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The DXY index is up on the day for the first time since Oct. 9

TJ Marta from The Overnight Express at 10/18/09


The DXY index is up on the day for the first time since Oct. 9. It got some help from the U.S. Treasury criticizing China about that country’s exchange rate and Japan’s currency advisor Gyohten stating that Japan, China and the U.S. need to collaborate to stabilize the greenback. JPY underperformed on Gyohten’s comments. GBP is outperforming, likely on speculative short-covering. 

DXY – First ‘up’ day in a week – The DXY index (75.583) is up overnight, with the USD mixed against the majors. Yesterday, the index made a new low since Aug ’08. Support lies at 75.211 (Oct 15 low), 75.165 (76.4% retracement of Mar ’08 to Mar ’09 rally, 75.00 (psychological), and 74.314 (Jun ’08 high). Resistance lies at 76.668 (Oct 12 high), 77.475 (Oct 2 high), 77.688 (Dec ’08 low) and 78.00 (psychological). Over the past two months, DXY has correlated most strongly with crude oil and the CRB index (all negative). Gold and the S&P 500 are less significant (negative). 

EUR/USD – Off yesterday’s high. EUR/USD (1.4923) is down overnight, after reaching a new high since Aug ’08 yesterday. Resistance lies at 1.4968 (Oct 15 high), 1.50 (psychological) and 1.5083 (Aug 11 ’08 high). Support lies at 1.4794 (uptrend off Oct low), 1.4481 (Oct 2 low) and 1.4447 (Aug high). The short-term correlates for EUR/USD are crude oil (positive) and, to a less extent, the S&P 500 (positive). 

GBP/USD – Spike continues. Cable (1.6315) continues to outperform the majors, consistent with an unwind of the record speculative short position established last week on the CFTC. Technical resistance lies at 1.6400 (Oct 16 high), 1.6468 (Sep 23 high), 1.6742 (Sep 11 high), 1.6743 (Jun high) and then 1.7043 (Aug high). Support lies at 1.5708 (Oct 13 low) and then 1.55 (psychological). The strongest correlates over the past two months for GBP/USD have been the DXY (negative), EUR/USD (positive). Crude oil (positive) is still significantly correlated, but the relationship has waned. The correlation S&P 500 (positive) has dropped even further, though it remains “significant”. 

USD/JPY – Rebound continues. USD/JPY (91.14) is up strongly overnight on further policymaker support. Resistance now lies at 91.29 (Oct 16 high), 92.53 (Sep 21 high) and 93.30 (Sep 7 high). Support lies at 88.01 (Oct 7 low) and then 87.13 (Jan ’09 low). The correlation of USD/JPY with the U.S. 10yr yield remains significant, while the U.S.-JP 10yr spread has been replaced by the Nikkei as significant. 

USD/CAD – Rebounding off low since Jul ’08. USD/CAD (1.0339) is narrowly mixed overnight, consolidating after the sharp rebound yesterday after the cross reached a new low since Jul ’08. Support lies at 1.0207 (Oct 15 low) and then parity. Resistance lies at 1.0592 (Sep low), 1.10 (psychological) and then 1.1125 (Aug high). In terms of other assets correlating with USD/CAD, watch the CRB, crude oil (both negative), USD index (positive) and SPX (negative). 

AUD/USD – Unstoppable - new high since Aug’08. AUD/USD (0.9211) is up – again – overnight and traded another new high since Aug ’08. Technical resistance for AUD/USD exists at 0.9270 (Oct 16 high) and 0.9275 (May ’08 low). Support lies at 0.8859 (Oct 1 high), 0.8570 (Oct 2 low), 0.8545 (Sep 14 low) and 0.8478 (Aug high). AUD/USD has correlated most strongly with equities (S&P 500, positive) and commodities (CRB, positive). The correlation with gold (positive) is slipping. The correlation with short-term interest rate spreads is rising, which is not surprising now that policy tightening is now back in play. 

NZD/USD – Stuck at 0.75. NZD/USD (0.7440) is off overnight after inching closer to 0.75. Resistance lies at 0.7496 (Oct 16 high) and 0.7500 (psychological). Support lies at 0.7255 (Oct 12 low), 0.7079 (Oct 2 low), 0.7000 (psychological) and 0.6897 (Aug high). The strongest correlates for NZD/USD during the past two months have been AUD/USD (positive) and the USD index (negative). Stocks (S&P 500, positive) and commodities (CRB index, positive) have a less significant relationship. 

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