Greenback Well Bid in Final Session; Unified Currency Talk Dismissed

Data this morning in the US was on the whole better than expected, highlighted by the latest consumer confidence release, coming in at 57.3 versus expectations for a 56.8 print. However, this has hardly factored into price action, with the USD rallying across the board (with the exception of the Yen), seemingly on a flight back into safety. US equities are back under pressure and all of the safe haven currencies have been benefiting as reflected by the liquidation in the Yen crosses as well.  Of the major currencies, the Euro has been hit the hardest, down some 1.65% against the greenback on the day. The Euro has been coming under added pressure as investors start to anticipate the potential for an ECB adoption of QE measures.  Any concerns over the Chinese calls for a unified currency earlier in the week have also been more than offset with a number of officials and organizations all coming out to reaffirm the USD position as the reserve currency of choice. This has also been helping to prop the buck. Market participants have also grown increasingly concerned over the state of TARP and exactly how much is left to help rid banks of toxic assets. Some reports show over 90% already committed which doesn’t leave much room for additional aid.

ANALYSIS OF SELECTED RATES


Aud/Nzd – We have been doing a lot of Kiwi selling this week with the currency showing overbought across the board. This cross is also now well oversold and dips should be used as opportunities to buy back into the broader up-trend. Setbacks have reached and slightly exceeded the 61.8% fib retracement off of the 1.1935-1.2935 Dec-Mar move but we do not expect the cross to be able to sustain below this level given the highly oversold daily readings.  Look for a medium-term higher low to carve out at current levels above 1.2000 ahead of the next major upside extension back towards the 2009 highs at 1.2935.

Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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