The US Dollar is back flirting with a break lower.

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• The US Dollar is back flirting with a break lower.
• Traders are going into risk-on mode with German and EU PMI numbers improving.
• The US Dollar Index faces pressure on the 103-handle again.

The US Dollar (USD) sinks lower with traders selling the Greenback in the assumption US Purchase Managers Index (PMI) numbers later this Wednesday will retreat further, while European ones a starting to turn. The initial moves came with German and European Purchasing Manager Indexes (PMIs), which in nearly all sectors showed improvement (though remaining in contraction territory). A further contraction in US PMI numbers later this afternoon could mean a meltdown for the Greenback.

On the economic front, as already mentioned in the above paragraph, US PMI numbers are set to be released this afternoon. The Manufacturing number will be especially significant (it is expected to remain unchanged at 47.9). Seeing the current market move already, a further sell-off of the Greenback could be at hand and see the DXY slide lower.

The US Dollar Index (DXY) is down after Europe reported two upbeat numbers in the Manufacturing PMI print. Though the two European numbers are still in contraction, this does not mean the EU is out of the woods yet, or is outperforming the US. This afternoon’s US PMI numbers could either eke out more losses for the Greenback if the numbers disappoint, or send the Greenback back to its earlier level in Asian trading if they surprise to the upside.

There are some economic data points that could still build a case for the DXY to get through those two moving averages again and run away. Look for 104.44 as the first resistance level on the upside, in the form of the 100-day SMA. If that gets scattered as well, nothing will hold the DXY from heading to either 105.88 or 107.20 – the high of September.

A bull trap looks to be underway, where US Dollar bulls were caught buying into the Greenback when it broke above both the 55-day and the 200-day SMA in last week’s trading. Price action could decline substantially and force US Dollar bulls to sell their positions at a loss. This would see the DXY first drop to 102.60, at the ascending trend line from September. Once below it, the downturn is open towards 102.00.

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