USD Carves Higher Lows, Euro Top Takes Shape Ahead Of April

By David Song, Currency Analyst

Talking Points
  • U.S. Dollar: New Home Sales On Tap, Bullard Sees Rate Hike In Late 2013
  • Euro: ECB President Draghi Talks Down Greek Exit, Further Easing Ahead
  • British Pound: BoE Sees Need For More Capital, RSI Maintains Downward Trend

U.S. Dollar: New Home Sales OnTap, Bullard Sees Rate Hike In Late 2013

The greenback pared the advance from earlier this week , with the Dow Jones- FXCM U.S. Dollar Index( Ticker: USDOLLAR ) tagging an overnight low of 9,950, but a risein New Home Sales could prop up the reserve currency as it dampensspeculation for additional monetary support. Demands for new homesare expected to increase 1.3% in February, and a positivedevelopment may push the dollar higher as the Fed continues tosoften its dovish tone for monetary policy.

Indeed, St Louis Fed President James Bullard struck a hawkish tone during an interview with Bloomberg TV, stating that ‘ultra-easy’ policy amongst the Group of Seven heightens the risk for inflation, and went onto say that monetary policy may be at a ‘turning point’ as he expects the FOMC to start normalizing monetary policy in late 2013. As the Fed changes its tune, the shift in the policy outlook is likely to dampen the correlation between risk sentiment and the USD, and we should see the greenback continue to appreciate against its major counterparts as the fundamental outlook for the world’s largest economy picks up. In turn, we will maintain our bullish call for the greenback, and we should see the dollar index make another run at the 78.6% Fibonacci retracement (10,118) as it looks to be carving out higher lows ahead of April.

Euro: ECB President DraghiTalks Down Greek Exit, Further Easing Ahead

The Euro fell back from a fresh weekly high of 1.3292and the single currency may continue to consolidate throughout theNorth American trade as market participants weigh the fundamentaloutlook for the region. European Central Bank President MarioDraghi spoke out against a Greek exit and warned that such an eventwould spur ‘higher inflation and instability,’and wemay see the central bank continue to shore up the ailing economy asit aims to encourage a sustainable recovery. As the EURUSDmaintains the range from earlier this month, the pair shouldcontinue to track sideways going into the end of March, but we willmaintain a bearish outlook for the single currency as Europeanpolicy makers struggle to stem the risk for contagion. As theEURUSD continues to carve out a head-and-shoulders top, we’restill looking for a major downturn in the exchange rate, but we arewaiting to see a break and a close below 1.3000 as it continues toprovide support.

British Pound: BoE Sees Need ForMore Capital, RSI Maintains Downward Trend

The British Pound struggled to maintain the overnight advance to1.5908 amid the slew of dismal developments coming out of the U.K.,and the sterling may continue to give back the advance from earlierthis month as market participants maintain bets for morequantitative easing. Indeed, the Bank of England encouragedcommercial banks to raise capital ‘as early asfeasible’ in order to combat future shocks, and thecentral bank may look to expand its balance sheet further in thecoming months in an effort to stem the downside risks surroundingthe region. However, as the BoE reverts back to a wait-and-seeapproach, we may see the GBPUSD maintain the range-bound priceaction going into April, but the pair looks poised for a move loweras the relative strength index maintains the downward trend carriedover from the previous month. In turn, we may see the pound-dollarthreaten interim support around 1.5600, but a break below thislevel would expose the 50.0% Fib retracement from the 2009 low tohigh around 1.5300.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

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Related Articles: Weekly Currency Trading Forecast

FX Upcoming

Currency

GMT

EDT

Release

Expected

Prior

USD

14:00

10:00

New Home Sales (FEB)

325K

321K

USD

14:00

10:00

New Home Sales (MoM) (FEB

1.3%

-0.9%

USD

18:30

14:30

Fed's Dennis Lockhart Speaks on U.S. Economy

Currency

GMT

Release

Expected

Actual

Comments

GBP

00:01

Nationwide Consumer Confidence (FEB)

47

44

Two-month low.

EUR

07:45

French Wages (4Q F)

--

0.3%

Holds steady for second month.

EUR

07:45

French Own-Company Production Outlook (MAR)

--

6

Highest reading since September.

EUR

07:45

French Business Confidence Indicator (MAR)

93

96

EUR

07:45

French Production Outlook Indicator (MAR)

-28

-15

EUR

09:00

Italy Retail Sales (MoM) (JAN)

-0.1%

0.7%

Rises for the first time since October.

EUR

09:00

Italy Retail Sales (YoY) (JAN)

-3.4%

-0.8%

GBP

09:30

BBA Loans for House Purchase (FEB)

37250

33103

Lowest since June.

CAD

11:00

Consumer Price Index (MoM) (FEB)

0.4%

0.4%

Fastest pace of growth since November, core inflation rises for the second month.

CAD

11:00

Consumer Price Index (YoY) (FEB)

2.7%

2.6%

CAD

11:00

Bank Canada CPI Core (MoM) (FEB)

0.3%

0.4%

CAD

11:00

Bank Canada CPI Core (YoY) (FEB)

2.2%

2.3%

CAD

11:00

Consumer Price Index (FEB)

--

121.2
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/us_open/2012/03/23/USD_Carves_Higher_Lows_Euro_Top_Takes_Shape_Ahead_Of_April.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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