Forex Flash: USD index targets 1 month high of 83.5 – Westpac

The USD index has edged for a few weeks, however in the wake of the sharp deterioration in EZ financial conditions, and linked to that the resurgence in EZ political risk there exists a definitive threat to this trend. According to the Westpac Strategy Team, “A USD supportive event risk mosaic next week, including a likely dovish Draghi press conference, will likely minimal progress towards the formation of a governing coalition in Italy and the headlong rush into the sequester, should boost the USD yet further. Our fresh 1 month target is for a run towards 83.5, just shy of the July 2012 highs.”

In the United States, the services ISM (Tuesday) and February payrolls the key releases in the week ahead. The consensus forecast for a 150k gain seem a touch on the high side given the mild drift higher in jobless claims through February. “We see risks that the payrolls trend in coming months shifts down as fiscal and gasoline headwinds start to shackle the economy.” the team warns.