DailyFX | April 9 2012 9:05 EDT
The greenback regained its footing on Monday, with the Dow Jones-FXCM U.S. Dollar Index advancing to an overnight high of 10,022, and the reserve currency may appreciate further over the next 24-hours of trading should Fed Chairman Ben Bernanke continue to talk down speculation for additional monetary support.
U.S. Dollar: Upward Trend Remains Intact, Chairman Ben Bernanke On Tap
The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR)pared the decline from Friday’s dismal Non-Farm Payrolls report, and we should see the greenback track higher throughout the day as market participants scale back their appetite for risk. As equity futures foreshadow a lower open for the U.S. market, the shift away from risk-taking behavior should spark increased demands for the reserve currency, and we may see FX traders become increasingly bullish against the USD should Fed Chairman Ben Bernanke continue to soften his dovish tone for monetary policy. Although the 120K rise in NFPs fell short of market expectations, we should see Chairman Bernanke continue to talk down speculation for another large-scale asset purchase program as central bank officials expect the economic recovery to get on a more sustainable path this year. In turn, we should see the USDOLLAR maintain the upward trend from earlier this year, and we anticipate to see another run at the 78.6% Fibonacci retracement around 10,118 as the central bank looks to conclude its easing cycle in 2012.
Euro:Threatens Range as ECB Lending Hits Record-High For Portugal
The Euro extended the decline from the previous week to hit a fresh monthly low of 1.3032, and the bearish sentiment underlining the single currency should continue to gather pace as the fundamental outlook for the region turns increasingly bleak. Indeed, a report by the Bank of Portugal showed commercial banks tapped a record EUR 56.3B from the European Central Bank, and the heightening risk for contagion may ultimately produce a bearish breakdown in the EURUSD as it threatens the range carried over from the previous month. As the EURUSD carves out a lower top coming into April, we are looking for a break and a close below 1.3200 to favor a move back towards the 23.6% Fib from the 2009 high to the 2010 low around 1.2630-50, and we may see the pair trade heavy throughout the course of the year as European policy makers struggle to stem the risk for contagion.
More to Follow...
--- Written by David Song, Currency Analyst
To contact David, e-mail firstname.lastname@example.org. Follow me on Twitter at @DavidJSong
To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to email@example.com.
Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum
Related Articles: Weekly Currency Trading Forecast
Business Outlook Future Sales (1Q)
Bank of Canda Senior Loan Officer Survey (1Q)
RICS House Price Balance (MAR)
Fed Chairman Ben Bernanke Speaks on Financial Stability
BoE's Adam Posen Speaks On Global Economy