USD Trading Outlook (02-12-2014)

AUD/USD Europe couldn’t add to losses after Asia set a new trend low for AUD/USD. The combination of a slumping USD and US yields along with rebounds in commodities had shorts scrambling to cover. The buys took the pair from near 0.8425 towards 0.8500 before it pulled back to the 0.8480 area into NY’s open. NY bought the dip as early NY saw the USD and bond yields remain soft. The par rallied above 0.8520 but suffered a nice intra-day set-back after ISM beat estimates. A quick trip towards 0.8480 was seen but buyers were there again and the pair went on to hit 0.8533. The USD clawed back some losses late in the day and the pair sat just above 0.8510 late in the day. Traders now turn their focus to the RBA later. Rates are expected to stay unchanged but the statement might pressure AUD lower. AUD strength is likely to be mentioned again which is nothing new. However, if mentions of lowering rates, as RBA’s Lowe recently noted, and intervention, as RBA’s Kent recently noted, are brought up AUD should trade heavy. It’s then possible today’s short squeeze gets erased and new lows get set.