The US dollar’s performance found confirmation late yesterday and overnight, with fresh local highs etched in virtually all USD pairs, and with the mighty greenback not far from pulling to new cycle highs across the board.
Closest today are AUD/USD and USD/JPY, with the later nudging above the multi-year highs overnight before pulling back a bit.
Today offers one of the thinnest economic calendars for a Tuesday in recent memory, so it will be all about looking for entry levels and follow through price action as we sail towards Thursday’s Retail Sales number out of the US and then next Wednesday’s FOMC meeting.
But let’s be honest – Fed interest rate expectations are at the middle of the range since last October – this is a momentum driven market that is probably going to keep going until it stops in huge climax reversal. I will not try to guess when that may arrive.
Chart: AUD/USD
AUD/USD has picked up the pace to the downside amid the full court press from the US dollar and it looks like the range lows will have a hard time holding here. Projecting the next levels lower is a bit tricky given the lack of an obvious wave pattern, but we can start with a 61.8% extension to 0.7500, then look toward a 100% extension, which comes in around 0.7250 and finally a “third wave scenario” that could mean 0.6830 in the weeks to come on a big 161.8% extension.
G-10 Rundown
USD: Looking for USD/JPY and AUD/USD follow through to add to the USD’s across the board vault to new highs for the cycle. Not sure what can stop the surge for now. Watching the US bond market with extra interest as the 10-year yield has closed in on its 200-day moving average around 2.30%.
EUR: We have seen a minor bounce in some of the Euro pairs, and watching whether the focus shifts to USD/JPY buying from EUR/USD selling as the former sees a breakout to new multi-year highs. EUR/USD minor resistance 1.0825 and bigger resistance at yesterday’s 1.0900+ highs.
JPY: Has so far been reluctant to build much momentum to the weak side, even if it is notably weaker against the USD relative to a week ago. Watching for whether that changes in the event USD/JPY pulls convincingly clear of the former 121.85 highs today. An interesting coinciding indicator on the prospects of the JPY may be US yields, with higher yields possibly applying more pressure to the upside.
GBP: GBP/USD looks like it wants to test the 1.4950 range lows even as EUR/GBP continues to slip-slide away. One wonders if the Bank of England begins to express a bit more worry on the currency strength as EUR/GBP nears 0.7000.
CHF: EUR/CHF trading mid-range and yielding no clues on what it wants to do next. USD/CHF is closing in on parity, a remarkable recovery.
AUD: Following up on the 0.7750 break overnight in a delayed reaction to Friday’s sell-off and now probing the bottom of the range and cycle low toward 0.7625. The next natural focus lower is on 0.7500 and possibly more like 0.7250.
CAD: USD/CAD looking higher, though CAD is outperforming against AUD, with AUD/CAD looking like an interesting alternative way to trade AUD weakness. USDCAD focusing on 1.2700 and 1.2800 resistance lines next as the key cycle high is up at 1.3000 from the global financial crisis period.
NZD: All about relative performance in the crosses after tomorrow night’s Reserve Bank of New Zealand meeting, which can swing the currency either way. Given the recent backup in the likes of AUD/NZD, the RBNZ will need to come out with a market dovish bent to keep the NZD on the defensive. Against the USD, the kiwi doesn’t stand a chance at the moment, as the next focus is on the 0.7177 cycle lows.
SEK: Some near-term consolidation a risk, with 9.27 as key resistance level, but potential toward 9.00 unless Riksbank begins to rattle its cage, which will happen eventually anyway even if we remain near current levels.
NOK: Today’s CPI the last data point of interest besides next Tuesday’s trade balance data ahead of March 19 Norges Bank meeting. Generally prefer NOK to the weak side and watching bottom of range in EUR/NOK, which is close to 200-day moving average. Oil a complicating factor from day to day.
Economic Data Highlights
- Australia Feb. NAB Business Conditions/Confidence out at 2/0 vs. 2/3 in Jan.
- China Feb. CPI out at +1.4% YoY vs. +1.0% expected and vs. +0.8% in Jan.
- China Feb. PPI out at -4.8% YoY vs. -4.3% expected and vs. -4.3% in Jan.
- Japan Feb. Preliminary Machine Tool Orders out at +28.9% YoY vs. +20.4% in Jan.
- Switzerland Feb. Unemployment Rate out unchanged at 3.2% (SA) as expected
Upcoming Economic Calendar Highlights (all times GMT)
- Norway Feb. CPI (0900)
- US Feb. NFIB Small Business Optimism (1300)
- UK BoE’s Carney to Speak (1435)
- UK BoE’s Fisher to Speak (1800)
- UK BoE’s McCafferty to Speak (1830)
- Australia RBA Assistant Governor Kent to Speak (2205)
- Australia Mar. Westpac Consumer Confidence (2330)
- Japan Jan. Machine Orders (2350)
- Australia Jan. Home Loans (0030)
- China Feb. Retail Sales (0530)
- China Feb. Industrial Production (0530)