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USDOLLAR Risks Further Losses on Dismal NFP- AUD Carving Lower High?

USDOLLAR Risks Further Losses on Dismal NFP- AUD Carving Lower High?

2014-03-05 18:25:00
David Song, Strategist
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Talking Points:

- USDOLLAR Risks Fresh Lows as Data Points to Dismal NFPs

- AUDUSD Remains Capped Despite Upbeat 4Q GDP

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10569.91

10589.59

10564.47

-0.13

73.68%

USDOLLAR Daily

Forex_USDOLLAR_Risks_Further_Losses_on_Dismal_NFP-_AUD_Carving_Lower_High_body_Picture_3.png, USDOLLAR Risks Further Losses on Dismal NFP- AUD Carving Lower High?

Chart - Created Using FXCM Marketscope 2.0

  • Needs to Retain Bearish RSI Momentum to Confirm Lower High
  • 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

MBA Mortgage Applications (FEB 28)

12:00

57.0

ADP Employment Change (FEB)

13:15

155K

45.1

ISM Non-Manufacturing Composite (FEB)

15:00

53.5

Federal Reserve Publishes Beige Book

19:00

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) pared the advance from earlier this week as the dismal ADP Employment report dampens the outlook for Non-Farm Payrolls (NFP), and the greenback may weaken further ahead of the Federal Open Market Committee’s (FOMC) March 19 meeting as the slowdown in job growth drags on interest rate expectations.

Indeed, we need to keep a close eye on the Relative Strength Index (RSI) as it threatens the bearish momentum from earlier this year, but a downside break in the oscillator would highlight a near-term top in the USDOLLAR as it appears to be carving a new series of lower highs paired with lower lows.

With that said, we may see interest rate expectations deteriorate further should the NFP report dampen the Fed’s scope to normalize monetary policy sooner rather than later, and the bearish sentiment surrounding the reserve currency may gather pace over the near-term should the slowdown in economic activity carry beyond the winter months.

Join DailyFX on Demand to Cover Current U.S. Dollar Trade Setups

Forex_USDOLLAR_Risks_Further_Losses_on_Dismal_NFP-_AUD_Carving_Lower_High_body_ScreenShot172.png, USDOLLAR Risks Further Losses on Dismal NFP- AUD Carving Lower High?

AUDUSD Daily

Forex_USDOLLAR_Risks_Further_Losses_on_Dismal_NFP-_AUD_Carving_Lower_High_body_Picture_1.png, USDOLLAR Risks Further Losses on Dismal NFP- AUD Carving Lower High?
  • Lacks of Momentum to Push Back Above 0.9000; Another Lower High?
  • 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)

Two of the four components strengthened against the greenback, with the British Pound and Australian dollar both gaining 0.38 percent, but the AUDUSD appears to be carving a lower-high just below the 0.9000 handle as the bearish RSI momentum remains intact.

Despite the better-than-expected 4Q GDP report, the limited market reaction suggests that the topside will stay capped as the Reserve Bank of Australia (RBA) ramps up its verbal intervention on the higher-yielding currency, and Governor Glenn Stevens may take a more aggressive approach in talking-down the aussie in an effort to further assist with the rebalancing of the real economy.

With that said, we will stick with the RBA in looking for a lower AUDUSD exchange rate, and the pair remains at risk of seeing fresh lows over the near-term as it carves a lower high in February.

--- 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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