USDOLLAR Range in Focus- AUD Remains at Risk for Lower Low

2014-03-04 17:30:00

David Song, Strategist

Talking Points:

- USDOLLAR Range in Focus as Bearish RSI Momentum Wanes

- AUDUSD Edges Higher Ahead of 4Q GDP as RBA Keeps Rate on Hold

Index	Last	High	Low	Daily Change (%)	Daily Range (% of ATR)
DJ-FXCM Dollar Index	10587.51	10590.38	10560.75	0.14	84.23%

USDOLLAR Daily

Forex_USDOLLAR_Range_in_Focus-_AUD_Remains_at_Risk_for_Lower_Low_body_Picture_3.png, USDOLLAR Range in Focus- AUD Remains at Risk for Lower Low

Chart - Created Using FXCM Marketscope 2.0

Topside Break/Close in RSI to Highlight Further Sideways Price Action
Interim Resistance: 10,657 (61.8 expansion)- Former Support
Interim Support: 10,509 (23.6 retracement) to 10,524 (38.2 retracement)

Release	GMT	Expected	Actual
ISM New York (FEB)	14:45	--	57.0
IBD/TIPP Economic Optimism (MAR)	15:00	45.3	45.1
Fed's Jeffrey Lacker Speaks on U.S. Economy	21:15

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) continued to pare the sharp decline from the previous month, but the greenback remains at risk of facing range-bound prices ahead of the highly anticipated Non-Farm Payrolls (NFP) report as it remains limited by former support around the 10,615 region.

The topside break in the Relative Strength Index (RSI) certainly suggests that a key low is in place as the oscillator carves a new series of higher highs paired with higher lows, and fundamental developments coming out of this week may set the tone for the remainder of the month as market participants weigh the outlook for monetary policy.

With the ADP Employment report expected to show a 155K rise in February, a further slowdown in U.S. job growth may undermine market speculation of seeing an upbeat NFP report on Friday, and a slew of dismal developments may generate another selloff in the greenback as it dampens the Fed’s scope to deliver another $10B taper at the March 19 meeting.

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Forex_USDOLLAR_Range_in_Focus-_AUD_Remains_at_Risk_for_Lower_Low_body_ScreenShot167.png, USDOLLAR Range in Focus- AUD Remains at Risk for Lower Low

AUDUSD Daily

Forex_USDOLLAR_Range_in_Focus-_AUD_Remains_at_Risk_for_Lower_Low_body_Picture_1.png, USDOLLAR Range in Focus- AUD Remains at Risk for Lower Low

Break Below Soft Support (0.8940-50) Favors Downside Targets as Bearish RSI Remains Intact
Interim Resistance: 0.9050 (23.6% expansion) to 0.9070 (38.2% retracement)
Interim Support: 0.8670 (100.0% expansion) to 0.8700 (78.6% expansion)

Three of the four components weakened against the greenback, led by a 0.70 percent decline in the Japanese Yen, while the Australian dollar gained 0.03 percent ahead of the region’s 4Q GDP report as the Reserve Bank of Australia (RBA) retained its current policy in March.

Indeed, it seems as though the RBA is toughing its verbal intervention on the higher-yielding currency in an effort to further assist with the rebalancing of the real economy, and a dismal 4Q GDP print may put increased pressure on the central bank to further embark on its easing cycle as Governor Glenn Stevens continues to warn of higher unemployment in 2014.

In light of the recent developments, we still favor ‘selling bounces’ in the AUDUSD as it carves a lower high around the 0.9050 region, and the pair remains at risk for a lower low as the bearish RSI momentum continues to take shape.

--- Written by David Song, Currency Analyst

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

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