Dollar' free fall resumes after brief consolidation earlier today. There are talk about yesterday as the death of the dollar after Fed ramped up the money printing machine to buy long term treasuries. Commodity currencies are the main beneficiary of the current dollar selloff. In particular, the Australian dollar is supported by the view that RBA's interest will remain the highest among the developed world and there will be no quantitative easing. Aussie is additional supported by gold prices too. Canadian dollar, on the other hand, is lifted by stronger than expected CPI numbers today as well ass rebound in oil prices. Euro remains firm against dollar but is bounded in range in EUR/CHF and even retreats in EUR/GBP. Markets remain rather uncertain on whether and when ECB will follow Fed's path to enter into quantitative easing.
Technically, dollar index's strong break of 83.58 cluster support is seriously dampening the medium term bullish case. At this moment further decline should be seen to support zone of 79.63 and 81.62. In particular focus will be on the medium term trend line support at 81.07 which must remain intact for the up trend from 71.31 to hold. Considering bearish divergence condition in daily MACD and RSI, such case is getting vulnerable. Sustained trading below the trend line support will confirm that the medium term to longer term tide in dollar has turned. Meanwhile above 84.61 is needed to be the first indication of stabilization. Otherwise, risk remains on the downside.
Looking elsewhere, EUR/USD's break of 1.3329 yesterday confirms that fall from 1.4719 has completed and is now opening up the case for a retest of this high. AUD/USD's break of 0.6849 resistance also confirms that current rally is now heading to 0.7267 resistance and above. In the commodity markets, Gold's correction from 1007.7 should have completed yesterday at 882.7 already and should now target a retest of this high. Crude oil's break of 50.47 resistance also argues that it has bottomed out in medium term too. Having said that, the broader picture also suggest that some more weakness in dollar is to be seen.
On the data front, US initial jobless claims dropped slightly to 646k while continuing claims made new record high of 5.473m. Headline CPI in Canada rose +1.4% yoy in February, higher than consensus of +1% and +1.1% in January as led by a +7.4% rise in food price as well as a +3% gain in shelter costs (including mortgage interest cost and cost for household utilities). On monthly basis, the gauge gained +0.7%, compared with market expectation of +0.25 and -0.3% in January. Excluding food and energy, core CPI grew +1.9% yoy (consensus: +1.5%, January: +1.9%) and +0.5% mom (consensus: +0.2%, January: -0.4%) during the month.
Switzerland's ZEW economic expectations improved slightly to -57.1 in March, the 5th consecutive increase, from -57.7 a month ago as the SNB announced rate cut and currency intervention last week. The UK posted the biggest budget deficit in February with PSNCR came in at 4.4B pound, higher than consensus of 3.75b pound. The figure was the highest since 1995. At the same time, January's reading was revised to a surplus of 24.9B pound from 25.1B pound estimated initially. Also disappointed the market is that CBI's industrial trend index slid 2 pointed to -58 in March, compared with consensus of -55 and -56 in February.
AUD/USD Mid-Day Outlook
Daily Pivots: (S1) 0.6618; (P) 0.6709; (R1) 0.6853; More
AUD/USD's rise is still in force and extends further to as high as 0.6919 in early US session, taking out mentioned 0.6849 resistance. At this point, intraday bias remains on the upside as long as 0.6800 minor support holds. Further rally should now be seen targeting 0.7267 resistance next. On the downside, below 0.6800 will turn intraday outlook neutral first and bring pullback. But downside should be contained above 0.6564 support and bring rally resumption.
In the bigger picture, the break of 0.6849 resistance suggests firstly that rise from 0.6248 has resumed. Secondly it also suggest that fall from 0.7267 has completed. More importantly, it indicate4s that whole consolidation from 0.6008 is still in progress with rise from 0.6248 as another leg. Further rally should now be seen to 0.7267 and even further to 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completion. Below 0.6564 is needed to indicate that recent rise has completed and turn focus back to 0.6248 support.