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Dollar Index Pushes Higher, Edges Closer to 100

H.S. Borji
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The US dollar continued to push higher against a trade-weighted basket of currencies on Monday, after another strong jobs report sent the index to new 12-year highs last week.

The dollar index climbed 0.1 percent to 97.71 on Monday, extending its 12-year highs, after surging more than 1.3 percent on Friday.

Stronger than forecast employment numbers continue to support expectations for a midyear rate hike by the Federal Reserve, despite the central bank’s renewed pledge for patience. While a midyear rate hike appears less likely today than it did at the end of last year, clearly diverging monetary policies in the United States and the rest of the advanced industrialized world will likely push the dollar index closer to the century mark.

There were no major reports out of Washington on Monday. On Tuesday the Commerce Department will report on January wholesale inventories, a small indicator of first quarter GDP.

The dollar continued to push higher against the Japanese yen on Monday, rising for a fourth straight day. The USDJPY climbed 0.44 percent to 121.27. The pair had struggled to extend its gains beyond the 1.21 resistance level. Its next target is 1.2136, according to the daily chart. On the downside, the pair is likely supported at 119.96.

The dollar was little changed against the euro, as the EURUSD continued to trade near 11-year lows as the European Central Bank begins implementing its €60 billion per month quantitative easing program. The EURUSD was trading at 1.0844. It faces initial support at 1.0783 and resistance at 1.0975.

An escalating Greek debt crisis is also weighing on the euro. Greek finance minister Yanis Varoufakis reaffirmed on Monday that Greece would consider a referendum on government policy if the Eurozone rejects Athens’ revised debt reform plans.

In economic data, investor confidence in the Eurozone rose to its highest level since 2007, as investors marked a definite end to Eurozone recession. The Sentix investor confidence index surged to 18.6 in March from 12.4 in February. That was well above forecasts calling for 15.0.

Elsewhere, the GBPUSD regained the 1.51 level after bottoming out in the low-1.50s following the US nonfarm payrolls report. Cable advanced 0.35 percent to 1.5106, although its upside is seen as limited. Initial resistance is likely found at 1.5197. On the downside, initial support is likely found at 1.4970.

The greenback declined against the Canadian dollar, as crude prices ticked higher, offering mild support for the commodity-driven currency. The USDCAD dipped 0.1 percent to 1.2601, after reaching an intraday low of 1.2572. The pair is supported at 1.2502. Resistance is ascending form 1.2676.

In Canadian data, housing starts declined sharply in February, aggravated by inclement weather throughout much of the country. Canadian housing starts declined to a seasonally adjusted annual rate of 156,300 in February, compared to 187,000 in January, the Canadian Mortgage and Housing Corporation reported on Monday. Economists forecast a decline to 179,000.

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