Last week saw the significant rise in expectations for a March rate hike from the Federal Reserve, and this produced a top-side breakout in the U.S. Dollar as the Greenback cleared a key resistance level. With that rate decision now just a week-and-a-half away, probabilities for a hike in March had shot past 90% to close last week; and this is after opening last week at around 40%.

So, despite the lack of discernible US-drivers availing themselves to markets this week, at least until we get to the Friday release of February Non-Farm Payrolls; the U.S. Dollar will likely remain a focal point as the Fed’s March rate decision in the following week (March 14-15) will continue to draw attention with hopes/expectations/fears of an impending rate hike.

On the chart below, we look at three potential areas to watch for support on ‘DXY’ in the effort of top-side continuation in the U.S. Dollar. At this early stage of the week, the optimal zone for that support to develop would appear to be around the 101-handle, or approximately 38.2% of the bullish move in the Greenback that started in early-February.

Chart prepared by James Stanley

Aussie Will be in the Spotlight

Australia will see a series of drivers rolled out this week. First we get the RBA rate decision, and there is scant expectation for any movement there. As we had written on Friday of last week, the RBA is between a rock-and-a-hard place on the rates front; with potential cuts bringing even more ‘exuberance’ in the real estate market with any potential hikes carrying the possibility of choking off growth and exports, even more. But after this rate decision on Tuesday morning (10:30 PM ET on Monday Night for U.S. traders), a couple of Chinese prints later in the week could further drive price action; with particular interest being paid to Chinese inflation numbers released on Thursday morning (Wednesday at 8:30 PM ET for U.S. Traders).

From a technical perspective – last week’s burst of strength in the Greenback appeared to help AUD/USD kick-start the next phase of its range. AUD/USD has been range-bound for the past year, and last week saw a down-side move off of the resistance zone around the .7750-zone; opening the door for targets around the zone of support towards the .7200-vicinity: