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USD Index Breaks Out On NFPs, Euro Continues To Face Headline Risks

By , Currency Analyst
09 March 2012 14:10 GMT

Talking Points

  • U.S. Dollar: Index Hits Fresh Monthly High as NFPs Top Forecast
  • Euro: Greece Invokes CAC, All Eyes on ISDA
  • British Pound: Outlook Mixed As RSI Maintains Downward Trend

U.S. Dollar: Index Hits Fresh Monthly High as NFPs Top Forecast

The 227K rise in U.S. Non-Farm Payrolls propped up the greenback on Friday, with the Dow Jones- FXCM U.S. Dollar Index (Ticker: USDOLLAR) advancing to a fresh monthly high of 9,963, and the reserve currency may appreciate further during the North American trade as market participants scale back speculation for additional monetary support. As the more robust recovery in the labor market fosters an improved outlook for the U.S., we should see the Federal Reserve continue to scale back its dovish tone for monetary policy, and positive developments coming out of the economy may continue to prop up the reserve currency as the correlation between risk and the dollar appears to be giving out.

As the economic docket for the following week is expected to reinforce an improved outlook for the region, the pickup in economic activity could pave the way for additional USD strength, and the index looks poised to retrace the decline from earlier this year as it clears the 61.8% Fibonacci retracement around 9,949. However, as market participation tends to think ahead of the weekend, we may see the dollar consolidate once Europe goes offline, and we will stick to the sidelines going into the week ahead as headlines coming out of the euro-area continue to shake up the currency market.

Euro: Greece Invokes CAC, All Eyes on ISDA

Although Greece was able to obtain 85.8% participation from private creditors, the Euro sold off following the announcement after the government said it would invoke the Collective Action Clause to obtain 95.7% involvement. Indeed, the International Swaps & Derivatives Association will determine if the CAC will trigger the $3B in credit-default swaps on Monday, but the single currency continues to face many hurdles as market participants turn their focus to the implementation of the second bailout package. As the EURUSD fails to test the 2/9 high (1.3020), the pair looks to be carving a head-and-shoulders top in March, and the short-term reversal looks poised to gather pace as the euro-dollar threatens the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3100. However, we would like to see the 50-Day SMA (1.3086) to give way to see the EURUSD give back the advance from earlier this year, and we will be keeping a close eye on the 23.6% Fib around 1.2630-50 as the technicals continues to instill a bearish outlook for the pair.

British Pound: Outlook Mixed As RSI Maintains Downward Trend

The GBPUSD came under pressure on Friday, with the exchange rate slipping to a low of 1.5713, but the pair looks should continue to track sideways over the near-terms as it maintains the range carried over from the previous month. As the 50-Day SMA (1.5677) continues to provide interim support, the pullback in the exchange rate could be short-lived, and we may see the exchange rate move back towards 1.6000 in the following week as market participants look forward to the Bank of England Minutes due out on March 21. However, as the downward trend in the relative strength index gathers pace, the oscillator casts a bearish outlook for the GBPUSD, and we may see the pound-dollar struggle to maintain the range-bound price action should the shift away from risk-taking behavior gather pace. A break below the moving average would certainly open the door for a test of the 50.0% Fibonacci retracement from the 2009 low to high around 1.5300, but we may see the BoE prop up the sterling as the central bank sees a diminishing risk of undershooting the 2% target for inflation.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

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Related Articles: Weekly Currency Trading ForecastFX Upcoming

Currency

GMT

EDT

Release

Expected

Prior

USD

15:00

10:00

Wholesale Inventories (JAN)

0.6%

1.0%

GBP

15:00

10:00

NIESR Gross Domestic Product Estimate (FEB)

--

-0.2%

Currency

GMT

Release

Expected

Actual

Comments

JPY

23:50

Japan Money Stock M2+CD (YoY) (FEB)

3.0%

2.9%

Slowest pace of growth since October.

JPY

23:50

Japan Money Stock M3 (YoY) (FEB)

2.6%

2.5%

AUD

0:30

Trade Balance (Australian dollar) (JAN)

1500M

-673M

First deficit since February 2011.

CNY

1:30

Consumer Price Index (YoY) (FEB)

3.4%

3.2%

Slowest pace of growth since June 2010.

CNY

1:30

Producer Price Index (YoY) (FEB)

0.1%

0.0%

Fails to grow for the first time since November 2009.

CNY

5:30

Retail Sales (YTD) (YoY) (FEB)

17.6%

14.7%

Lowest since January 2010.

CNY

5:30

Industrial Production (YTD) (YoY) (FEB)

12.3%

11.4%

Lowest since December 2009.

CNY

5:30

Fixed Assets Investment ex Rural (YTD) (YoY) (FEB)

20.5%

21.5%

Lowest since December 2002.

EUR

8:00

German Labor Costs s.a. (QoQ) (4Q)

--

1.1%

Rises for the third time in 2011.

EUR

8:00

German Labor Costs w.d.a. (YoY) (4Q)

--

3.3%

EUR

7:00

German Consumer Price Index (MoM) (FEB F)

0.7%

0.7%

Fastest pace of growth since November.

EUR

7:00

German Consumer Price Index (YoY) (FEB F)

2.3%

2.3%

EUR

7:00

German CPI - EU Harmonised (MoM) (FEB F)

0.9%

0.9%

EUR

7:00

German CPI - EU Harmonised (YoY) (FEB F)

2.5%

2.5%

EUR

8:00

German Trade Balance (euros) (JAN)

13.0B

13.1B

Imports marked the biggest rise since May.

EUR

8:00

German Exports s.a. (MoM) (JAN)

2.0%

2.3%

EUR

8:00

German Imports s.a. (MoM) (JAN)

1.5%

2.4%

EUR

8:00

German Current Account (euros) (JAN)

10.4B

8.0B

EUR

7:45

French Manufacturing Production (MoM) (JAN)

0.5%

0.2%

Rises for the fourth time in the last six month.

EUR

7:45

French Manufacturing Production (YoY) (JAN)

-0.5%

-1.2%

EUR

7:45

French Industrial Production (MoM) (JAN)

0.5%

0.3%

EUR

7:45

French Industrial Production (YoY) (JAN)

-1.2%

-1.5%

EUR

7:45

French Central Government Balance (euros) (JAN)

-9.0B

-12.5B

Smallest deficit since January 2010.

EUR

9:00

Italian Industrial Production s.a. (MoM) (JAN)

-1.1%

-2.5%

Biggest decline since September.

EUR

9:00

Italian Industrial Production w.d.a. (YoY) (JAN)

-1.5%

-5.0%

EUR

9:00

Italian Industrial Production n.s.a. (YoY) (JAN)

--

-2.1%

GBP

9:30

BoE/GfK Inflation Expectations (FEB)

--

3.5%

Lowest since August 2010.

GBP

9:30

Industrial Production (MoM) (JAN)

0.3%

-0.4%

Declines for the fourth time in the last six months.

GBP

9:30

Industrial Production (YoY) (JAN)

-3.1%

-3.8%

GBP

9:30

Manufacturing Production (MoM) (JAN)

0.3%

0.1%

Rises for the second straight month.

GBP

9:30

Manufacturing Production (YoY) (JAN)

0.2%

0.3%

GBP

9:30

Producer Price Index Input n.s.a. (MoM) (FEB)

1.0%

2.1%

First rise since September.

GBP

9:30

Producer Price Index Input n.s.a. (YoY) (FEB)

7.1%

7.3%

GBP

9:30

PPI Output n.s.a. (MoM) (FEB)

0.3%

0.6%

Price pressures tip higher for the first time since September.

GBP

9:30

PPI Output n.s.a. (YoY) (FEB)

3.9%

4.1%

GBP

9:30

PPI Output Core n.s.a. (MoM) (FEB)

0.1%

0.5%

GBP

9:30

PPI Output Core n.s.a. (YoY) (FEB)

2.5%

3.%

CAD

12:00

Net Change in Employment (FEB)

15.0K

-2.8K

First decline since November.

CAD

12:00

Unemployment Rate (FEB)

7.6%

7.4%

CAD

12:00

Full Time Employment Change (FEB)

--

9.1K

CAD

12:00

Part Time Employment Change (FEB)

--

-12.0K

CAD

12:00

Participation Rate (FEB)

66.7

66.5

CAD

13:30

Labor Productivity (QoQ) (4Q)

0.6%

0.7%

Fastest pace of growth since 1Q 2011.

CAD

13:30

International Merchandise Trade (Canadian dollar) (JAN)

2.00B

2.10B

Narrows for the first time in two-months.

USD

13:30

Change in Non-Farm Payrolls (FEB)

210K

227K

Tops 200K for the third month, last month’s rise was the highest since May 2010.

USD

13:30

Change in Private Payrolls (FEB)

225K

233K

USD

13:30

Unemployment Rate (FEB)

8.3%

8.3%

USD

13:30

Underemployment Rate (U6) (FEB)

--

14.9%

USD

13:30

Change in Manufacturing Payrolls (FEB)

22K

31K

USD

13:30

Average Hourly Earning (MoM) (FEB)

0.2%

0.1%

Holds below 2.0% for the second month.

USD

13:30

Average Hourly Earning (YoY) (FEB)

2.0%

1.9%

USD

13:30

Average Weekly Hours (FEB)

34.5

34.5

USD

13:30

Change in Household Survey (FEB)

--

428

USD

13:30

Trade Balance (JAN)

-$49.0B

-$52.6B

Largest deficit since October 2008.

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09 March 2012 14:10 GMT