Talking Points:
- AUD/USD Tests 2015 Support Ahead of RBA Minutes, Australia Employment Report.
- USDOLLAR Extends Losses Ahead of FOMC Meeting- Updated Forecasts in Focus.
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Chart - Created Using FXCM Marketscope 2.0
- AUD/USD extends the advance from earlier this year, with the pair coming up against the 2015 support zone around 0.7580 (5% expansion) to 0.7590 (100% expansion); will keep a close eye on the Relative Strength Index (RSI) especially as the oscillator appears to be pushing into overbought territory.
- The Reserve Bank of Australia’s (RBA) Minutes may further boost the appeal of the higher-yielding currency as Governor Glenn Stevens continues to endorse a wait-and-see approach, and a meaningful rebound in Australia Employment may spark fresh 2016 highs in AUD/USD as market participants scale back bets for a rate-cut.
- As a result, the key developments coming out next week may spur break/close above the 2015 support zone, which should open up the next topside target around 0.7650 (78.6% retracement).
- Despite the near-term breakout, the DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short AUD/USD since March 1, with the ratio hitting fresh extremes this month as it slipped below -2.00.
- Retail sentiment has narrowed from recent extremes as the ratio currently sits at -1.84 as 35% of traders remain long, while open interest continues to pick up as it stands 21.3% above the monthly average.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11971.84 | 12021.53 | 11953 | -0.26 | 122.08% |
Chart - Created Using FXCM Marketscope 2.0
- Despite the light economic docket, the USDOLLAR extends the decline from earlier this month, with the greenback slipping to fresh 2016 lows; may largely be a function of position adjustments as market participants turn their attention to the Federal Open Market Committee (FOMC) interest rate decision on March 16.
- With the U.S. Consumer Price Index (CPI) anticipated to show stickiness in the core rate of inflation, the fresh projections (growth, inflation as well as the interest rate dot-plot) coming out of the central bank may generate a near-term recovery in the greenback should the FOMC show a greater willingness to further normalize in 2016.
- Nevertheless, the failure to hold above the February low (12,001) accompanied by the bearish RSI formation may lead to a further decline in the USDOLLAR should the index break/close below the next key area of interest around 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
Read More:
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--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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