USDOLLAR Index Fights Back to Trendline from June Lows
- AUDUSD breaks to fresh yearly lows below $0.7270.
- USDCAD triangulates, looking for a break above C$1.3055.
Hold the presses on the 'greenback may be topping' headlines: the past 24-hours have seen a quick revival by the US Dollar. USD-pairs, particularly those in the commodity currency complex, have taken a sharp turn reversing the prior two day's losses. The turn can be greatly attributed to, in our opinion, the very strong weekly US claims data yesterday, which indicated some of the tightest labor market conditions in four decades.
As such, market expectations for the forthcoming July US Nonfarm Payrolls report are starting to rise, helping buoy the greenback as it pertains to interest rate expectations: a strong (over +250K) could stoke expectations for a September rate hike, something which Federal Reserve officials have touted in recent weeks.
Markets, on the other hand, are still pricing in January 2016 as the most likely period for the Fed's first rate hike (per the fed funds futures contracts). This divergence in perception on policy could prove to be the most significant US Dollar driver in Q3'15.
See the above video for technical considerations in EURUSD, AUDUSD, NZDUSD, USDJPY, and the USDOLLAR Index.
--- Written by Christopher Vecchio, Currency Strategist
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