USD Eyes Key Trendline Resistance- AUD Posts Largest Decline In 2012

By Michael Boutros, Currency Strategist

The greenback was markedly stronger at theclose of North American trade with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR ) advancing 0.52% on the session after moving afull 114% of its daily average true range. Ongoing concernsregarding a slowdown in China and the Greek debt saga has continuedto weigh on broader market sentiment with equity markets postingtheir largest one-day decline this year. Stocks drifted lowerthroughout the session with the Dow, the S&P, and NASDAQplummeting 1.57%, 1.54% and 1.36% respectively.

The move into risk aversion has fueled havenflows into the dollar with the index closing at its highest levelsince January 18th. The greenback closed just below key resistanceat the 61.8% Fibonacci extension taken from the August 1 st and October 27 th troughs at 9845. This level remains paramountfor the index with a breach eyeing long-standing trendlineresistance dating back to the October 4th highs, currently justabove the psychological 10,000 barrier. Note that the relativestrength index has now confirmed a break above key RSI resistancedating back to October 3rd, suggesting the index may now haveenough momentum for a breach above 9945 in the days to come. Dailysupport continues to rest at the confluence of the 50% extensionand the 100-day moving average at 9850.

An hourly chart shows the index continuing to hold above trendline support dating back to February 29th before encountering resistance at former trendline support dating back to February 8th. A breach above this level eyes subsequent topside resistance targets at 9950, 9980 and the 10,000 mark. Interim support rests at 9920 backed by 9900, 9875, and the 50% extension at 9850. Look for the dollar to consolidate after advancing 1.45% over the last three days with a drawdown offering more favorable long entry positions.

The greenback advanced against three of thefour component currencies highlighted by a 1.11% advance againstthe Australian dollar. The aussie remains under pressure after theRBA left the door open for further easing noting that inflationexpectations leave “scope for further easing.” Theremarks coupled with ongoing tensions in Europe and China fueled abroad-based risk sell-off with higher yielding currencies like theaussie and the kiwi coming under substantial pressure. The Japaneseyen is the top performer of the lot with an advance of 0.85% on thesession. Classic haven flows have continued to support loweryielding assets with the yen and the dollar acting as the chiefbeneficiaries as investors scale back their appetite for risk. Forthe updated USDJPY scalp targets refer to this morning Winners/Losers report .

Tomorrow’s US economic docket is highlighted by the February ADP employment report with consensus estimates calling for the addition of 205K private sector payrolls, up from a previous print of 170K. The report is often used as a gauge for the more encompassing non-farm payroll report which will be released on Friday, with traders eyeing calls for a print of 210K. As we noted earlier in the year, look for positive data to slowly begin to support the greenback as improving domestic conditions start to put pressure on the Fed to start normalizing monetary policy.

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

3/7

13:15

MEDIUM

ADP Employment Change (FEB)

205K

170K

3/7

13:30

LOW

Non-Farm Productivity (4Q F)

0.8%

0.7%

3/7

13:30

LOW

Unit Labor Costs (4Q F)

1.2%

1.2%

3/7

15:00

LOW

Consumer Credit (JAN)

$12.000B

$19.308B

---Written by Michael Boutros, Currency Strategist with DailyFX.com

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DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/us_dollar_index/usd_trading_today/2012/03/06/USD_Eyes_Key_Trendline_Resistance-_AUD_Posts_Largest_Decline_in_2012.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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