USD Slips On Safe Haven Outflows

Feb 22 21, 10:08 GMT

USD slipped lower on Friday and stabilised somewhat during today’s Asian session against a number of its counterparts as vaccination optimism caused safe haven outflows for the greenback. It’s characteristic how the USD lost against commodity currencies yet gained on safe haven currencies such as JPY and CHF, which may have also suffered safe haven outflows. On the other hand, it should be noted that the US budget deficit, trade deficit and a substantially high amount of debt issuance tends to create worries among analysts, as the US economy is still recovering. Given the lack of high impact financial releases we expect fundamentals to guide the USD defining the market’s positioning.

The USD index dropped on Friday clearly breaking the 90.55 (R1) support line, now turned to resistance, and stabilised in the Friday’s late American and today’s Asian session. As the index broke the downward trendline incepted since the 18th of February, we switch our bearish outlook in favor of a sideways bias initially, yet we suspect that the bulls may be just around the corner. On the other hand, it should be noted that the RSI indicator below our four our chart is below the reading of 50, reminding of the presence of the bears for the pair. If the bulls be in charge, the Index could break the 90.55 (R1) line and aim for the 91.07 (R2) level. Should the bears take over, we may see the index breaking the 89.92 (S1) line and aim for the 89.40 (S2) level.

AUD rallies on optimism

AUD rallied against the USD reaching an almost 3 year high as optimism is on the rise due to the ongoing vaccination process in various countries. It should be noted that AUD also got support from the rising copper and iron ore prices, due to expectations of higher demand, given the rebound of economies and the picking up of economic activity of the industrial sector in various economies. At the same time worries for higher inflation tended to also boost the Aussie, while at the same time raised Australian yields. Should prices of iron ore and copper continue to be on the rise, we may see the attractiveness of the Aussie gaining ground.

AUD/USD rallied on Friday, breaking the 0.7785 (S2) and the 0.7875 (S1) resistance lines, both now turned to support. Given the pair’s steep rise and the RSI indicator being above the reading of 70, we may see a correction lower being performed, as the pair maybe overbought. Should the pair’s direction continue to be dictated by buyers, we may see the pair breaking the 0.7950 (R1) resistance line aiming for higher grounds. Should on the other hand a selling interest be displayed by the markets, we may see AUD/USD breaking the 0.7875 (S1) support line and aim for the 0.7785 (S2) support level.

Other economic highlights today and early Tuesday:

Today during the European session, we highlight Germany’s Ifo indicators for February, while later on, ECB President Christine Lagarde is scheduled to speak and could generate some interest among EUR traders. Also, just before Tuesday’s Asian session starts, we get New Zealand’s retail sales growth rate for Q4.

As for the rest of the week

On Tuesday, we get UK’s employment data for December, Eurozone’s final HICP Rate for January, the US consumer confidence for February while Fed Chairman Powell testifies, and BoC Governor Macklem speaks On Wednesday, we note Australia’s wage price index for Q4, RBNZ’s interest rate decision, Germany’s detailed GDP rate for Q4, the US New home sales for January, while Fed Chairman Powell testifies. On Thursday, we get Australia’s capital expenditure rate for Q4, Germany’s Gfk Consumer Sentiment for March, Eurozone’s economic sentiment for February, the US durable goods orders for January, the 2nd estimate of the US GDP rate for Q4, and the weekly US initial jobless claims figure. On Friday, we get Japan’s Tokyo CPI rates for February, Japan’s preliminary industrial output for January, UK’s nationwide house prices for February, France’s final GDP rate for Q4, France’s preliminary HICP rate for February, the US Consumption rate for January and the final US U.Mich. Sentiment for February.

USD Index H4 Chart