The greenback was lower at the close of North America trade with the Dow Jones FXCM Dollar Index (Ticker: US Dollar) falling 0.26% on the session. The losses come on the back of a substantial shift in risk appetite that saw US equities surge across the board with the Dow, the S&P, and NASDAQ advancing 2.26%, 2.83%, and 3.32% respectively. Stronger than expected personal spending figures in pre-market trade gave futures a lift with markets steadily advancing throughout the day to close at session highs. Trade volume remained thin however as many investors were on the sidelines after hurricane Irene ravaged the northeast seaboard over the weekend. The damages were less substantial than anticipated with the storm sparing New York City the worst of its wrath, adding fuel to today’s rally in risk
The greenback remained on the defensive with the index holding its recent range ahead of this week’s economic docket. The dollar sees increased risk for extended losses with a break below the key 61.8% long-term Fibonacci extension taken from the June 7th and November 30th 2010 crests at 9380. Price action will largely be determined by broader market sentiment as investors digest the implications of Bernanke’s remarks at Jackson Hole where he evaded talk of further Fed easing while hinting that the central bank remains poised to respond should the situation deteriorate.
The index continues to range between the key 61.8% and 38.2% Fibonacci extensions taken from the July 12th and August 8th crests at 9410 and 9515 respectively. As noted in last week’s USD Trading Today report, the greenback risks significant losses with a break below 9400 with subsequent floors seen at 9380 and the 76.4% extension at 9345. Topside resistance is eyed at 9440 backed by the 50% extension at 9460 and the 38.2% extension at 9515.
The dollar fell against all the component currencies save the yen which declined by 0.21% on the session. Highlighting the performance chart is a 0.77% advance in the Australian dollar which surged late in the day as traders jettisoned so called “safe haven” assets in favor of yields. For now, the aussie continues to boast the highest interest rate of the developed economies and accordingly it has been the primary beneficiary of today’s rally in risk.
Tomorrow’s economic docket is highlighted by the August consumer confidence report and the FOMC minutes from the August 9th meeting. Consensus estimates call for confidence to fall to 52.0, down from the previous read of 59.5, its second lowest print this year. Investors will be carefully combing the FOMC minutes for subtexts after the vote saw three dissenters early this month. And while the minutes are likely to reinforce Bernanke’s comments at Jackson Hole in omitting talk of another round of quantitative easing, the record may reveal a shift among voting members as inflation concerns are rekindled and begin to take root. Looming over trade this week are the August non-farm payroll figures on tap for Friday with estimates calling for yet another dismal print of just 75K, down from 117K the in July. Disappointing data tomorrow could weigh on the recent shift in risk sentiment to the benefit of the dollar as traders seek refuge in the reserve currency.
