EUR/USD (a 4-hour chart)
The U.S. dollar has drawn below the gap against the news that Larry Summers officially withdrew his candidacy from the post Federal Reserve chairman. The question now is whether falling will be continueв during the week too or it was just an overreaction? The break down on Sunday night occurred because many traders considered Summers as the favorite for the chairman of the Fed, who would be much more militant than Ben Bernanke.
If there is not bullish reversal, the dollar index DXY will test support at 81.36, in accordance with the technical analysis. If the gap is not closed soon, we will certainly see a test of the August lows at 80.75 and it is likely to test support at 80.49. Until the last level holds, macro bullish outlook on DXY is saved and there is still a chance to develop a more substantial rally.
Barack Obama's hopes of a smooth transition of power in the U.S. Federal Reserve did not come true, when Larry Summers on Sunday night suddenly refused to replace Ben Bernanke when he steps down in January.
Summers, former Treasury Secretary under President Clinton, was a leader to take charge of U.S. monetary policy at a critical period of economic recovery.
Despite the impeccable reputation as an economist and politician, Summers is associated with a period of laissez-faire economic policies that led to the failure of the banking system and his decision to resign on the eve of the fifth anniversary of the crisis shows how difficult it is for politicians to make key decisions in Washington.