Talking Points:

-Post-NFP AUD/USD Rebound Eyes 0.7600 Hurdle; Australia Employment Report on Tap.

- Scotland Referendum Shakes EUR/USD Outlook; Attention Turns to Dutch Election.

DailyFX Table

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

AUD/USD

0.7588

0.7592

0.7531

47

61

AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using Trading View

  • AUD/USD extends the advance following the U.S. Non- Farm Payrolls (NFP) report, with the pair at risk for a larger recovery as the 0.7500 (50% retracement) handle offers near-term support; however, the string of failed attempts to close above the Fibonacci overlap around 0.7590 (100% expansion) may produce range-bound conditions especially ahead of the Federal Open Market Committee (FOMC) meeting as the central bank is widely expected to deliver a March rate-hike.
  • Nevertheless, another 16.0K expansion in Australia Employment may heighten the appeal of the higher-yielding currency and encourage the Reserve Bank of Australia (RBA) to adopt an upbeat outlook for the region as ‘conditions in the global economy have continued to improve over recent months,’ but it seems as though Governor Philip Lowe and Co. are in no rush to move away from the record-low interest rate as ‘inflation remains quite low;’ in turn, the fresh projections coming out of the FOMC may play a greater role in dictating near-term price action as market participants gauge the diverging paths for monetary policy.
  • Note AUD/USD continues to operate within the 2016 rate after failing to test the November high (0.7778), with the pair at risk of giving back the advance from earlier this year especially as the Relative Strength Index (RSI) extends the bearish formation carried over from the previous month.

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

EUR/USD

1.0677

1.0714

1.0656

9

58

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using Trading View

  • EUR/USD pulls back from a fresh monthly high of 1.0714, with the single-currency at risk of facing additional headwinds as Scotland plans to hold a second referendum, while market participants eagerly await the results of the Dutch elections; another failed attempt to close above the Fibonacci overlap around 1.0660 (50% expansion) to 1.0680 (78.6% expansion) may cap the near-term rebound in the exchange rate especially as the European Central Bank (ECB) keeps the door open to further embark on its easing-cycle.
  • Growing concerns surrounding the stability of the monetary union may encourage the Governing Council to further support the euro-area, and President Mario Draghi and Co. may show a greater willingness to extend its asset-purchase program beyond the December 2017 deadline as officials continue to strike a dovish tone and argue ‘headline inflation had increased recently, mainly owing to developments in energy prices;’ the ECB’s widening balance sheet may continue to cast a long-term bearish outlook for the euro-dollar exchange rate especially a Chair Janet Yellen warns ‘waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly.
  • Lack of momentum to hold/close 1.0660 (50% expansion) to 1.0680 (78.6% expansion) may open up the downside targets, with the first region of interest coming in around 1.0600 (23.6% expansion) followed by near-term support around 1.0470 (38.2% expansion) to 1.0500 (50% expansion).

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--- Written by David Song, Currency Analyst

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