10/27 - EUR/USD eyes wedge/key MA

10/26 - DXY rebounds above the 10-day MA

10/21 - DXY rejects at key moving average

The US Dollar Index failed once again at the key 10-day MA. This allowed the EUR/USD to advance above the 1.50 threshold and now possibly sets the stage for further weakness in the Greenback. The absence of weekly divergence and lack of substantial resistance leave room for the EUR/USD to advance towards the 1.52 region, unless risk aversion reappears as it did in the final hour of North American trade Wednesday. Either way, the 10-day MA has become the proverbial line in the sand for the DXY & EUR/USD. All market participants should keep a careful eye on these key moving averages to determine whether a pullback could materialize into a more meaningful correction.

DXY maintains key support

The US Dollar Index maintains wedge trendline support and a key Fibonacci retracement (78.6% of July 08 to March 09 range) remains in place despite failing to overcome the 10-day MA & the 76 handle (former pivot support turned resistance). Meanwhile, the EUR/USD retreated after failing to breach the coveted 1.50 barrier, highlighting 4-hourly bearish MACD, RSI & Stochastics divergence. More importantly, Tuesday's reaction low has highlighted a short-term rising wedge, while 4-hourly RSI has formed a Head & Shoulders pattern. A break below wedge support & the 10-day MA (under the 1.49 region) together with a loss of RSI neckline support near 50, could suggest a deeper retreat towards the 35-day EMA (near 1.4750). A 4-hour close above 1.50, however, will negate the wedge scenario and could trigger a parabolic move up towards 1.52.

10/19 - DXY fails at former pivot & 10-day MA

10/16 - MISSED SELL ENTRY POINT

10/15 - DXY maintains wedge support, key Fib

The US Dollar Index continues to maintain support at a wedge trendline and at a key Fibonacci retracement (78.6% of July 08 to March 09 range) just below 75.50. A strong close (for Friday) is now necessary to round-up daily RSI & MACD to confirm bullish divergence. The resistant 10-day MA will be the key test to determine whether the Greenback can recover. Failure to reclaim this fast, yet important moving average will likely leave the DXY susceptible to a capitulation-type sell-off. The EUR/USD is in a similar position. Recent strength is now probing a wedge trendline at similar resistance levels seen two years ago during the last bull campaign. Below rising 10-day MA support will confirm bearish divergence and signal a broader correction.

While it may be premature to buy the Greenback, bearish price-action in Gold and the Loonie are reasons alone for a possible reversal.