Dollar Strengthens on Dudley Comments, USDJPY Above 100, AUDUSD Still Falling - 3.7.2013

Currencies move in an interesting way always when you don’t anticipate for that, yesterday was the case for that, ignoring that ahead lays US Jobless Claims, holiday tomorrow and NFP on Friday. The US dollar gained against its major peers without giving so much importance to technical indicators. Firstly the USDJPY breached the psychological resistance at 100 in a seemingly easy way and went as high as 100.80, also the EURUSD dropped below 1.30 continuing its down trend pattern.

Strength of the greenback came after the New York FED member Dudley commented again about asset purchases plans and siad that should the economy show a surprisingly weaker jobs creation and lower than projected growth, the FED stimulus would remain high. Also said that the FED would reduce the asset purchases pace only if the economy improves as expected, which means unemployment to move closer to 6.5%. Thus the Non-Farm Payrolls significance is increasing but for today traders will focus on an earlier indicator, the ADP NFP Labor report which only excludes the government jobs creation compared to NFP. We consider the upside more likely to hold for today for the US dollar index but on Thursday and early on Friday sideways is more likely as traders would be unwilling to take the risk before important news coupled by low volume due to holiday.

Elsewhere, the Aussie was also negatively influenced by greenback’s strength, with the AUDUSD still providing profits to short traders by falling to new low since August 2010, it was lastly seen at 0.9063. In addition, weaker than anticipated Retail Sales weighed on prices while Australian Trade Balance is improving mainly due to its depreciated currency.