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USD Holds Range Ahead Of Retail Sales, AUD Long-Term Trend in Focus

USD Holds Range Ahead Of Retail Sales, AUD Long-Term Trend in Focus

David Song, Strategist

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10006.28

10023.4

9992.73

0.00

55.55%

USD_Holds_Range_Ahead_Of_Retail_Sales_AUD_Long-Term_Trend_in_Focus__body_ScreenShot078.png, USD Holds Range Ahead Of Retail Sales, AUD Long-Term Trend in Focus

Although the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is little changed from the open, the greenback looks poised for a move higher as it continues to carve an interim floor around the 9,980 figure. As the 30-minute relative strength index bounces back from oversold territory, we should see the index work its way back towards the top of the interim range around the 10,100 figure, and we may see currency traders turn bullish against the dollar as the economic docket is expected to highlight an improved outlook for the U.S. As the index holds above the June low, we will maintain our bullish call for the time being, and the greenback looks poised for a larger reversal as it continues to carve out a higher low in August.

USD_Holds_Range_Ahead_Of_Retail_Sales_AUD_Long-Term_Trend_in_Focus__body_ScreenShot079.png, USD Holds Range Ahead Of Retail Sales, AUD Long-Term Trend in Focus

Indeed, the USDOLLAR continues to threaten the upward trend from earlier this year as it remains stuck within a narrow range, but the fresh batch of data coming out of the world’s largest economy may fuel a short-term rally in the index as the recovery gradually gathers pace. As U.S. retail sales are expected to increase 0.3% in July, the rebound in private sector consumption may curb expectations for another round of quantitative easing, and we may see the FOMC endorse a wait-and-see approach throughout the remainder of the year as the economy gets on a more sustainable path. As the relative strength index continues to find trendline support, the oscillator reinforces our bullish outlook for the USD, and a slew of positive developments may fuel a short-term rally in the greenback as it dampens the scope for QE3.

USD_Holds_Range_Ahead_Of_Retail_Sales_AUD_Long-Term_Trend_in_Focus__body_ScreenShot080.png, USD Holds Range Ahead Of Retail Sales, AUD Long-Term Trend in Focus

The greenback advanced against two of the four counterparts, led by a 0.51 percent decline in the Australian dollar, and the high-yielding currency may continue to give back the advance from earlier this year as it carves out a lower top around the 1.0600 figure. As the AUDUSD maintains the downward trend carried over from 2011, the pair looks poised for a sharp reversal in the coming days, and the RSI may fail to maintain the bullish formation as it remains capped by the 67 figure. In turn, we may see the AUDUSD fall back towards the 20-Day SMA around 1.04447, and the high-yielding currency may ultimately give back the rebound from 0.9580 as the ongoing turmoil in the global economy continues to drag on risk-taking behavior.

--- 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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