Talking Points

  • U.S. Dollar: Index Hits Fresh Monthly High as NFPs Top Forecast
  • Euro: Greece Invokes CAC, All Eyes on ISDA

U.S. Dollar: Index Hits Fresh Monthly High as NFPs Top Forecast

The 227K rise in U.S. Non-Farm Payrolls propped up the greenback on Friday, with the Dow Jones- FXCM U.S. Dollar Index (Ticker: USDOLLAR) advancing to a fresh monthly high of 9,963, and the reserve currency may appreciate further during the North American trade as market participants scale back speculation for additional monetary support. As the more robust recovery in the labor market fosters an improved outlook for the U.S., we should see the Federal Reserve continue to scale back its dovish tone for monetary policy, and positive developments coming out of the economy may continue to prop up the reserve currency as the correlation between risk and the dollar appears to be giving out.

As the economic docket for the following week is expected to reinforce an improved outlook for the region, the pickup in economic activity could pave the way for additional USD strength, and the index looks poised to retrace the decline from earlier this year as it clears the 61.8% Fibonacci retracement around 9,949. However, as market participation tends to think ahead of the weekend, we may see the dollar consolidate once Europe goes offline, and we will stick to the sidelines going into the week ahead as headlines coming out of the euro-area continue to shake up the currency market.

Euro: Greece Invokes CAC, All Eyes on ISDA

Although Greece was able to obtain 85.8% participation from private creditors, the Euro sold off following the announcement after the government said it would invoke the Collective Action Clause to obtain 95.7% involvement. Indeed, the International Swaps & Derivatives Association will determine if the CAC will trigger the $3B in credit-default swaps on Monday, but the single currency continues to face many hurdles as market participants turn their focus to the implementation of the second bailout package. As the EURUSD fails to test the 2/9 high (1.3020), the pair looks to be carving a head-and-shoulders top in March, and the short-term reversal looks poised to gather pace as the euro-dollar threatens the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3100. However, we would like to see the 50-Day SMA (1.3086) to give way to see the EURUSD give back the advance from earlier this year, and we will be keeping a close eye on the 23.6% Fib around 1.2630-50 as the technicals continues to instill a bearish outlook for the pair.

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--- Written by David Song, Currency Analyst

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