USD falls for the second day in a row

The US dollar dropped sharply in the currency market on Wednesday, falling for the second day in a row and it has erased all gains that followed the stronger-than-expected US labor market numbers released on Friday.

The US Dollar index, which gauges the greenback against its main competitors, opened the day above 96.00 and is about to end slightly above 95.50. It bottomed during the day at 95.37, the lowest level in a week.

During the second half of the American session it trimmed losses and managed to move off lows, particularly against the pound and commodity currencies. Still, it posted the lowest close in days.

Momentum in the DXY now favors the downside. Today the decline was capped by the strong short-term support located at 95.35; below here attention would turn to 94.95, where August lows are located. On the opposite direction, immediate resistance is seen at 95.85 followed by 96.00. Greenback needs to rise above the area between 96.40 - 96.55 (Aug 5 & 9 high / 20-day moving average) to clear the way to more gains.