US Dollar Index Reaches 10,070 Objective- Consolidation Ahead

By Michael Boutros, Currency Analyst

The greenback advancedfor a third consecutive day in North American trade with the DowJones FXCM Dollar Index (Ticker: USDollar) closing higherby 0.33% on thesession. A steady stream ofcomments and weaker than expected prints industrial production dataout of the Euro zone have kept heavy pressure on the risk-tradewith US markets following European equities lower early in thesession. Stocks found some support mid-day with the Dow, theS&P, and the NASDAQ closing off session lows for a loss of1.10%, 1.13%, and 1.55% respectively. The decline was accompaniedby massive drawdowns across the commodity sector with gold tumbling3.5% and crude oil off by more than 5.2% as global growth concernscontinue to take root.As noted in myprevious USD Trading report, the dollar was ableto maintain course for a test of the 76.4% Fibonacci extensiontaken from the August 1st and October 27th troughs at 10,070.Strong resistance holds here with a topside break exposing targetsat the October highs at 10,140. Daily support rests at the 61.8%extension at 9950. With three days of substantial gains for thedollar, look for a short-term correction in the index at some pointover the next 24-hours with the relative strength index likely torebound off RSI resistance. A breakabove coupled with a breach of the 76.4% extension eyes topsidetargets. An hourly chart shows the index breaching the 10,035 resistance level we closed at yesterday before triggering our targets at the 76.4% Fibonacci extension at 10,070. Interim support holds at 10,035 with a break below eying subsequent floors at 10,000 and former trendline resistance, now acting as support. Again we note the probability of a pullback of some magnitude continues to rise with our medium term outlook remaining weighted to the topside.The greenback advancedagainst all four component currencies highlighted by a 1.09%advance against the Australian dollar. Classic haven flowsdominated early trade with the aussie succumbing to heavy sellingpressure as traders jettisoned higher yielding assets in favor ofthe perceived safety of the greenback. The euro also came underattack after a bond auction in Italy saw record yields with thesingle currency closing lower by 0.41% on the session. The sterlingwas able to pare a large portion of the day’s losses with thepound off by just 0.06% at the close. As noted in the Winners/Losers report earlier today, the yencontinues to hold its recent range as haven flows saw dollar gainsoutpace those of the yen which also closed higher against all itsmajor counterparts save the greenback. Tomorrow’s economic docket see’s a flurry of data highlighted by November producer prices, industrial production, and the December Philadelphia Fed survey. Consensus estimates call for producer prices to hold at 5.9% y/y, with the month on month figure expected to print at 0.2% from a previous decline of 0.3% m/m. The pace of industrial production is expected to have softened from last month with calls for a read of 0.2%, down from 0.7% with the Philly Fed seen improving to 5.0 from a previous print of 3.6. As concerns about global growth once again come into focus, more and more emphasis will be placed on US economic data moving forward after the Fed cited no intentions of implementing further quantitative easing at yesterday’s rate decision. Look for the dollar to ease after hitting technical resistance with a significant downturn in broader market sentiment likely to fuel the momentum needed for a topside break of the 10,070 level. Upcoming Events

Date	GMT	Importance	Release	Expected	Prior
12/15	13:30	LOW	Producer Price Index (MoM) (NOV)	0.2%	-0.3%
12/15	13:30	MEDIUM	Producer Price Index (YoY) (NOV)	5.9%	5.9%
12/15	13:30	LOW	Producer Price Index ex Food & Energy (MoM) (NOV)	0.2%	0.0%
12/15	13:30	MEDIUM	Producer Price Index ex Food & Energy (YoY) (NOV)	2.8%	2.8%
12/15	13:30	LOW	Current Account Balance (3Q)	-$107.2B	-$118.0B
12/15	13:30	LOW	Empire Manufacturing (DEC)	3	0.61
12/15	13:30	LOW	Initial Jobless Claims (DEC 10)	390K	-
12/15	13:30	LOW	Continuing Claims (DEC 3)	3640K	-
12/15	14:00	MEDIUM	Net Long-term TIC Flows (OCT)	-	$68.6B
12/15	14:00	LOW	Total Net TIC Flows (OCT)	-	$57.4B
12/15	14:15	MEDIUM	Industrial Production (NOV)	0.2%	0.7%
12/15	14:15	LOW	Capacity Utilization (NOV)	77.9%	77.8%
12/15	15:00	MEDIUM	Philadelphia Fed. (DEC)	5.0	3.6

--- Writtenby Michael Boutros, Currency Analyst with DailyFX.comTocontact Michael email mboutros@dailyfx.comor followhim on Twitter @MBForex.Tobe addedto Michael’s email distribution list, send an email withsubject line “Distribution List” to mboutros@dailyfx.com DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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