USD Index turns bearish
The USD Index, which measures the strength of the US dollar against a basket of currencies, failed to hold onto Fridays gains as we saw bears come in yesterday afternoon to drive the USD lower. The index dropped from 102.50 to 101.50 indicating that markets are weary of the bullish FED talks, choosing to follow the data instead. Markets will remain sensitive to news out of the US with better than expected data likely to result in a strengthening of the USD while worse than expected news will see the USD fall further as the USD index heads for the 100 support level.
Ausy Dollar ignores bad news to trade higher
The AUDUSD traded higher, testing 0.7400 despite worse than expected retail sales which came in at 0.2% vs the expected 0.4%. The move higher comes in the face of a falling dollar and strengthening gold prices which have lifted the commodity based currency. The AUD is expected to continue north provided that gold can fight its way higher and news from the region remains neutral to positive. However, should the USD find its feet, resulting in gold giving back its recent gains, we would see the commodity linked currency head south as the AUDUSD looks for support at 0.7300.
CAD remains strong despite falling crude prices
The Canadian dollar remained strong yesterday despite a selloff in crude oil, which should have led to a depreciation of the crude exporters currency. The resilience comes on the back of a positive outlook by the Bank of Canada regarding the Business Survey Outlook. The looney is expected to remain resilient with investors holding out until todays Building Permits figure, expected at 2.4%, in which the health of the housing sector will be revealed. A better than expected release will see the CAD strengthen as the green shoots of recovery become more obvious. However, worse than expected data will see CAD bulls retreat as the looney depreciates.