The dollar came under broad selling pressure on Wednesday, with investors emboldened to test key lows against the euro, the Swiss franc and a basket of currencies as more signs emerged pointing to US policy easing. The euro looked set for a challenge of $1.40 and its eight-month high at $1.4030 after Federal Reserve minutes the day before reinforced expectations of more quantitative easing, with a sustained break above the $1.4025-45 area seen as heralding further gains.
But they cautioned that eurozone policymakers were likely to be increasingly unhappy if the euro rose above $1.40. The euro rose 0.2 percent to $1.3955, triggering stop-loss orders around $1.3950-60 before running into selling at $1.3970-90. Resistance was expected at $1.3985, Friday's session high, with talk of more stop-losses lined up above that level.
The $1.4030 high is seen as the target to beat if the euro is to push higher rather than correct downwards. Chartwise, it is seen gearing up to test the $1.4025-45 area, with a sustained break opening the way for a rise to $1.4195-1.4220 - the lows of December and the highs of late January. On the downside, its 200-week moving average sits at $1.3926.
The euro gained across the board, climbing against the yen, sterling and the Swiss franc. The market has become very short of dollars on QE expectations, raising the risk of a rebound as it becomes harder for players to sell it down further. The dollar index fell 0.3 percent to 77.15, not far above the nine-month low of 76.906 set last week, although it has bounced off the 76.90 area twice in the past week.
The dollar also eased to a record low of 0.9546 Swiss francs while the Australian dollar edged back towards last week's 28-year high of $0.9918. The dollar firmed 0.1 percent against the yen to 81.80 yen, supported by nervousness that Japanese authorities could intervene the closer it gets to its record low of 79.75 yen. The dollar hit a 15-year low of 81.37 yen on Monday.
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