A precipitous decline in the greenback, almost 2 percent in the past week, looks to be running out of steam. A measure of dollar momentum is near a level that signals to some analysts it has fallen too far, too fast and is set to reverse direction.

The U.S. employment report on May 6 may also support Fed plans to raise rates.
“We’ve come a long way quite quickly and there was a sense that we were a little bit stretched,” said Daragh Maher, New- York-based head of U.S. currency strategy at HSBC Holdings Plc.

“The Fed has tried to stress throughout that the door remains open to June. We’ve still got data to come in terms of the employment report, but I don’t think they want to rule it out.”

Eoin Treacy's view

As I mentioned in yesterday’s Subscriber’s Audio, the Dollar Index was testing the August reaction low and that represented the lower side of the medium-term range. If it was going to reassert demand this was the area. Today’s impressive rally off of the intraday low suggests at least near-term support and a clear downward dynamic would be required to question current scope for an unwind of the short-term oversold condition. 


The Dollar posted upside key day reversals against the Canadian Dollar and British Pound. Upside follow through tomorrow would confirm a low of at least near-term and potentially medium-term significance. 

The RBA’s decision to cut interest rates lent the Dollar additional impetus and the Aussie fell to break its four-month progression of higher reaction lows.

Meanwhile the Dollar continues to firm from the region of the trend mean against the Renminbi.