The US dollar is consolidating its recent gains in the foreign exchange market as players await fresh trading incentives. There is a host of US economic data today, including weekly jobless claims, regional Fed surveys (Empire and Philly for March), PPI and the TIC data. Yet barring major surprises, the data will not shake the market's confidence that the US economy is performing somewhat better and sufficiently so as to have reduced the odds of QE3.
The euro held support near $1.30, which is seen as the lower end of its trading range. Given current short-term positioning, it likely requires a new fundamental development to successfully breach the band, which extends toward the $1.2975 area. North American players appear to be somewhat more bullish the dollar presently and NY dealers will inherit the books today with the euro getting stretch on the hourly momentum readings. Look for the upside to be limited to the $1.3100 area.
The dollar made a new high for the move against the yen, poking briefly through the JPY84 level. However, the gains were not sustained. Many players are hesitant to chase the dollar higher from here, especially as the fiscal year end is nearing and many suspect that some repatriation is still to occur. Short-term market participants need to be careful of a reversal. This may be signaled today by a break of the JPY83.50 area. Yet, like the euro, the yen's mild recovery is sufficient to drive the short-term momentum indicators into over-stretched territory.
Since the end of February, sterling has pulled back from $1.60 to about $1.56. Given the Fitch cut in the UK's rating outlook, the less than even lukewarm reception to the 100-year bond idea, and the soft employment and earnings data out yesterday, sterling is holding in better than one could have expected. Even though it is under-performing today, it has not made a new low for the week. That said, the market does not appear done yet with probing the downside. It will take a move above $1.57 to take the downside pressure off and the intra-day technical indicators suggest this is unlikely in North America today.
The Australian dollar made a marginal new low for the week earlier today, which is also the lowest the Aussie has been since Jan 20. Key support near $1.04 has been approached, but it held and like the $1.30 area in the euro, this has prompted some short covering by momentum traders and buying by some bottom pickers. However, it ran out of steam just above $1.05 and appears poised to work its way lower. Support now is seen near $1.0460.
The Canadian dollar is flat and shows no significant impulse in either direction. A slight bias toward the US dollar, however, could see a slightly softer Canadian dollar tone. The greenback faces resistance near CAD0.9950. A break would signal a retest on parity and the recent high set in front of the CAD1.0030 area.