Last week we saw US Dollar rally sharply against all major currencies with the Euro and the Sterling effected the most. US Dollar closed higher for the first week in nine amidst a sharp correction in Wall Street.
Early of the week, US Dollar rally was seen as an unwinding of overextended US Dollar short position but by mid week it showed that the US Dollar may yet to continue higher till the end of the week.
Fundamentally, The US Dollar strong rebound was attributed to the lite version “Quantitative Easing ” announcement which downgrade the economic outlook. Wall Street was on the sell off mood and the US dollar rebounded.
Our immediate reading on the US Dollar move into next week is whether US Dollar can maintain its trajectory and pace. Interest rate and economic fundamental considerations take a back seat to trader sentiment trends; but confidence can be catalyzed or destroyed by meaningful fundamental events.
It will be critical to watch whether the highly-correlated US S&P 500 will continue lower in the days ahead. The index had recovered sharply following noteworthy tumbles in mid-June to early July. Yet a substantial 11.7% trough-to-peak advance was not enough to take it above highs set in June, and the recent turn lower leaves momentum firmly to the downside. It may be especially important to watch when/if the S&P tests the 1050 mark, as a break below would leave the strongly psychologically significant 1000 handle as next significant support.
Technically, US Dollar Index managed to hold above the psychological 80 level and has rebounded strongly since then. The current development suggested that The US Dollar is still bullish and expected to test resistance at 83.45 (38.2% retracement of 88.70 to 80.08 at 83.37).
The USD/MYR pair fall further to T2 before rebounding on strong US dollar moved against almost currencies on Wednesday. The uptrend rebound was resisted by the downtrend line and on Friday the pair experienced a sharp fall on strong showing of local stock market.
The next week, the pair is expected to test the support at 3.16 with resistance at previous high at 3.1952.
