Bloody valentine: dollar finds no love

What a dramatic day it turned out to be. US inflation data surprised to the upside while retail sales disappointed. The dollar jumped then sold off.

What a dramatic day it turned out to be. US inflation data surprised to the upside while retail sales disappointed. The dollar jumped then sold off. Stock indices also fell sharply before bouncing back even more strongly. Risk is back on. But bond yields remained elevated with the benchmark 10-year climbing to 2.90% as it closes in on that critical 3% level. The market is now pricing in a 100% chance of a rate hike in March. But it looks like the dollar does not care anymore, as it continues to shrug off better than expected news. The Fed’s projected rate hikes had been mostly priced in before the inflation data came out anyway. But this does not mean that the dollar cannot bottom out soon. However, when the market talks and refuses to do what it ‘should’ then once has to listen carefully.  The market is telling us that the dollar has not bottomed out yet. This could be because of the fact that central banks elsewhere are also turning hawkish. Previously it was a one-horse race, with the Fed being the only hawkish one out there on its own. Now you have the BoE, BOC, and several others joining in as worries about global inflation rises. In addition, concerns over US debt and lack of trust in the government could be additional factors weighing on the dollar.

Aussie jobs data in focus

So, while it might be Valentine’s Day, the dollar is finding no love. With that in mind, there’s a good chance the AUD/USD will be able to push further higher tonight barring the release of very disappointing Aussie jobs figures. Employment is expected to have risen by 15,300 in January while the unemployment rate is seen steady at 5.5%. It is worth remembering that the devil is always in the detail: sometimes a strong headline figure masks over the cracks and the employment data looks impressive only because of a rise in part time jobs. So, what the Aussie bulls need to see is a rise in full time employment, regardless of what the headline figure shows.

AUD/USD could extend rally

With the US dollar selling off in reaction to today’s US macro pointers, the AUD/USD is more likely to go up than down in the next couple of days. As a result, we expect the potential dips to old resistance levels at 0.7895 or 0.7875 to be supported. The key bullish objective now is at 0.7990-0.80050. This area was previously support and so could turn into resistance upon re-test. In addition, the 61.8% Fibonacci level also comes into play here. The trend is clearly bullish as indicated for example by rising 50- and 200-day moving averages.

Source: eSignal and

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account