USD Index Poised For Fresh Highs, AUD Struggles To Hold Support

By David Song, Currency Analyst

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

9986.62

9995.96

9935.67

0.35

91.34%

T he Dow Jones-FXCM U.S. Dollar Index(Ticker: USDollar ) remains 0.21 percent higher from the open after moving91 percent of its average true range, and the rebound from 9,896looks poised to gather pace as the greenback appears to be breakingout of the downward trending channel from earlier this month.Although the 30-minute relative strength index is coming off ofoverbought territory, the upward trend in the oscillator reinforcesour call for more USD strength, and we may see a small pullbackbefore a larger move to the upside. As the Federal Open MarketCommittee takes note of the more robust recovery, the shift incentral bank rhetoric should continue to prop up the dollar, andthe committee may see scope to conclude its easing cycle in 2012 asthe world’s largest economy gets on a more sustainablepath.

As the USDOLLAR maintains the upward trending channel from earlier this year, we are looking for another run at the 78.6 percent Fibonacci retracement (10,118), and we may see the greenback mark fresh highs for the year as the central bank continues to curb speculation for more quantitative easing. Indeed, St. Louis Fed President James Bullard talked down the risks surrounding the region as he expects the recovery to gather pace this year, but went onto say that inflation is moderating slight above the 2% while speaking in China. As the stickiness in price growth paired with the rise in private sector activity heightens the outlook for inflation, we may see the FOMC lift the benchmark interest rate off the record-low towards the end of the year, but the central bank may look to extend ‘Operation Twist’ amid the ongoing slack within the housing market.

Three of the four components lost ground against the greenback, led by a 0.97 percent decline in the Australian dollar, and the AUDUSD may continue to give back the advance from earlier this year as the downward trending channel takes shape. As the AUDUSD slips back below the 100-Day SMA (1.0380), a close below the moving average would strengthen our call for more aussie weakness, and we will be closely watching the relative strength index as it maintains the downward trend carried over from February. As the technical outlook paints a very bearish picture for the aussie-dollar, we should see the exchange rate track lower in April, and the pair may ultimately come up against the 38.2 percent Fib from the 2010 low to the 2011 high around 0.9930-50 as risk sentiment falters.

--- Written by David Song, Currency Analyst

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

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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/daily_dollar/2012/03/28/USD_Index_Poised_For_Fresh_Highs_AUD_Struggles_To_Hold_Support.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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