USD To Advance As Stocks Drift Ahead Of Significant Event Risk

By Michael Boutros, Currency Analyst

The greenback wasfirmer at the close of North American trade with the Dow Jones FXCMDollar Index (Ticker: US Dollar) climbing a modest0.19% on the session. Markets continue to lack conviction ahead ofmajor event risk later this week as traders look to interest ratedecisions from the RBNZ, BoE, and the ECB, and Friday’s muchanticipated EU summit. Reaction to yesterday’s credit watch warning from rating agencyStandard & Poor’s saw a mixed performance in Europeanequities which carried over into the US session with the Dow andthe S&P climbing 0.43% and 0.11% respectively, while the NASDAQfell by 0.23%.The dollar continues tohold above the 9830 level cited in previous reports with a test oftopside resistance at 9900 failing to produce any significantadvances for the reserve currency. A fresh long-term Fibonacciextension taken from the 2010 and 2011 lows offer better guidancemoving forward with downside support highlighted by the 76.4%extension at 9790 and key 61.8% extension at 9700. Daily topsidetargets are held at the 100% extension at 9930 and thepsychological 10,000 level. Look for the greenback to continue toconsolidate into the close of the week with our medium term bullishbias remaining intact. Note that the indexcontinues to hold between the 20 and 50-day moving averages at 9883and 9819 respectively with a flattening RSI suggesting the dollarmay be poised for a breakout. An hourly chart showsthe index trading within the confines of a newly formed ascendingchannel formation after breaking a previous channel dating back toNovember 25th. Interim support nowrests at the convergence of channel support and the 50% Fibonacciextension taken from the August 1st and October 27th troughs at 9850, withsubsequent floors seen at 9800 and the 38.2% extension at 9754. AndRSI break above 50 eyes topside resistance at 9900 with a breachhere eyeing targets at the 61.8% extension at 9946 and10,000.The greenback advancedagainst three of the four component currencies highlighted by a0.35% advance against the British pound. The sterling, which isfeatured in today’s Scalp Report, continues to faceheadwinds ahead of the Bank of England rate decision on Thursdaywith ongoing concerns about the European crisis and its impact onthe UK continuing to limit advances in the pound. The strongestperformer of the lot was the yen which advanced a modest 0.11% asyen advances outpaced those of the dollar. As risk continues totaper off, both the yen and the dollar look to benefit as tradersseek refuge in lower yielding assets. The euro was virtuallyunchanged on the session as price action continues to hold betweenthe 61.8% and 50% Fibonacci extensions taken from October 27th and November 13th crests at 1.3335 and1.3425 respectively. Click here for EUR/USD scalp chart. Tomorrow’s US economic calendar provides little in the way of event risk with dollar price action likely to continue to take cues from broader market sentiment. Accordingly the reserve currency may within its recent range as traders eye GDP figures out of Australia later tonight and data out of Europe tomorrow with the UK industrial/manufacturing production, and German industrial production on tap.--- Writtenby Michael Boutros, Currency Analyst with DailyFX.comJoinMichael tomorrow for Live Coverage of the USNFP Print at 1315GMT (8:15ET)Tocontact Michael email mboutros@dailyfx.comor followhim on Twitter @MBForex.Tobe addedto Michael’s email distribution list, send an email withsubject line “Distribution List” to mboutros@dailyfx.com DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/us_dollar_index/usd_trading_today/2011/12/06/USD_to_Advance_as_Stocks_Drift_Ahead_of_Significant_Event_Risk.html

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