Dollar strengthens further in early US session after strong employment data. Initial jobless claims dropped -19k to 223k in the week ended February 25, below expectation of 245k. More importantly, that is the lowest level since March 1973 and indicates persistent healthiness in the job market. The four-week moving average dropped to 234.25k, down from 240.50k, hitting lowest since April 1973. Continuing claims rose 2k to 2.07m in the week ended February 18. The greenback is boosted by increasing speculations of a rate hike by Fed this month. Technically, the greenback took out near term resistance level against Sterling and Canadian Dollar earlier this week. While it’s still limited below corresponding resistance against Euro and Yen, AUD/USD is following and broke a near term support level today.

Euro unmoved by CPI data

Eurozone CPI accelerated to 2.0% yoy in February, above expectation of 1.9% yoy, and met ECB’s target. Core CPI, nonetheless, was unchanged at 0.9% yoy. Euro receives little support from the data and remains weak against the greenback. Some analysts point to the fact that core inflation remains weak and stable at best. And, there is no reason for ECB to change its ultra-loose monetary policies. In addition, Eurozone will be facing a number of political risks this year, including elections in France, the Netherlands and Germany, as well as Brexit. Also from Eurozone, PPI rose 0.7% mom, 3.5% yoy in January, unemployment rate was unchanged at 9.6%. German import price rose 0.9% mom in January.

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Sterling PMI construction beat expectation

Sterling, on the other hand, strengthens mildly against Euro too. UK construction PMI rose to 52.5 in February, above expectation of 52.0. Markit noted that "February’s survey data highlights that the UK construction sector has rebounded from its postreferendum soft patch but remains on a relatively slow growth trajectory." However, "weaker momentum in the house building sector was a key factor weighing on construction growth, alongside a renewed fall in work commercial projects." Also from Europe, Swiss GDP rose 0.1% qoq in Q4, below expectation of 0.4% qoq. Swiss retail sales dropped -1.4% yoy in January.

Australia trade surplus shrank sharply

Australia trade surplus narrowed to AUD 1.3b in January, much smaller than expectation of AUD 3.8b. Exports dropped -3%, AUD 31.8b, led by sharp decline in non-monetary gold and non-rural exports. Imports, however, jumped 4% to 30.5b, with a surge in consumption, intermediate and other merchandise and capital goods. The report is seen as mixed by economists, as the pickup in consumer goods is positive. Also from Australia, building approvals rose 1.8% mom. Japan monetary base rose 21.4% yoy in February.

AUD/USD Mid-Day Outlook

Daily Pivots: (S1) 0.7641; (P) 0.7670; (R1) 0.7704; More…

AUD/USD’s fall today and break of 0.7605 support indicates that the rebound from 0.7158 has completed at 0.7740 already. Intraday bias is turned back to the downside for 55 day EMA (now at 0.7570) first. Sustained trading below there will pave the way to lower side of medium term range at 0.7144/7158. On the upside, break of 0.7740 will bring another rise, but we’d still expect strong resistance from 0.7777/7833 resistance zone to bring near term reversal.

In the bigger picture, we’re still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8164) and above.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Monetary Base Y/Y Feb 21.40% 23.20% 22.60%
00:30 AUD Trade Balance (AUD) Jan 1.30B 3.82B 3.51B 3.33B
00:30 AUD Building Approvals M/M Jan 1.80% -0.50% -1.20% -2.50%
06:45 CHF GDP Q/Q Q4 0.10% 0.40% 0.00% 0.10%
07:00 EUR German Import Price Index M/M Jan 0.90% 0.50% 1.90%
08:15 CHF Retail Sales (Real) Y/Y Jan -1.40% -3.50%
09:30 GBP Construction PMI Feb 52.5 52 52.2
10:00 EUR Eurozone PPI M/M Jan 0.70% 0.60% 0.70% 0.80%
10:00 EUR Eurozone PPI Y/Y Jan 3.50% 3.20% 1.60%
10:00 EUR Eurozone Unemployment Rate Jan 9.60% 9.60% 9.60%
10:00 EUR Eurozone CPI Estimate Y/Y Feb 2.00% 1.90% 1.80%
10:00 EUR Eurozone CPI – Core Y/Y Feb A 0.90% 0.90% 0.90%
13:30 CAD GDP M/M Dec 0.30% 0.30% 0.40%
13:30 USD Initial Jobless Claims (FEB 25) 223K 245k 244k 242K
15:30 USD Natural Gas Storage -89B

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