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Mar 2, 2018

GREENBACK GAINS ON DOVISH TESTIMONY FROM NEW FED CHAIR POWELL

DOLLAR BETS

The U.S dollar moved higher against a basket of top-tier currencies this week, as new Federal Reserve Chairman Jerome Powell told a congressional committee that recent data has strengthened his confidence on inflation and the overall U.S economy. The U.S dollar index moved well above the key 90.00 level, as traders bet that the Federal Reserve will raise the United States interest rate four times this year. Fed officials will release new forecasts when they meet next month, including their views on the appropriate future path of U.S interest rate hikes.

  • The USD Index is strongly bullish while trading above the 90.45 level, further upside towards the 91.40 and 92.50 levels seems likely.

  • If the USD Index trades below the 90.45 level, a correction back towards the 89.90 and 89.25 levels remains possible.

WEAKER CHINESE GROWTH

China's manufacturing sector slowed more than expected during the month of February, falling to its weakest reading in over one and a half years. China’s monthly Manufacturing Purchasing Managers Index barely held above the 50.00 number needed for expansion, with a disappointing 50.3 headline number. Growth in China's services industry also slowed, suggesting the key sector was starting to display signs of fatigue. February’s weakness was partly attributed to disruption due to the Lunar New Year holidays, and losses to factory output from tougher pollution rules, although traders feared a loss of momentum is gathering pace.

  • The AUDUSD pair remains bearish below the 0.7785 level, further downside towards the 0.7740 and 0.7715 levels seems likely.

  • Should price-action trade above the 0.7785 level, upside towards 0.7845 and 0.7900 appears possible.

EURO ELECTION FEARS

The euro moved lower against the greenback this week, as traders and investors became cautious ahead of this weekend’s Italian General Election vote. The EURUSD pair traded towards the 1.2200 level, as bulls dramatically scaled back bets on the euro, with the pair recently topping out around the 1.2555 level this month. The latest polling amongst Italian voters showed a wide-range of outcomes are possible for Sunday’s election, with volatility in the euro currency and Italian stocks likely to be at elevated levels on the Monday market open.

  • The EURUSD pair remains bearish whilst trading below the 1.2203 level, further losses towards 1.2095 and 1.1980 remain possible.

  • Should the EURUSD pair breach the key 1.2292 resistance level, further upside towards the 1.2351 and 1.2430 levels seems possible.

SOARING RAND

The South African rand moved to a three-year trading high against the U.S dollar this week, amidst rumors the new South African President is to make sweeping cabinet changes. The ZARUSD pair moved to its highest level since February 2015, as reports surfaced President Cyril Ramaphosa is considering a cabinet reshuffle after replacing former leader Jacob Zuma. However, other commodity related currencies lost ground against the greenback, as weaker than expected economic data from China and Japan hurt the sentiment amongst the Australian, New Zealand and Canadian dollar.

  • The USDCAD pair remains bullish whilst trading above the 1.2640 level, further upside 1.2800 and 1.2910 seems possible.

  • A loss of the 1.2640 level for the USDCAD pair may lead to a further weakening towards the 1.2550 and 1.2460 support regions.

 

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