News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
AUD/USD Snaps Lower; US Dollar Volatility to Rise as NFPs Loom

AUD/USD Snaps Lower; US Dollar Volatility to Rise as NFPs Loom

Rich Dvorak, Analyst

US DOLLAR STRENGTH SENDS AUD/USD PLUMMETING; NFP REPORT EYED

FX markets saw some heightened activity during Thursday’s trading session driven by a big influx of US Dollar strength. The broader DXY Index spiked 0.65% to its highest level since 14 May as the US Dollar felt buying pressure across the board of major currency pairs. US Dollar strength was notable against the Aussie in particular with AUD/USD plunging 93-pips on the day.

AUD/USD price action trades well below the 0.7700-handle now, which appears to provide confirmation of the bearish head and shoulders pattern we flagged two weeks ago. This could suggest AUD/USD is primed to weaken further, though it will likely be important to keep tabs of the fundamental drivers catalyzing the move.

The Australian Dollar has faced fresh headwinds recently amid dovish RBA rhetoric while the US Dollar has seen waves of demand due to mounting Fed taper risk.Not to mention, IG Client Sentiment data on AUD/USD trader positioning alludes to potential for more follow-through to the downside as well.

USD PRICE OUTLOOK - US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

USD Price Chart Outlook US Dollar Implied Volatility Trading Ranges AUDUSD EURUSD USDJPY USDCAD GBPUSD

Nevertheless, outlook for AUD/USD and the broader US Dollar likely hinges on the upcoming release of nonfarm payrolls and how the monthly jobs report sways the Fed taper debate. NFPs are scheduled to cross market wires Friday, 04 June at 12:30 GMT. As such, overnight US Dollar implied volatility readings have perked up quite a bit.

Notably better-than-expected NFP data would likely correspond with broad-based US Dollar strength. On the other hand, if NFPs miss consensus forecast, the US Dollar could whipsaw back lower as bears look to fade recent strength. Ultimately, I will be keeping an eye out for the direction of Treasury yields as a positively-correlated bellwether to where USD price action heads next.

Keep Reading – US Dollar Forecast: Inflation, Fed Taper Debate, Yields are Key

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES