Greenback eyeing some key events

The main theme in the FX space from overnight trade was greenback strength on the back of yet another encouraging unemployment claims reading. 

Source: Bloomberg

Unemployment claims came in at 284,000, the lowest readings since February 2006. This saw the four-week average drop to around 300,000. This is a good sign heading into next week’s non-farm payrolls data. With optimism continuing in the US jobs market, the greenback managed to edge higher.

We continue to see evidence that Janet Yellen’s concerns about slack in the jobs market are perhaps a touch overdone. Already she has said if key metrics, particularly jobs and inflation, continue to track ahead of the Fed's run rate then this could force the Feds hand as far as rates are concerned.

Next week we also have the FOMC meeting which could potentially shed more light on rates. Having said that, traders are likely to remain hesitant being caught out short the greenback. Having said that, USD/JPY looks like it is in prime position to benefit from this. USD/JPY has broken a downtrend resistance and could be headed to 102 in the near term.

AUD/NZD in prime position

Yesterday I briefly touched on AUD/NZD and I continue to feel it is a key currency pair to watch in the near term. The pair broke a downtrend resistance which has been in place since November last year and with the RBNZ set to hold rates for a while, there is a good chance we’ll see further near-term weakness for the NZD. The next barrier for the pair is in the 1.1026 where we could see some consolidation. Once this level is breached then traders are likely to be looking to add to AUD/NZD longs.

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