USD On The Move

US dollar is visibly stronger today across the board. The most obvious factor here is the failed Greek bailout plan. Euro dollar is the most widely traded currency pair and the euro is the biggest component of the DXY, the basket of currencies widely used to measure the dollar's strength. As such, material weakness in the euro will translate to USD strength against most of its trading counterparts.

Technically, the DXY chart looks strong. Despite a break below its recent channel (see chart below), the index bounced off its 50 day MA and, more importantly, bounced off its 79.50 support.

Other factors to consider: the S&P 500 is overextended and likely to pull back or trend sideways. As previously mentioned, 1166 is still a valid resistance for the S&P. A pullback in stocks will likely reduce risk appetite which may help the USD gain vs. the commodities currencies and further boost the dollar. In addition, there's some speculation regarding another unscheduled discount rate hike. The last hike was unscheduled and occurred exactly one month ago.

Taken together, the evidence is pointing to a stronger dollar on the backdrop of risk aversion.

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