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USDOLLAR Rebound to Generate Lower High- Euro Correction on Tap

USDOLLAR Rebound to Generate Lower High- Euro Correction on Tap

2014-03-07 17:50:00
David Song, Strategist
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Talking Points:

- USDOLLAR Rebounds as NFP Climbs 175K; Looking for Lower High

- Euro Capped By Trendline Resistance; Correction on Tap?

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10544.35

10544.53

10502.65

0.12

114.14%

USDOLLAR Daily

Forex_USDOLLAR_Rebound_to_Generate_Lower_High-_Euro_Correction_on_Tap_body_Picture_3.png, USDOLLAR Rebound to Generate Lower High- Euro Correction on Tap

Chart - Created Using FXCM Marketscope 2.0

  • Marks Lower Low (10,502) Following Bearish RSI Break; At Risk for Lower High
  • Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,470 Pivot

Release

GMT

Expected

Actual

Change in Non-Farm Payrolls (FEB)

13:30

149K

175K

Unemployment Rate (FEB)

13:30

6.6%

6.7%

Labor Force Participation Rate (FEB)

13:30

63.0%

Change in Private Payrolls (FEB)

13:30

145K

162K

Change in Manufacturing Payrolls (FEB)

13:30

5K

6K

Two-Month Payroll Net Revision (FEB)

13:30

25K

Underemployment Rate (FEB)

13:30

12.6%

Change in Household Employment (FEB)

13:30

42K

Average Hourly Earnings (MoM) (FEB)

13:30

0.2%

0.4%

Average Hourly Earnings (YoY) (FEB)

13:30

2.0%

2.2%

Average Weekly Hours (FEB)

13:30

34.4

34.2

Trade Balance (JAN)

13:30

-$38.5B

-$39.1B

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

17:00

Former-Fed Chair Ben Bernanke Speaks on U.S. Economy

17:30

Consumer Credit (JAN)

20:00

$14.000B

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) bounced back from a fresh monthly low of 10,502 as the Non-Farm Payrolls (NFP) report raised the outlook for growth and inflation, and the greenback may continue to track higher ahead of the Fed’s March 19 meeting as market participants ramp up bets of seeing another $10B reduction in the asset-purchase program.

However, as the USDOLLAR marks a lower low, a short-term correction may ultimately generate another lower high amid the bearish sentiment surrounding the reserve currency, and we will retain our approach for ‘selling bounces’ in the greenback as the downward trend in the Relative Strength Index continue to take shape.

With that said, we’ll watch the upside objectives for a near-term top, and the dollar may face additional headwinds over the near to medium-term should the Fed show a greater willingness to retain its zero-interest rate policy (ZIRP) for an extended period of time.

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

Forex_USDOLLAR_Rebound_to_Generate_Lower_High-_Euro_Correction_on_Tap_body_ScreenShot184.png, USDOLLAR Rebound to Generate Lower High- Euro Correction on Tap

EURUSD Daily

Forex_USDOLLAR_Rebound_to_Generate_Lower_High-_Euro_Correction_on_Tap_body_Picture_1.png, USDOLLAR Rebound to Generate Lower High- Euro Correction on Tap
  • Holds Within Upward Trending Channel; Higher High in Place?
  • Interim Resistance: 1.3960 (61.8 expansion)
  • Interim Support: 1.3600 Pivot to 1.3620 (23.6 retracement)

Three of the four components weakened against the dollar, led by a 0.28 percent decline in the Japanese Yen, while the Euro bucked the trend, with the single currency managing to hold a 0.05 percent gain.

Nevertheless, the EURUSD looks poised for a near-term pullback as it falls back from trendline resistance, and we will look for a higher low in the coming days as long as the RSI retains the bullish trend carried over from the previous month.

With a slew of European Central Bank (ECB) officials scheduled to speak next week, the fresh batch of central bank rhetoric may limit the downside for the single currency as President Mario Draghi retains a rather neutral tone for monetary policy, but we may see a growing number of Governing Council members favor a weaker Euro exchange rate in an effort to stem the risk for disinflation.

--- 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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