The U.S. Dollar Index strengthened in the back half of last week after Q4 GDP proved doubters wrong, writes Bill Baruch, President of BlueLineFutures.com.

Euro (ECH)

Session close: Settled at 1.13435, down 28 ticks

Fundamentals: The U.S. Dollar Index strengthened in the back half of last week after Q4 GDP proved doubters wrong by simply coming in at a marginal 2.6%. Because of this, dollar buyers were unfazed by a weaker than expected ISM Manufacturing Index and Michigan Consumer Sentiment report on Friday.

This wave of dollar strength carried into the new week and pressured the euro through midsession. While UK Construction PMI may have weighed more broadly on the region, the euro-centric data was better; Sentix Investor Confidence was the latest in a run of less-worse sentiment reads and PPI was a tenth higher than expected.

Helping the overall midsession turn and finally deterring those dollar bulls was a surprise contraction on U.S Construction Spending. Monday was expected to be the quieter session before things pick up today. Final Eurozone Services and Composite PMIs are due at 3:00 am CT following the regional reads. Eurozone Retail Sales are out as well as a slew of other economic indicators.

Technicals: Price action slipped sharply last week after failing to get out above the 50- and 100-day moving averages. This three-day drop has now reached the psychological 1.13 battleground; a level in which the bulls have shown up. First key support comes in at 1.1302-1.1328 and this held today. Our pivot at 1.1367-1.1369 will be what’s most crucial in telling who has the near-term edge. Above this level, the bulls can look to push a retest at 1.1434-1.1447, now major three-star resistance; this aligns the 50- and 100-day moving averages, trend line from the Jan. 10 high and other significant indicators. We are bullish.

Bias: Bullish/Neutral

Resistance: 1.1392-1.1395**, 1.1434-1.1447***, 1.1491**, 1.15575-1.1563***

Pivot: 1.1367-1.1369

Support: 1.1302-1.1328**, 1.1283*, 1.1245-1.1261***

Yen (JYH)

Session close: Settled at .89585, up 20.5 ticks

Fundamentals: The Yen broke-down through support on Thursday traded lower into the weekend. After equity markets opened higher Sunday night, the Yen was destined for further weakness.

owever, the tables turned this morning during U.S hours and S&P lost much as 1.8% from the high. This reinvigorated interest in the Treasuries and helped stabilize the Yen despite the S&P finishing smack in the middle of its range on the session. If weakness in equities persists into tomorrow, we expect the Yen to climb back to its breakdown point near .9000. Tonight, we look to a 10-year JGB Auction and tomorrow will be all about the data and Fed speak.

Technicals: Last week, the yen broke down below both the continuous 100- and 200-day moving averages, which aligned with major three-star support at .9011-.9032. Because of this we are now neutral. While the 100-day appears to want to cross above the 200-day, more importantly is now the stagnated 50-day moving average; after rising since Dec. 14, it appears it might move lower on tomorrow’s session and this does not bode well for momentum. The breakdown was textbook and went right to our next level of support. This must hold, and we must see a close back above .9004-.9014 in order to neutralize the weakness.

Bias: Neutral

Resistance: .9004-.9014**, .9091-.9015**, .91555-.9186**, .9238-.9249***

Support: .8919-8931**, .88355-.8845***

Aussie (March)

Session close: Settled at .7088, up 13 ticks

Fundamentals: The Aussie dollar finished higher Monday ahead of the central bank’s policy decision. They are not expected to cut rates tonight although there is a belief that the next rate-move is likely to be a cut due to dissipating growth domestically, slipping home prices and headwinds globally. The data last night was mixed with Building Approvals better and Company Gross Operating Profits worse. Overall, the Aussie held ground very well given the broader risk-off shift as the session developed.

Technicals: Price action slipped sharply last week as the U.S Dollar Index gained ground, but the Aussie has not broken below major three-star support and that makes tonight’s post-fundamental swings very technically important. We have first key resistance coming in at .7121-.7137 and a fundamental move out above here later this evening should garner a technical tailwind.

Bias: Neutral

Resistance: .7121-.7137**, .7208**, .7278- .7300***, .7407****

Support: .7063-.7082***, .7001-.7024**, .6825***

Canadian (CDH)

Session close: Settled at .7513, down 8.5 ticks

Fundamentals: Despite the tailwind that crude oil has brought to the Canadian dollar; Friday’s weakness weighed on the loonie, but it was not the only factor. Canada’s GDP figures showed a monthly contraction by 0.1% when neither growth nor a contraction was expected. Today’s session will prove critical ahead of Wednesday’s Bank of Canada meeting with the closely watched Ivey PMI due at 9:00 am CT.

Technicals: The Canadian dollar finds itself at a crucial technical inflection point. Major three-star support comes in at .74855-.7505 and for now this is holding. A continued hold here would reinvigorate a wave back up to .7565, which closely aligns with the 100-day moving average. However, if support breaks, there is room to go.

Bias: Neutral

Resistance: .7565**, .7615-.7649***, .7716-.7725**, .7835

Support: .74855-.7505***, .7436**, .7330***

Bill Baruch provides technical levels on all markets throughout the week at  BlueLineFutures.com