In fact, saying that the market was hungry for such a move yesterday might be understating it. This is a market that was desperate for just about anything to go right, after having been beaten down by inflation and a hawkish Fed for almost the entirety of the year so far.
The recent consolidation in the dollar pointed to some technical vulnerabilities and now after the surging rally in Wall Street yesterday, the charts are pointing towards a further drop in the greenback before things could potentially get better.
As broader market sentiment improves with both stocks and bonds rallying, the dollar is now in for a rough time. Let's take a look at the charts.
In the case of EUR/USD, price is breaking out to its highest levels in three months after sealed a break above its 100-day moving average (red line) and the October highs yesterday. There is potential for price action to extend further, towards the 200-day moving average (blue line), seen at 1.0438 currently - not before the August highs at 1.0364-68 first though.
Even GBP/USD is looking fairly perky despite the pound's recent shambolic performance in the past two months:
The pair is trading back above its 100-day moving average (red line) and a weekly break above the trendline resistance (white line) could spell further upside momentum towards 1.2000 next.
Meanwhile, I also highlighted some other considerations for USD/JPY and AUD/USD here and here respectively earlier.
Putting aside the rebound in USD/JPY, the other charts point towards an increasing likelihood of the dollar needing to correct lower further before finding some technical assistance. Even USD/CAD is looking poised to try and take a run at its own 100-day moving average (red line) next, much like AUD/USD.
