The Dollar Showing Signs of Distress

By: Hillel Fuld
The USD hit an 8 month low VS the JPY and hovered near a three-month trough against the EUR on Wednesday. This is a direct result of the weak
U.S. data and talks about the Federal Reserve embarking on further policy leniencies, which is pushing down Treasury yields.

The USD fell as low as 85.40 yen, its lowest since the end of November before inching back to 85.51, down 0.3 percent on the day. A fall below a November low of 84.82 yen would take the pair to its lowest level in a whopping 15 years.

"The market is full of dollar bears," said Ayako Sera, market strategist at Sumitomo Trust & Banking.

"Some are speculating the Fed could announce a further relaxation of policy at its meeting next week," she said.


The USD Index

The dollar index, a gauge of the greenback's performance against major currencies, saw no drastic changes at 80.568 .DXY, remaining below its 200-day moving average, now at 80.744.

It fell as low as 80.469 the previous day, dropping below its 200-day moving average for the first time since January, which analysts said implies that we will see further decline.

The index is threatening to revisit April lows at 80.031, while support lies at 79.724, the 61.8 percent retracement of its November to June rally.

Investors were on watch for comments from Japanese authorities, although most think currency intervention is unlikely before USD JPY breaks the 15 year-low.

Japan’s finance minister reiterated on Wednesday that he is closely watching currency moves.

The EUR was little changed from late U.S. trade at $1.3230, remaining within sight of a three-month high of $1.3262 reached on trading platform EBS on Tuesday.


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