The sell off in the U.S. Dollar can’t come as a complete surprise to traders.
The dollar continued its slide through the 77.00 and 76.00 major psychological number as expectations for a December rate cut is being factored into the market due to the housing markets and banking credit issues.
The announcement by the Chinese stating that there will be a shift away from the U.S. Dollar to stronger currencies like the Euro accelerated the dollar sell off during last night’s Asian session approx 9:00pm EST. This further reflects the global sentiment that the U.S. Dollar is has lost it’s standing as the dominant global currency.
But can this really be a surprise to traders watching the Dollar over the past 18 months?
The euro and pound continue to benefit from the weak dollar and there is very little reason to think that the prior support at 76.00 will not become resistance.
However, 75.00 will not be broken as easily as some dollar bears would think. The “too far too fast” journey to today’s low of 75.07 leaves some room for a corrective bounce…but do not read a significant reversal here.
The dollar correlated majors are not the only story here at crude oil seems poised to reach $100/barrel this week and gold climbs to a 28 year high. The AUD/USD and USD/CAD have been major beneficiaries of this rally in commodities. Look to today’s crude oil inventory number to initiate a push to $100.
The dollar-yen sell off is likely to continue as the Dow looks to open weaker this morning.
All charts presented with permission from Autochartist pattern recognition software.