[The Street] USD Drifts As Traders Eye Greece- Index Holds Below Key Resistance

By Michael Boutros, Currency Analyst

The greenback wasmarginally lower at the close of North American trade with the DowJones FXCM Dollar Index (Ticker: US Dollar) sliding 0.08% on thesession. Equity markets pared early losses throughout the day withthe Dow, the S&P, and the NASDAQ advancing 0.71%, 0.63%, and0.34% respectively. Markets seem to lack conviction however as theadvance in stocks was not accompanied by strength in higheryielding assets and currencies. Traders continue to closely monitordevelopments out of Europe as Greece struggles to form a coalitiongovernment and ratify the strict measures needed to secure the nexttranche of bailout funds. With rates on Italian bonds soaring torecord euro-era highs, concerns have now started to shift asinvestors demanded higher yields to hold Italian debt. Despite thesurge yields, the mood remains calm with many traders holding onthe sidelines as European headlines continue to dominatenewswires.

The dollar continues to hold below the 38.2% Fibonacci extension taken from the June 2010 and November 2010 crests at 9745 and could come under pressure if market sentiment continues to improve. The index now sits between the 20 and 50-day moving averages at 9684 and 9750 respectively with a break below risking substantial losses for the reserve currency. Note that daily RSI has also had trouble clearing the 50-mark suggesting that the greenback may lack enough momentum for a topside break of the 9745 level.

An hourly chart showsthe index continuing to straddle the 50% Fibonacci retracementtaken from the Augus! t 1st advance at 9730.Interim support rests at 9700 backed by the 61.8% retracement at9633 and 9600. Topside resistance remains at 9745 backed by 9800and the 38.2% retracement 9825.

The greenback fellagainst three of the four component currencies highlighted by a0.23% decline against the Japanese yen. The USD/JPY has continuedto drift lower as traders attempt to fade the recent run-up sparkedby last week’s intervention. As we’ve noted in previousreports, it’s likely that yen advances will be limited asinvestors remain reluctant to test the resolve of Japaneseofficials by pressing the yen to high to quickly. The pound andaussie also made modest advances as the dollar eased against mostof its major counterparts in US trade. It should come as nosurprise that the euro was the worst performing currency of the lotwith a loss of 0.12% on the session. As uncertainties regarding thesituation in Greece mounting, the EUR/USD pair has continue torange within the confines of an ascending channel formationdescribed in today’s EURUSD / AUDUSD Scalp report.

The economic docket tomorrow is rather negligible with the NFIB and IBD/TIPP economic optimism surveys on tap. With little in the way of data from the US, investors will continue to closely monitor newswires out of Europe with broader market sentiment likely to drive dollar price action.

Upcoming Events

Date	GMT	Importance	Release	Expected	Prior
11/8	12:30	LOW	NFIB Small Business Optimism (OCT)	90.2	88.9
11/8	15:00	LOW	IBD/TIPP Economic Optimism (NOV)	41.0	40.3

--- Writtenby Michael Boutros, Currency Analyst with DailyFX.com

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Original Article: http://www.dailyfx.com/forex/fundamental/us_dollar_index/usd_trading_today/2011/11/07/USD_Drifts_as_Traders_Eye_Greece-_Index_Holds_Below_Key_Resistance.html