FOREX: Dollar Poised To Extend Gains As Risk Aversion Returns

By Ilya Spivak, Currency Strategist

Talking Points
  • US Dollar Higher in Asia as FOMC Announcement Weighs on QE3 Bets
  • S&P 500 Futures Point to Risk Aversion, Hinting Dollar to Extend Gains
  • UK Jobless Claims Unlikely to be Major Market-Mover for British Pound

The US Dollar (ticker: US Dollar ) continued to push higher overnight afteradding 0.23 percent against its leading counterparts over thepreceding 24 hours after the Federal Reserve policyannouncement scattered QE3 expectation s further , easing concerns policymakers would furtherdilute the benchmark currency. S&P 500 stock index futures are pointing materiallylower in late Asian trade, hinting risk aversion is likely topropel the greenback higher still in the hours ahead.

The US currency broke with its long-strandinginverse relationship with stock prices yesterday. Indeed, theS&P 500 surged higher alongside the Dollar in the aftermath ofthe FOMC announcement, a response that we did not expect . The break-down of risk on/off tradingdynamics seems like a temporary development however, with theimpact of FOMC on equities obscured by an unexpected announcementof an increase in dividend payments and a $15 billion share buybackfrom JPMorgan . This delayed downward pressure on riskyassets from reduced QE3 expectations, but is unlikely to havedismissed it altogether. With that in mind, a catch-up move lowerin sentiment and linked assets appears probable.

On the economic data front, UK JoblessClaims figures are on tap. Expectations call for arelatively modest 5k increase in applications for unemploymentbenefits. The three-month UnemploymentRate is forecast to remain unchanged at 8.4 percent.A print in line with expectations will probably neither advance nordetract from the case for additional Bank of England stimulus,leaving the British Pound at the mercy of broader risk trends.

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

Westpac Consumer Confidence (MAR)

-5.0%

-

4.2%

23:30

AUD

Westpac Consumer Confidence Index (MAR)

96.1

-

101.1

23:50

JPY

BSI Large All Industry (QoQ) (1Q)

-2.7

-

-2.5

23:50

JPY

BSI Large Manufacturing (QoQ) (1Q)

-7.3

-

-6.1

0:30

AUD

Dwelling Starts (4Q)

-6.9%

-3.0%

-5.8% (R+)

2:00

NZD

Non Resident Bond Holdings (FEB)

60.3%

-

59.3%

4:30

JPY

Industrial Production (MoM) (JAN F)

1.9%

-

2.0%

4:30

JPY

Industrial Production (YoY) (JAN F)

3.4%

-

-1.2%

4:30

JPY

Capacity Utilization (MoM) (JAN F)

-1.3%

-

3.1%

6:00

JPY

Machine Tool Orders (YoY) (JAN F)

-8.6%

-

-8.6%

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

9:30

GBP

Claimant Count Rate (FEB)

5.0%

5.0%

Medium

9:30

GBP

Jobless Claims Change (FEB)

5.0K

6.9K

High

9:30

GBP

ILO Unemployment Rate (3M) (JAN)

8.4%

8.4%

Medium

9:30

GBP

Average Weekly Earnings (3M/YoY) (JAN)

1.9%

2.0%

Low

9:30

GBP

Weekly Earnings ex Bonus (3M/YoY) (JAN)

1.9%

2.0%

Low

10:00

EUR

Euro-Zone CPI (MoM) (FEB)

0.5%

-0.8%

Medium

10:00

EUR

Euro-Zone CPI (YoY) (FEB)

2.7%

2.7%

Medium

10:00

EUR

Euro-Zone CPI - Core (YoY) (FEB)

1.6%

1.5%

Low

10:00

EUR

Euro-Zone Industrial Production (MoM) (JAN)

0.6%

-1.2%

Medium

10:00

EUR

Euro-Zone Industrial Production (YoY) (JAN)

-0.7%

-2.0%

Medium

10:00

CHF

Credit Suisse ZEW Survey (Expectations) (MAR)

-

-21.2

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2970

1.3166

GBPUSD

1.5564

1.5761

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
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/daily_briefing/session_briefing/euro_open/2012/03/14/FOREX_Dollar_Poised_to_Extend_Gains_as_Risk_Aversion_Returns.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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