USD Trading Outlook (17-03-2015)

AUD/USD Some short covering took hold in Europe’s morning and NY added to that bias early on. The pair sat near 0.7645 into NY’s open. A series of soft US data prints put the USD on its heels. AUD/USD quickly lifted to the 0.7680 area but no further gains could be made. The USD staged a rally as US bond yields clawed back some losses. AUD/USD slid form the highs and tested near the opening levels. Aiding the slide lower was AUD/NZD trading heavy and probing near 1.0350. AUD/USD remained heavy late in the day and sat near 0.7645. Traders now turn their attention to the RBA minutes for hints of future policy action. Any impact might be limited though as the FOMC on Wednesday garners most of the markets attention for now..

EUR/USD Dips were bought in Europe and EUR/USD sat near 1.0525 into NY’s open. Short covering in NY saw bull pressure applied right out of the gate. The lift got an added boost as Empire Mfg and US IP data were on the soft side. Bears scrambled to cover as thoughts that the Fed might leave ‘patient’ in their language on Wednesday were upped. The lift pierced 1.0600 and eventually extended to a high of 1.0620. Leveraged names were the noted buyers and macros contributed to the rally a bit as well. Some of the pair’s gains faded in the afternoon as the USD rallied on a rebound in US bond yields. late in the day EUR/USD sat near 1.0585. EZ Feb CPI and Germany’s March ZEW are the big risks for the upcoming session. Above forecast results could see the short squeeze go a bit further. Big gains are unlikely though as the market won’t get overly aggressive ahead of the Fed.

USD/JPY Subpar US econ data and slight slippage in Tsy yields were not enough to pull USD/JPY below importer and spec bids into 121.00. With US and other equity markets, particularly the N225 futures, on the rise and USD-JPY 2-yr yield spreads a shade higher today, USD/JPY erased its early NY losses and is roughly unchanged on the day, but still below Fri & Thur’s highs. The BOJ meeting ends this evening and QQE2 is expected to be voted extended without much resistance. If the major wage agreements due to be announced on Wed are generous by recent historical standards, it will give the BOJ a bit more breathing room on the reflation front. Reports o/n that the GPIF’s head, Mitani, will not be replaced and that no big policy board is imminent, should play into the GPIF et al asset reallocation trend that has favored USD/JPY longs and yen shorts in general. All eyes are on the Fed for any signs it is more or less likely to tightening midyear or in Sep, as the rising USD has been a major component in the USD/JPY rise since the QQE2 shock wore off at year-end. EUR/JPY retraced 38.2% of the Mar 10-13 drop w today’s 128.81 high.

AUDUSD

Pivot: 0.7675

Our preference: Short positions below 0.7675 with targets @ 0.7605 & 0.7555 in extension.

Alternative scenario: Above 0.7675 look for further upside with 0.772 & 0.7745 as targets.

Comment: The RSI is mixed and calls for caution. The pair is rebounding and is challenging its resistance, caution.

Supports and resistances:
0.7745 ***
0.772 ***
0.7675 ***
0.7661 Last
0.7605 ***
0.7555 ***
0.7525 **