USD at 5 Month Lows and Draghi Grinning Like a Cheshire Cat

March 31, 2016

USD at 5 Month Lows and Draghi Grinning Like a Cheshire Cat
The US Dollar hit its lowest price in 5 months overnight, as the market continued to price in even less chance that the Fed hikes in the near term.

I am a little surprised at this run, as I thought the risk was skewed greater to the upside in USD. With the Fed as wishy-washy as they are, I still think this could be too much, and setup for the mother of all USD rallies when they ‘surprise us’, but that’s well and truly putting the kart before the horse now, with markets pricing in just a 21% chance of a hike priced in for June and a 55% chance for 2016 at all.

Moving on, and last night’s notoriously unreliable ADP, the reading was basically in line with expectations and therefore didn’t get markets too excited.

“USD ADP Non-Farm Employment Change (200K v 195K expected and 205K (revised down 9K) previous)”

The 200K jobs added in the private sector was all but in line with expectations and the 9K downward revision from the previous month again really nothing to write home about when the ADP is so infamous as an indicator for Friday’s NFP:

“USD Non-Farm Employment Change (206K expected and 242K previous)”

All this US Dollar weakness gave the Euro and Kiwi the biggest boost, thanks to the hunt for yield/stability and better than expected economic data respectively.

EUR/USD 4 Hourly:
Forex chart, EURUSD 4 Hourly, 160331
Click on chart to see a larger view.

As you can see from the above EUR/USD 4 hour chart, price came within just a few pips of taking out the 2016 highs. With better than expected business confidence and consumer prices within the Eurozone, Draghi will be grinning like a Cheshire cat that the ECB’s stimulus may actually be filtering through!

We have further 2nd tier German data tonight on the economic calendar which will probably take on further importance with the Euro buzzing around this level.

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Chart of the Day:
As for the Kiwi, this was my main scenario that I have been looking for this week:


Overnight price pushed right up into projected channel resistance and the long wicks show that sellers are definitely present:

NZD/USD 4 Hourly:
Forex chart, NZDUSD 4 Hourly, 160331
Click on chart to see a larger view.

If you agree with the short bias, keep watching the lower time frame charts from here for any possible re-tests of previous short term support now acting as resistance.

Keep an eye on the @VantageFX Twitter feed for more on this potential setup as it unfolds.

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On the Calendar Thursday:
NZD ANZ Business Confidence

GBP BOE Gov Carney Speaks
GBP Current Account

EUR German Retail Sales m/m
EUR German Unemployment Change

CAD GDP m/m
USD Unemployment Claims

Expecting Asia to be a quiet one with Kiwi business confidence the tier 2 highlight.

Do you see opportunity trading Forex with Vantage FX? Take advantage on your own instant $50,000 Forex Forex demo.

Dane Williams – @VantageFX

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