U.S. Dollar Trading Mixed in Limited Action

The U.S. Dollar is trading mixed in limited action. Higher metals, crude oil and equities indicate demand is strong for higher yielding assets.

The U.S. Dollar is trading mixed in limited action. Higher metals, crude oil and equities indicate demand is strong for higher yielding assets. This may pressure the Dollar once the New York market opens. Trading conditions are thin because of Friday’s important U.S. Non-Farm Payrolls Report. Investors are shying away from taking large positions ahead of this report, thereby capping volatility.

The Dollar weakened on Wednesday following the release of a worse than expected ADP private employment report. Traders were looking for an increase of 40,000 jobs but the report showed a 24,000 job loss. This could be a sign that the economy is weakening and that the Fed will keep interest rates low for some time.

Today’s Weekly Initial Claims Report will shed further insight on the U.S. jobs outlook. Traders are expecting this week’s report to show initial claims of 440,000. Later in the morning, the U.S. reports ISM Manufacturing and Construction Spending. Both reports could trigger mild reactions but are not expected to be market movers because of this week’s focus on jobs data.

The EUR USD is trading flat to lower following an uneventful overnight session. News that German retail sales in February fell 0.4% versus a forecast of flat failed to move the market. On Wednesday, the main trend turned up on the daily chart, but gains have been limited since this change took place. The daily chart indicates that a retracement zone at 1.3542 to 1.3607 is currently providing resistance. In addition a long-term down trend line at 1.3620 is also stopping the advance.

Bullish Euro traders have to be concerned about what is happening in the capital markets regarding Greece. Greek bond prices have been falling since their initial offering earlier in the week. This could be a sign of a lack of confidence in Greece’s ability to finance its debt. The falling bond prices are an indication that the recently approved rescue plan has failed to reduce borrowing costs. Greek bonds have basically become a burning match to investors.

GBP USD short-traders continue to cover positions in reaction to the positive 4Q GDP Report from earlier in the week. Thin trading conditions because of this week’s U.S. jobs data is also helping to drive this market higher, due to the absence of a major seller. The main trend is down but this market is rapidly approaching the last main top at 1.5381. A move through this price will turn the main trend to up. Based on the intermediate-term range of 1.5814 to 1.4780, traders should look for a possible technical bounce off a 50% price level at 1.5297. In addition, a downtrending Gann angle and .618 price level combine to form a resistance cluster at 1.5417 to 1.5419. Fundamentally, worries have eased concerning the economy and the U.K. credit rating, but traders are still worried about the U.K. budget deficit and the possibility of a hung parliament following the upcoming election.

The sideways Euro is causing limited trading in the USD CHF overnight. Currently this market is resting on a key 50% level at 1.0513 and trading slightly above a main bottom at 1.0506. A break through this level could trigger a further decline to 1.0423. The direction of this pair will be controlled by the movement in the Euro.

Stronger global equity markets are helping to boost the USD JPY for the third day in a row. Overnight buyers drove this market up to just shy of the January top at 93.77. A strong New York stock session could trigger a breakout over this level today. Despite yesterday’s weaker ADP report, traders seem to be betting on a strong Non-Farm Payrolls number on Friday.

Greater demand for higher risk commodities and equities is helping to pressure the USD CAD. Yesterday’s close below a .618 level at 1.0152 was a sign of weakness. Downside momentum is once again building which is setting up the possibility of a trade to parity over the near-term. Wednesday’s Canadian GDP Report suggests that the economy is growing. Traders are once again pricing in the strong possibility of an interest rate hike by the Bank of Canada at its next meeting. Even if this doesn’t take place, traders are confident the BoC will hike rates before the Fed.

The AUD USD is up slightly because of the sharply higher equity markets. Yesterday the Aussie sold off early after weaker than expected retail sales were reported. Aggressive traders who bet a strong retail sales report would lead to a rate hike in April pared their positions, leading to Thursday’s weaker trade. Some traders remain positive the Reserve Bank of Australia will hike rates 25 basis points anyway because of the stronger housing markets. Earlier this week, traders drove the Aussie higher because of hawkish comments from RBA Governor Glenn Stevens.

The NZD USD is trading lower after failing to take out a key 50% retracement level at .7124 earlier in the week. Downside momentum is strong enough to retest support at .6992. Following Thursday’s bearish Aussie retail sales report, traders are reducing bets the Reserve Bank of New Zealand will raise interest rates in June.