USD Dominant, Could Revisit Feb Highs

The USD rallied for a second session Friday, boosting the USD index to new weekly highs and narrowing the gap with February's best levels and the 100-dma - both of which remain key levels of resistance. Despite a calmer day for US bond markets (which had been subject to acute volatility earlier in the week), there remained pockets of volatility in currency markets, with AUD selling off aggressively alongside NZD.

• This reversal in growth-proxy and commodity-tied currencies followed a pause in the bull trend for industrial metals and oil, most of which hit new multi-year cycle highs mid-week.
• The pullback in both GBP/USD and AUD/USD this week was particularly eye-catching, with both pairs off as much as 350 pips from the week's best levels. Markets look for confirmation on whether the moves have been corrective, or are the beginning of a trend reversal.
• Focus in the coming week turns to Chinese PMI data, Canadian GDP and the February Nonfarm Payrolls report. The US are expected to have added 150,000 jobs over the month, with the unemployment rate inching 0.1 ppts higher to 6.4%.
• The RBA rate decision is due, in which markets will be watching for any comment on the recent sharp increase in Australian yields.