Market Analysis: 3 March 2017

Market Analysis: 3 March 2017

by Christala Parmaxi, CFTe 


US Dollar’s rally is back as the USD has been surging for the second consecutive day against all of its major counterparties, with the biggest loser of Thursday being the Australian Dollar. Precisely, the US Dollar appreciated by 1.39% against the Aussie, 1.13% against the New Zealand Dollar and 0.22% against the British Pound which was the only currency that was not affected by yesterday’s rally. However, the Pound appreciated against all of the rest of the G7 members, thus greenback’s rally since to be stronger than Pound’s. US Dollar’s upside rally has driven the EURUSD below the level of 1.05, New Zealand Dollar below 0.71 and currently testing 0.7, Canadian Dollar above the critical resistance of 1.34 and the Australian Dollar below 0.76. The Canadian Dollar was negatively affected by the GDP release which was 0.2% lower than the previous month and 0.3% lower than the previous quarter.

Moreover, it is worth pointing out that the Australian Dollar sank against all of its major counterparties but the depreciation against the Dollar was the highest figure of the day. The lowest drop of the Australian Dollar was recorded against the New Zealand Dollar which also closed the day lower against the G7 except the Australian Dollar. Since both New Zealand and Australia depend on trading and specifically on exports, a strong domestic currency is a thread for the overall economy of the counties. Thus, it would be critical for traders to watch the economic data releases of those countries that are related to the trade balance and exports, such as the Exports, Imports and Trade Balance Indices. Yesterday, those indices were all released opposed to the Australian trade since Imports were increased and Exports with Trade Balance were decreased.

Today, all eyes would be on Chairwoman Janet Yellen and Vice Chairman Stanley Fischer speeches. The next FOMC monetary policy meeting is on March 15th and there will be no further comments from those Fed members by then. Thus, traders will make sure that they pay attention to every single word of Fischer and Yellen since they may indicate the next rate hike timing. In our view, the risks for the US Dollar is to the downside in case the two officials do not hold a hawkish tone and be positive for a March rate hike. In the meantime, the Fed Fund Futures give a 77% probability to March rate hike, which makes the Dollar even more vulnerable to dovish or neutral comments by the Vice Chairman and Chairwoman.

Technical View

The Pound broke the significant support of 1.225 to the downside and is trading around 1.223 at the time of writing. The pair has already reached our suggested target at 1.222. MACD had a bearish cross with its signal while RSI is slopping upwards on bearish territories. Moreover, ADX is on overextended negative levels indicating the possibility of the negative directional movement to have taken too long. In our view, if the pair crosses the support of 1.221 to the downside, then we see it lower around the support of 1.215. On the flipside, if the price moves above the resistance of 1.23, then we see it higher at around 1.237.

The Aussie fell sharply yesterday breaking the downtrend line and the psychological level of 0.76. There was a correction up to 0.758 during the last hour on the chart below, but it was not strong enough to reach 0.76. Both MACD and RSI are on bearish territories slopping to the downside, while MACD has also crossed its signal supporting the bearish momentum. The next valid support is near 0.754 and then the critical level of 0.75 while the risks to the upside are near 0.76 and 0.7685 which is the strongest resistance of the last days.

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