Daily Change (%)
Daily Range (% of ATR)
DJ-FXCM Dollar Index
The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is 0.18 percent lower from the open after moving 123 percent of its average true range, and the greenback may continue to trade heavy over the next 24-hours of trading as the dovish statement from Fed Chairman Ben Bernanke fuels speculation for additional monetary support. As the index marks lower highs paired with lower lows, it looks as though a downward trending channel in starting to take shape, but we may see a small rebound going into the overnight session as the 30-minute relative strength index bounces back from oversold territory.
Although Fed Chairman Bernanke kept the door open to expand the balance sheet further, the central bank head remained cautiously optimistic toward the economy amid the more robust recovery, while Philadelphia Fed President Charles Plosser talked up the risk for inflation as he expects the region to grow 'moderately' going forward. As central bank officials raise their outlook for growth and inflation, we should see the Federal Open Market Committee conclude its easing cycle this year, but there could be a growing rift within the FOMC as Mr. Bernanke maintains a dovish tone for monetary policy. Nevertheless, as the USDOLLAR maintains the upward trend carried over from the previous month, the dip in the relative strength index appears to be a false break, and we should see the reserve currency regain its footing as long as the index holds above 9,900.
Three of the four components advanced against the greenback, led by a 0.58 percent advance in the Australian dollar, and the high-yielding currency may appreciate further over the next 24-hours of trading as market participants increase their appetite for risk. However, as the AUDUSD pares the advance to 1.0544, we should see the exchange rate continue to track the downward trending channel from earlier this month, and the pair looks poised for another move to the downside as we expect to see a lower low going into April. In turn, we should see the AUDUSD slip back below the 200-Day SMA (1.0404), which could ultimately pave the way to see a test of the 38.2 percent Fib from the 2010 low to the 2011 high around 0.9930-50.
--- Written by David Song, Currency Analyst
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