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Greenback Still Finding Solid Bids on Dips

Greenback Still Finding Solid Bids on Dips

2010-03-18 11:48:00
Joel Kruger, Technical Strategist




 The session had begun with some broad based USD selling, but in the end, it was not clear which direction the markets were favoring, with the major currencies giving back much of their gains into North American trade, while commodity currencies continued to surge. There have been a lot of concerns over the financial stability in the European economies, including the UK, and it seems as though market participants are content on trading into the commodity bloc which arguably offers higher yields and more stable economic outlooks.

Relative Performance Versus USD on Thursday (As of 11:40GMT) –

1)    KIWI              +0.20%
2)    CAD               +0.07%
3)    YEN               +0.04%

4)    STERLING    -0.28%       
5)    AUSSIE        -0.28%
6)    EURO            -0.48%   
7)    SWISSIE     -0.48%

Fed Fisher was out late Wednesday saying the Fed is not at the point yet to change language or policy, and this has marginally weighed on the buck. Meanwhile on the data front, the Tankan survey has come out in Japan and shows manufacturers turning the least pessimistic since June 2008. In Australia, merchandise imports came in softer, but failed to materially factor into price action. The RBA’s monthly bulletin was also released and continued to show the central bank returning to being a net seller of its currency. Famed commodity investor Jim Rogers was out talking down the Euro and Pound, while at the same time plugging the Chinese currency and commodities. Finally, New Zealand consumer confidence was released and came out on the weak side after showing a decline for the second straight month.

In European trade, the major currencies came under additional pressure, with the Euro leading the declines as more concern and uncertainty surfaced on the Greek topic. While PM Papandreou attempted to downplay any fears of a Greek blowup, the news that the Greece would be looking for aid from the IMF over the Easter holiday was enough to easily offset the PM comments and trigger a fresh round of selling. The Pound was also back under pressure, with the single currency initially holding up well following the better than expected PNCR data, but eventually succumbing to broader USD positive flows and some disappointing CBI industrial trends. The Swiss Franc was also one of the weaker currencies on the day, with talk that the SNB was out checking rates, enough to trigger some profit taking in short Eur/Chf positions that have proven to be highly profitable and potentially exhausted at this point.

Looking ahead, the busy calendar for Thursday continues, with Canada international securities transactions (8.0B expected) kicking things off at 12:30GMT, along with a batch of US data releases including; CPI (0.1% expected), current account (-119.8B expected), initial jobless claims (455k expected), and continuing claims (4500k expected). The Philly Fed (18.0 expected) is then scheduled for release at 14:00GMT, along with leading indicators (0.1% expected). On the official circuit, Fed Hoenig and Lacker speak to bankers in Washington at 12:30GMT, while Fed Duke steps up a couple of hours later in front of the same panel at 15:30GMT. US equity futures are barely bid, while commodities are mixed with gold higher and oil lower.


Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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