USD Strong Thesis Echoed

After the eventful week that passed, the internet news is now abuzz with theses echoing my own. Some interesting articles from DailyFX that I found:

Bullish USD

There is another means for the dollar to maintain its bullish projection; but it would be far more difficult to muster. If the world’s reserve currency was able to shake its label as the primary safe haven; it could rise on the merits of its own economic performance. While we have been trending toward this state for some time, it has been very slow. A rapid shift would be difficult to accomplish because of the currency’s place in the world’s financial markets, the prevalence of its Treasuries, the ballooning budget deficit, the fact that it is considered the source of the worst financial crisis since WWII and the very fact that it is used as a benchmark. Nonetheless, data and speculation put this indicator high up on the scale of economic recovery. While the US certainly isn’t enjoying the pace of expansion of its Chinese counterpart; the pace and extent of its recovery are expected to beat the UK, Japan and the Euro Zone (which we will confirm with next week’s GDP numbers). Friday’s non-farm payrolls certainly bolstered this belief after the disappointing details of the 2Q GDP report. Next week’s data will certainly weigh in on this front. A confidence and retail sales report will cover consumer spending which accounts for approximately 70 percent of the economy. The trade report will fill in for global demand and the capital flows it is adds or detracts.

Bearish Swiss Franc

Based on price action on August 7, it appears that the three major “safe haven” currencies have been winnowed down to two, following the surprisingly strong US non-farm payroll results. Indeed, the Swiss franc and the Japanese yen were the weakest of the majors not only for the day, but for the entire week as “riskier” assets like stocks and FX carry trades rallied. The moves were likely very encouraging for the Swiss National Bank, which has made no secret of their desire to prevent the Swiss franc from appreciating against the euro. However, with EURCHF now facing several levels of resistance at 1.5345, 1.5380, and 1.5446, traders may be feeling a little more cautious of assuming that the pair is on a one-way track higher.

Bearish Euro

The euro was one of the weakest major currencies on Friday, but it has little to do with European data. Instead, the release of US non-farm payrolls triggered a surge in the US dollar, which led EURUSD to break out of a tight range and down roughly 200 points. Looking at things from a macro perspective, the US employment numbers have led the markets to price in a greater probability of rate hikes by the Federal Reserve down the line, while the neutral tone struck by the European Central Bank on Thursday has left the euro dead in the water. That said, while 1.4150 offered support for EURUSD on Friday, more substantial support may not come into play until 1.4080, where we have the 50 SMA and a rising trendline connecting the April and July lows.

Bullish Ozzie

The Australian dollar finished the week barely changed against its US namesake, but a surprising shift from the Reserve Bank of Australia and otherwise bullish fundamental developments boosted forecasts for the AUD and sent it to fresh peaks versus the Japanese Yen. Australian central bank officials struck a decidedly positive note on the state of the domestic economy, boosting growth forecasts and pointing to improved conditions in domestic activity. They likewise strongly implied that they view current interest rates as sufficient to nurture growth—leaving the door open for rate increases through the foreseeable future. Markets responded in kind, sending implied December, 2009 interest rates to their highest levels since November of last year. Positive surprises in Employment data likewise boosted sentiment, and bullish sentiment pushed the high-yielding Aussie to fresh 10-month peaks against the safe-haven Japanese Yen.