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USD Outlook Hinges on NFP- Limited AUD Correction Offers Range Trade

USD Outlook Hinges on NFP- Limited AUD Correction Offers Range Trade

David Song, Strategist

Talking Points:

- USDOLLAR to Hold Steady Ahead of Non-Farm Payrolls (NFP)

- Australian Dollar Correction Remains Limited- Range in Focus

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10706.41

10721.65

10697.98

-0.05

64.29%

USDOLLAR Daily

Forex_USD_Outlook_Hinges_on_NFP-_Limited_AUD_Correction_Offers_Range_Trade_body_Picture_3.png, USD Outlook Hinges on NFP- Limited AUD Correction Offers Range Trade

Chart - Created Using FXCM Marketscope 2.0

  • Carving String of Higher Lows- Ascending Triangle Taking Shape?
  • Relative Strength Index Clears Bearish Trend- Watch for Confirmation
  • Interim Resistance: 10,753 (23.6 expansion) to 10,759 (61.8 retracement)
  • Interim Support: 10,657 (61.8 extension)- Closing Basis

Release

GMT

Expected

Actual

Challenger Job Cuts YoY (DEC)

12:30

--

-5.9%

Initial Jobless Claims (JAN 4)

13:30

335K

330K

Continuing Claims (DEC 28)

13:30

2850K

2865K

Fed’s Esther George Speaks on U.S. Economy

18:30

Fed’s Narayana Kocherlakota Speaks on U.S. Economy

0:00

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) pared the advance to 10,721 even after the European Central Bank (ECB) strengthened its forward-guidance for monetary policy, and the dollar may continue to hold a tight range ahead of Non-Farm Payrolls (NFP) as the U.S. economy is expected to add another 197K jobs in December.

In light of the ongoing improvement in the labor market, another better-than-expected NFP print should give the Fed greater scope to further normalize monetary policy over the coming months, and the data may prompt a topside break in the USDOLLAR as it continues to carve a series of higher lows.

Indeed, the shift in the policy outlook should help to limit the downside for the greenback, but a slowdown in wage growth may become a growing concern for the central bank amid the risk for disinflation.

Join DailyFX on Demandto Cover Current U.S. Dollar Trade Setups

Forex_USD_Outlook_Hinges_on_NFP-_Limited_AUD_Correction_Offers_Range_Trade_body_ScreenShot214.png, USD Outlook Hinges on NFP- Limited AUD Correction Offers Range Trade

AUDUSD Daily

Forex_USD_Outlook_Hinges_on_NFP-_Limited_AUD_Correction_Offers_Range_Trade_body_Picture_1.png, USD Outlook Hinges on NFP- Limited AUD Correction Offers Range Trade
  • Limited Correction to Offer Range Trade- RSI Breaks Out of Bearish Trend
  • Interim Resistance: 0.8980 (38.2 expansion) to 0.9000 (1.618 expansion)
  • Interim Support: 0.8865 (61.8 expansion) to 0.8890 Pivot- Close Basis

In contrast to Wednesday, three of the four components advanced against the greenback, led by a 0.18 percent rally in the Japanese Yen, while the Australian dollar bucked the trend, with the AUDUSD slipping 0.16 percent.

Indeed, the commodity bloc is trading on a weaker tone as market sentiment falters, but the AUDUSD may continue to face range-bound prices over the near-term as the Reserve Bank of Australia (RBA) sticks to its wait-and-see approach.

In turn, we will look to play the support & resistance zones over the near-term, but the bearish sentiment surrounding the higher-yielding currency may gather pace over the coming months as growth and inflation in the $1T economy remains subdued.

--- 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, please follow this link.

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