[DanRath]

Recently the market watches the Dollar a lot but hardly blinks when the trade numbers come out (All about employment, housing etc).

This could be a big mistake now. Only twice in the USD bear market did trade and the USD-index diverge. Firstly was in 2005 as the likely impact of HIA overshadowed the deterioration in trade. Funnily enough in early 2006 the USD-index started falling again and the overlay re-established itself.

One might argue that the second time-divergence took place was in the 2nd half of 2008. This was also likely an aberration as it came as the USD was in demand in the financial de-leveraging environment.

We have not seen a trade number like this since Dec. 2001 when the USD-index was over 115.

The FX dynamic of “economic de-leveraging” is likely different from “financial de-leveraging”.

This dynamic could be extremely USD positive in the near-term.

EURUSD – daily chart


The hold of trend resistance and 76.4% Fibonacci against the recent highs suggests that in the short term, EURUSD can trade significantly lower and accelerate down if / when it breaches 1.3113. A move down to the 1.2750 area in the short term is expected.