Dollar Struggled Before Equities Rebound, Yields And Bernanke Weigh

By John Kicklighter, Currency Strategist
  • Dollar Struggled Before Equities Rebound, Yields and Bernanke Weigh
  • Euro Drops Across the Board in the Lead Up to the EU’s Meeting
  • Japanese Yen Puts in for Another Rally: Repatriation or Risk Trends?
  • Australian Dollar Volatile on Fickle Risk Trends, Rate Outlook Getting Serious
  • Canadian Dollar Tips Lower after Budget Report, GDP Data Ahead
  • British Pound Hardly Flinches on Drop in Housing Data, Sentiment
  • Gold Slides for a Third Day but Curbing More of its Losses

Dollar Struggled Before Equities Rebound, Yields and Bernanke Weigh

The dollar has put infor a remarkable showing in volatility terms this past 24 hours,and that is likely to carry through over the final hours of thistrading week. However, as we’ve discussed before: volatility does not necessarily translate into trend generation . There is a lot in thefundamental backdrop currently that can stir volatility for thegreenback, but underlying risk trends are once again holding thereins. If the greenback is playing its risk appetite connections,its erratic performance makes a little more sense. The benchmarkS&P 500 took a high-profile dive below the round, 1,400-figureon the open of the New York session at the behest of the bearishpressure in the preceding futures trade. Yet, what could have beena marked step towards securing a larger shift in bearing wasinstead sharply retraced before the close of the day. We couldattempt to attribute this sudden change in attitude to event riskor Fed speak, but that would be more convenient thanaccurate.

As long as sentiment is anchored just off multi-year highs, the dollar will struggle to make meaningful progress. That said, we should appreciate the scheduled event risk from this past session for its influence on future developments. The final reading of the 4Q GDP figures wasn’t a repricing event on its own, but the 2.1 percent increase in consumer spending and weakest increase in corporate profits in three-years reminds us of the balance of power going forward. Similarly, the weekly jobless claims data doesn’t disrupt a multi-month trend, but the near, four-year low in initial filings sets up speculation for next week’s NFPs. Even the commentary from Bernanke, Lockhart, Plosser and Lacker offers limited influence. The market is trying to read everything the Chairman says for QE3 potential while the others are more straightforward. Is there anything that can change this state of indecision over the final day? Unlikely. But, watch the newswires for catalysts, not the economic docket.

Euro Drops Across the Board in the Lead Up to the EU’s Meeting

EURUSD may be trading back above 1.3300 in the early hours of Friday’s session, but the euro is hardly putting up a strong showing of its own. In fact, the shared currency was lower against all of its major counterparts except for the Swiss franc through the past trading day’s close. Once again, the data available doesn’t necessarily paint the picture of a currency that should come under significant pressure. The Euro-area confidence figures were generally mixed (business confidence was hit hard but consumer and economic sentiment was steady) and the German unemployment rate dropped to a two-decade low. Far more interesting were the updates on running fears. Ahead of the EU’s meeting of Finance Ministers and central banks to discuss increasing the ‘firewall’ to €700-940 billion, there is a strong consensus for approval and the implications seem to already be priced in. Another threat that may have been defused was the due date on Ireland’s €3.06 billion payment on its bank bailout funds – which it now plans to pay with a government bond. That said, there are plenty of periphery problems that could flare up.

Japanese Yen Puts in for Another Rally: Repatriation or Risk Trends?

The yen put in anotable rally Thursday morning, and the currency seems to be makinga repeat performance through the early hours of this new session.However, despite the aggressive rallies, critical levels on the crosses have yet to cave. A fewkey figures to keep track of: USDJPY at 82.00; EURJPY at 108.75;GBPJPY at 130; and 85.00 for AUDJPY. Whether we can overpower thefloor on these pairs depends on what the fundamental fuel happensto be powering the volatility. It seems highly likely thatrepatriation of earnings by Japanese corporations from theirinternational operations is involved in this unusual activity; butif that is the case, we have a closing window for its influence– Monday is a new fiscal year. If we intend to break supportand generate follow through afterwards, it will have to comethrough risk aversion. Carry unwinding is a constant threat formost high yielding pairs, but the situation is a little differentfor the USDJPY. We’ll discuss that should ithappen.

Australian Dollar Volatile on Fickle Risk Trends, Rate Outlook Getting Serious

A swell in riskappetite through the second half of the US session helped carry thecarry-favorite, Australian dollar higher. A little more interestingthough was the volatile drive through the early Asian tradinghours. Normally, we would look to the Chinese economic docket forguidance on regional risk sentiment and export-derived growthexpectations for the currency, yet the MNI business confidencereport for the world’s second largest economy disappointed.This is a dangerous time to take a stance on risk without a clearcatalyst. In the meantime, the 12-month rate forecast for the RBAhas grown to 80 bps worth of cuts. That’s the most bearishoutlook since February 6 th – and just beforethe RBA decision…

Canadian Dollar Tips Lower after Budget Report, GDP Data Ahead

Canadian Finance Minister Flaherty released the 2012-2013 budget forecast to a growth-minded market. According to the policy maker, the economy will run a deficit of C$21.1 billion through the period following a C$24.9 billion shortfall through the previous fiscal year. He expects a balanced budget in the 2015-2016 period – which would give an added level of appeal in fiscal stability if growth holds. Speaking of the economy, we have January GDP figures due in the upcoming North American trading session. Expectations are set low.

British Pound Hardly Flinches on Drop in Housing Data, Sentiment

There was a round of notable UK event risk – generally unflattering, but it seemed like the sterling traders were more interested in matching the health of its euro counterpart. For event risk this past session, the housing market soured with the biggest drop in the Nationwide House Prices reading in two years and an eight-month low in mortgage approvals. Of further concern the GfK Consumer sentiment survey unexpectedly slipped with the current read on personal finances matching a series’ record low. Austerity isn’t looking so good in this data.

Gold Slides for a Third Day but Curbing More of its Losses

It was technically athird consecutive decline for gold through Thursday, butthe metal has shown increasingly aggressive rebound through the endof its sessions. That said, the late recoveries haven’tturned into true strength as we see every currency (again, exceptfor the franc) made progress against the alternative store ofwealth. On a side note, volume on the futures market notable easedback from Wednesday’ six-month high 379,000 contractturnover.

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ECONOMIC DATA

N ext 24 Hours

GMT

Currency

Release

Survey

Previous

Comments

0:00

AUD

HIA New Home Sales (MoM) (FEB)

-7.3%

Housing market softening

0:30

AUD

Private Sector Credit (MoM) (FEB)

0.3%

0.2%

Credit seeing some short term expansion on lower rates

0:30

AUD

Private Sector Credit (YoY) (FEB)

3.3%

3.5%

1:35

CNY

MNI March Business Condition Survey

58.87

Own survey improving

2:00

NZD

Money Supply M3 (YoY) (FEB)

5.4%

Rapid rise suggest tightening

5:00

JPY

Annualized Housing Starts (FEB)

0.840M

0.822M

Construction also rising on higher demand

5:00

JPY

Housing Starts (YoY) (FEB)

-1.1%

-1.1%

6:00

EUR

German Retail Sales (YoY) (FEB)

0.1%

-2.3%

Retail sales expected to rise, though continued improvement may be questionable

6:00

EUR

German Retail Sales (MoM) (FEB)

1.2%

-1.6%

7:00

CHF

KOF Swiss Leading Indicator (MAR)

0.07

-0.12

Swiss index improving

9:00

EUR

Italian CPI EU Harmonized (YoY) (MAR P)

3.3%

3.4%

Italian prices seeing shorter term fall with consumer spending waning

9:00

EUR

Italian CPI (NIC Incl. Tobacco) (YoY) (MAR P)

3.2%

3.3%

9:00

EUR

Euro-Zone CPI Estimate (YoY) (MAR)

2.5%

2.7%

Price estimates lower, could indicate recession due to lack of consumer spending, demand

12:30

CAD

GDP (MoM) (JAN)

0.1%

0.4%

Canadian GDP figures for January expected to rise slower, may be due to input price increases

12:30

CAD

GDP (YoY) (JAN)

1.7%

1.8%

12:30

USD

Personal Income (FEB)

0.4%

0.3%

US spending, income data showing consumers receiving benefit of recovering economy

12:30

USD

Personal Spending (FEB)

0.6%

0.2%

12:30

USD

PCE Deflator (YoY) (FEB)

2.3%

2.4%

12:30

USD

PCE Core (MoM) (FEB)

0.1%

0.2%

12:30

USD

PCE Core (YoY) (FEB)

1.9%

1.9%

12:30

USD

PCE Deflator (MoM) (FEB)

0.3%

0.2%

13:45

USD

Chicago Purchasing Manager (MAR)

63

64

Midwest index moderating

13:55

USD

U. of Michigan Confidence (MAR F)

74.8

74.3

Final revision still expected higher

14:00

USD

NAPM-Milwaukee (MAR)

58

58.6

Manufacturing industries weaker

GMT

Currency

Upcoming Events & Speeches

07:00

EUR

Euro Zone Finance Ministers Meet in Denmark

10:30

EUR

EU-27 Finance Ministers and Central Bankers Meet in Denmark

14:00

USD

Revisions: Wholesale Trade Sales

16:00

USD

Revisions: Industrial Production

SUPPORT AND RESISTANCE LEVELS

To seeupdated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To seeupdated PIVOT POINT LEVELS for the Majors and Crosses, visitour Pivot Point Table

CLASSIC SUPPORT ANDRESISTANCE EMERGING MARKETS 18 :00GMT SCANDIES CURRENCIES 18:00GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

16.5000

2.0000

9.2080

7.8165

1.3650

Resist 2

7.5800

5.6625

6.1150

Resist 1

14.3200

1.9000

8.5800

7.8075

1.3250

Resist 1

6.5175

5.3100

5.7075

Spot

13.1813

1.8298

7.9516

7.7618

1.2719

Spot

6.7826

5.7501

5.9324

Support 1

12.6000

1.6500

6.5575

7.7490

1.2000

Support 1

6.0800

5.1050

5.3040

Support 2

11.5200

1.5725

6.4295

7.7450

1.1800

Support 2

5.8085

4.9115

4.9410

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\ Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist. 3

1.3096

1.5727

77.65

0.9464

1.0227

1.0620

0.8168

100.92

121.26

Resist. 2

1.3055

1.5689

77.49

0.9434

1.0203

1.0586

0.8142

100.59

120.94

Resist. 1

1.3014

1.5652

77.33

0.9405

1.0179

1.0552

0.8116

100.27

120.61

Spot

1.2931

1.5576

77.01

0.9345

1.0132

1.0484

0.8063

99.62

119.97

Support 1

1.2848

1.5500

76.69

0.9285

1.0085

1.0416

0.8010

98.97

119.32

Support 2

1.2807

1.5463

76.53

0.9256

1.0061

1.0382

0.7984

98.65

119.00

Support 3

1.2766

1.5425

76.37

0.9226

1.0037

1.0348

0.7958

98.32

118.67

v

--- Written by: JohnKicklighter, Senior Currency Strategist for DailyFX.com

To contact John , email jkicklighter@dailyfx.com . Follow me on twitter athttp://www.twitter.com/JohnKicklighter

To be added toJohn’s email distribution list, send an email with thesubject line “Distribution List” to jkicklighter@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/daily_briefing/session_briefing/daily_fundamentals/2012/03/30/Dollar_Struggled_Before_Equities_Rebound_Yields_and_Bernanke_Weigh.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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