The US dollar index tumbled to 90.5 area – a level not seen since Jan 2015 as the Euro and sterling both surged on Friday night cheering on fresh political development in Europe.

Germany’s chancellor Angela Merkel unveiled a coalition deal between her party and the Social Democrats, sending the Euro 1.4% higher, extending gains driven by ECB’s hawkish meeting minutes last week.

Technically, EUR/USD has broken out above 127.2% Fibonacci Extension line of 1.210 and is about to challenge a key 161.8% Fibonacci level at the 1.220 area. Momentum indicators MACD, RSI and DMI have swung to the upside following a brief correction early last week. Bullish side seems to be taking control again. Breaking out above 1.220 level will open room for more upside towards the 200% Fibonacci level at 1.232 area.

EUR/USD

US Equity indices extended gains into new territories in anticipating for a good earnings season, which will kick off this week. US dollar’s weakening trajectory will benefit not only US exports but will also boost MNCs’ earnings when their overseas profits are translated back to the US dollar. Positive sentiment has spread over to Asian market this morning with major Asian markets positioned to open higher.

CMC’s client sentiment function shows that among CMC’s global client basis, the sentiment on S&P 500 remains bullish-biased with 62% of Top client’s position on the long side. The sentiment on EUR/USD leans towards the upside too, with 88% of top client’s positions positioned for euro to strengthen further.

Client Sentiment – SPX 500 vs. Singapore Free Jan 2018

Weak dollar fuelled the rally of commodities, especially gold, silver and crude oil. Brent oil price touched US$70 per barrel for the first time in three years. Despite rising concerns that high oil price may attract more shale oil production, the optimism on the demand side may underpin this concern and drive the price higher.

Gold price jumped over 1.2% to US$1,338 this morning, and its next major resistance level could be found at US$ 1,356 area. Momentum indicators MACD, RSI and DMI have turned bullish again following dollar’s freefall over the past two days. Trend indicators 10-Day SMA and SuperTrend (10,2) are both sloped upward, suggesting an uptrend is intact in the near term.

 

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