usd rebound lack credibility

talking point:  

. the Dollar marked its critical technical breakdown Monday, but follow   through has not come readily for EUR/USD, GBP/USD and others.

. A modest bout of bullish pressure built up for US indices through the holiday, rendering strong gaps but little follow through.

 

The global financial markets were back up to full liquidity Tuesday with US traders back online following the MLK holiday. The gear change generate a noticeable jump in volatility and from US equity indices to VIX to FX to cryptocurrency. Yet, in while we see a uniform jolt of activity from all these different corners of the financial system, there seems little consistency to underlying theme - such as the traditional risk-on/risk-off or fixation on monetary policy forecasts. 

The greenback is attempting to stage a recovery on Tuesday, but after the Asian demand, momentum has faltered. The current widespread strengthening doesn’t look convincing and will likely attract a new wave of selloff in the short term.A modest bout of bullish pressure built up for US indices through the holiday, rendering strong gaps but little follow through

    





As for EUR/USD, despite the local retreat, the bullish trend remains intact and the upside risks persist as long as the currency pair is trading above the 1.2030 area. Doubts over the German coalition deal have undermined the recent euro’s rally, but the correction is rather another buying opportunity than a bearish signal.

EUR/USD may resume its ascent on Wednesday, if the euro area inflation data point to consumer prices growth. In this scenario, the initial upside target is 1.2270. The break above this level will introduce scope for the 1.23 threshold.