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USDOLLAR to Target Fresh Low- USDJPY Risks Higher High on Dismal NFP

USDOLLAR to Target Fresh Low- USDJPY Risks Higher High on Dismal NFP

2014-03-06 17:25:00
David Song, Strategist

Talking Points:

- USDOLLAR to Eye Fresh Lows as Bearish RSI Momentum Gathers Pace

- USDJPY Coming Up Against Key Resistance Ahead of Non-Farm Payrolls (NFP)

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10528.21

10577.2

10528.21

-0.39

134.33%

USDOLLAR Daily

Forex_USDOLLAR_to_Target_Fresh_Low-_USDJPY_Risks_Higher_High_on_Dismal_NFP_body_Picture_3.png, USDOLLAR to Target Fresh Low- USDJPY Risks Higher High on Dismal NFP

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

Fed's William Dudley Speaks on U.S. Economy

13:15

Non-Farm Productivity (4Q F)

13:30

2.2%

1.8%

Unit Labor Costs (4Q F)

13:30

-0.5%

-0.1%

Initial Jobless Claims (MAR 1)

13:30

336K

323K

Continuing Claims (FEB 21)

13:30

2970K

2907K

Factory Orders (JAN)

15:00

-0.5%

-0.7%

Fed's Charles Plosser Speaks on Monetary Policy

18:00

Fed’s Dennis Lockhart Speaks on U.S. Economy

23:00

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) looks well on its way to fresh lows as the bearish momentum in the Relative Strength Index (RSI) gathers pace.

Indeed, the highly anticipated Non-Farm Payroll (NFP) report may generate a further decline in the greenback should the release drag on interest rate expectations, and a pronounced slowdown in job growth may also lead to a greater shift in the policy outlook as Fed Chair Janet Yellen retains a rather dovish tone for monetary policy.

With that said, the USDOLLAR may ultimately come up against the 10,470 pivot as it searches for support, and we may continue to see a series of lower highs & lower lows in the first-half of 2014 as the recent slowdown in economic activity dampens the Fed’s scope to start normalizing monetary policy.

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

Forex_USDOLLAR_to_Target_Fresh_Low-_USDJPY_Risks_Higher_High_on_Dismal_NFP_body_ScreenShot179.png, USDOLLAR to Target Fresh Low- USDJPY Risks Higher High on Dismal NFP

USDJPY Daily

Forex_USDOLLAR_to_Target_Fresh_Low-_USDJPY_Risks_Higher_High_on_Dismal_NFP_body_Picture_1.png, USDOLLAR to Target Fresh Low- USDJPY Risks Higher High on Dismal NFP
  • Yen Weighed by Risk Appetite; Bullish RSI Break to Brings Up Former Support
  • Interim Resistance: 103.30 (23.6 retracement) to 103.50 (100.0 expansion)
  • Interim Support: 100.50 (61.8 expansion) to 100.70 (61.8 expansion)

Three of the four components strengthened against the greenback, led by a 1.28 percent rally in the Australian dollar, while the Japanese Yen shed another 0.72 percent as market participants continued to raise their appetite for risk.

It looks as though the USDJPY will respect former support (103.30-50) ahead of NFPs, but the topside break in the RSI certainly suggests that dollar-yen will resume the upward trend carried over from the previous year as it carves a higher low in February.

As a result, we’ll watch the topside targets ahead of the Federal Open Market Committee’s (FOMC) March 19 meeting, but the bullish outlook may unravel if the Bank of Japan (BoJ) shows a greater willingness to halt its easing cycle even before achieve the 2 percent target for inflation.

--- 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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