The March U.S. Dollar Index is trading a little better this morning after a sharp sell-off on Friday. The Greenback is being boosted by a weaker Euro which is succumbing to profit-taking following last week’s strong rally. A weaker British Pound is also contributing to the dollar’s strength. The Sterling is down because of the threat of additional easing by the Bank of England.
Profit-taking is also helping to drive the Japanese Yen higher. Finally, the U.S. Dollar is rising versus the Canadian Dollar as lower inflation figures diminish hopes the Bank of Canada will raise interest rates in the near-term. All of these factors are helping to contribute to a firmer U.S. Dollar.
Technically, the March U.S. Dollar Index found support on the 50% level of a short-term retracement zone. This level is 79.84. A failure to hold this level could drive the market into Fibonacci support at 79.74.
Uptrending Gann angle support at 79.68 could provide support if tested, but the most important angle is at 79.96. This angle provided resistance twice last week. An uptrending Gann angle is at 80.05. This makes 79.96 and 80.05 an important price cluster and pivot area. A breakout over this zone could trigger an acceleration to the upside.
Since the main trend is down, look for selling pressure on its initial test but if today’s upside momentum can continue then a breakout though 80.05 could trigger a rapid acceleration to the upside. Since the Euro controlled much of the dollar’s weakness last week then a break in this currency is likely to be the catalyst behind any rally.