The surprisingly soft US PMI report here was a key trigger that kicked off a fresh round of selling in the dollar yesterday. In a time when markets are fearing the Fed being more aggressive in the tightening cycle, the two conditions for that i.e. higher inflation data and stronger economic data in general, have come up short and so the dollar is paying the price.
The greenback was at a checkpoint of sorts since the end of last week and while there were some positive technical developments on Monday, that is all pretty much gone now as price action reverses and head back in the other direction.
EUR/USD is now trading back above its 200-day moving average (blue line) after the first attempt last week failed to get past the key level. A firm break above that and a push above 1.0500 will keep buyers in a good spot to chase a move towards key trendline resistance (white line) next, above the 1.0600 mark.
Meanwhile, GBP/USD has also managed to secure a daily break above the 1.2000 mark and that leaves scope for buyers to roam towards the 200-day moving average (blue line) next - now seen at 1.2189. That will be the next critical resistance level for the pair before the August highs at 1.2276-93 come into play.
With equities also pushing higher yesterday in a bad news is good news kind of mood, the aussie has also come back up with AUD/USD securing a return above its 100-day moving average (red line). That is keeping buyers in a decent spot as price now runs into another test of its 61.8 Fib retracement level at 0.6767 once again.
To summarise, dollar bulls tried to make a bit of a comeback but are being thwarted at the checkpoint as economic data fails to validate the recent rebound. And so, the technicals are now pointing to the notion that we might get another downside leg in the dollar again.
