euro Dollar slumped by more than 1.5% below 1.12 after it hit the day high of 1.1240. I was personally expecting at least some resistance would hurdle the falling around the 1.1260 level, where there was the lower boundary of one-month-length sideway. The bottom has supported EURUSD eight times now in the last four weeks. The breakthrough triggered stop-loss sell orders at multiple levels below 1.1260 and suppressed the exchange level to a further low. The next two targets of bears are 1.1150 and 1.1098, which was 26th January’s low.

The surge of the Dollar last night was first boosted by the economic data. The recent CPI data implied US inflation is close to recovery, fuelling the speculation of a rate hike. Although the lower oil prices pushed the January CPI to a negative 0.7%, the lowest record since December 2008, the core CPI (excluding food and energy) rose 0.2% higher than market expectation. Furthermore, the US durable goods orders data is partially attributed to the rally of USD as it unexpectedly expanded by 2.8%.

The shift of the market direction did not happen and the USD is still heading to its decade high. The AUD and GBP which made their upward breakout against the Dollar fell back to their previous trading ranges. It seems to be a universal rule of trading that we shall trade with the trend not against it as we may not be able to survive before the true reversals. Now, as all major peers are technically bearish against the Dollar, betting on a stronger USD somewhat seems to be the only safe option before the reverse truly comes.

The Kiwi Dollar failed to stand above the resistance of 0.76 as mentioned before. The carry-trade strategy supported its rally in the last month, but the trend may stop at this level. Traders should be aware of the downward risk of NZDUSD.

Looking to the stock markets, Shanghai Composite surged 2.15% as the market is betting on further easing. The Nikkei Stock Average gained 1.08% to 18786. Australian ASX 200 lost 0.6% to 5909. In European markets, the UK FTSE was up 0.21%, the German DAX climbed 1% and the French CAC Index gained 0.58%. The US stock indices remained mostly unchanged. The S&P 500 closed 0.15% lower at 2111. The Dow slid 0.1% to 18215, and the Nasdaq Composite Index climbed 0.42% to 4988.

On the data front, New Zealand ANZ Business Confidence will be released at 11:00 AEDST. US Prelim GDP will be out at 0:30 AEDST; Chicago PMI and Pending Home Sales will be an hour later.

Have a great trading day!

NB: Please note all references to rates above are approximate

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