Dollar index up to three-week highs
The dollar is gaining further traction as we get things going in Europe. Dollar index is up by 0.18% on the day to three-week highs, as EUR/USD falls to session lows of 1.2200 on the day. The key level to look out for here is the 1.2206 level, the low posted on 9 February. If that fails to hold, it's going to be further downhill action for the pair.
The pair hit a figurative double top just above 1.2500, and is now forming a double bottom at current levels. Buyers will have to hold on here if we are to see a move back to test the highs this year. But looking at the daily chart:
The underlying bullish trend remains as the upward trendline formed since April last year is still in tact. As long as that holds, buyers can take comfort that the pair will see further upside. Right now, the trendline support sits around 1.2090 - so that will be the true key test if we are seeing a break to the downside.
The thing about the euro this week is that there are key risk events coming on the weekend with both the Italian elections and German coalition deal vote count falling on 4 March. Month-end flows today are also dictating play a little, but when there are risk events as such, it's what you would expect - investors and traders are getting out and moving to the sidelines for further clarity.
And that will be something to consider in the next two days of trading as well.
