Summary: Another day, another Dollar. FX saw mixed reactions after the US Department of Labour reported that the number of Americans filing for Unemployment Claims in the week ending April 11 was 5,245,000. While the number bettered forecasts of 5.35 million and improved the previous week’s upward adjusted claims of 6.615 million (from 6.606m), the monthly total hit a record 22 million Americans seeking unemployment benefits. The Philadelphia Manufacturing Index hit a 45-year low at -56.6. Despite the worrisome data, the US Dollar maintained its dominance in FX. The Dollar Index (USD/DXY) a gauge of the Greenback’s value against a basket of six foreign currencies, rose to 99.979 (99.567). US President Trump is due to announce guidelines on re-opening the country’s economy later today. The Euro underperformed, extending its drop to 1.0840 (1.0912). Eurozone governments continued to grapple with a Euro 500 billion deal reached last week to support countries which is widely seen as insufficient. Against the Yen, the Dollar climbed 0.25% to 107.90 (107.45) as Japan extended its state of emergency to the whole country. Sterling eased to 1.2450 (1.2530). Risk currencies fared a bit better. The Australian Dollar eked out a gain of 0.23% to 0.6320 (0.6285). USD/CAD dipped to 1.4040 from 1.4080 after Oil prices rebounded off their lows.
Wall Street rallied on strong health care and technology-related stocks with the prospect of nations reopening their economies which were shut down due to the spread of Covid-19. In late New York, the Dow was up 1.6% to 23,815 (23,450). The S&P 500 rose 1.9% to 2,830 (2,780). The key US 10-year bond yield was 1 basis point lower to 0.62%.
Other data released yesterday saw Australia create 5,900 Jobs, beating forecasts of a Job loss of -40,000. Australia’s Unemployment rate rose to 5.2% from 5.1%. US March Housing Starts fell to 1.22 million units from a downwardly adjusted 1.56 million, and missing expectations of 1.31 million. Building Permits, however, climbed to 1.35 million units, beating forecasts of 1.30 million.
On the Lookout: The spotlight today will be on China’s Q1 GDP and trifecta of economic data, Industrial Production, Retail Sales and Fixed Asset Investment (March). Latest forecasts, while expected to show falls, are all better than those in the previous month.
Other data released today are Japanese February Revised Industrial Production, Capacity Utilisation, and Tertiary Industry Activity. Euro area reports kick off with Italy’s Trade Balance, and the Eurozone Final Headline and Core CPI data. Finally, the US reports on its Conference Board’s Leading Index.
Trading Perspective: The US Dollar managed to keep its title of King in the FX world despite the dismal and worrisome US economic data. Ongoing pessimism on the global economy is putting a bid on the Greenback. Markets are of the view that the rest of the world will be worse. The mood shifts from risk-on to risk-off with high volatility trading conditions.
The environment forces traders to be more discretional, have an overall view, but try not to fall in love with it. Maintain flexibility, know your levels well, establish your parameters and be aware of the market’s positioning.
USD/CAD – Caught Between Oil and USD – 1.3950-1.4200 Likely
The Dollar/Canadian Loonie had a relatively narrow trading range for a change although there was high volatility in between. USD/CAD closed on the weak side at 1.4045 from 1.4105 yesterday. Despite the overall stronger US Dollar, Brent Crude Oil prices rebounded off their lows to close at USD 30.80, a gain of 2.31%. The strong performance of risk assets also supported the Loonie.
Bank of Canada Governor Stephen Poloz repeated that the bank stands ready to expand its QE and provide further stimulus should conditions warrant it.
While a base is building in the USD/CAD, the other side of the equation is the US Dollar. With more worrisome data coming from the United States, we could see another dip is this currency pair before higher. USD/CAD has immediate support at 1.4020 followed by 1.3970. Immediate resistance can be found at 1.4100 and 1.4140 and then 1.4170. Look to trade a likely range of 1.3950-1.4200 today. Preference is to buy dips to 1.3950.
AUD/USD – Building a Base, Chinese GDP in Focus, 0.6250-0.6450
The Australian Dollar held its own, managing to eke out a gain versus the overall stronger US Dollar. AUD/USD closed at 0.6340 from 0.6320 yesterday. In early Friday morning Sydney trade, the Aussie Battler climbed to 0.6385 on the rise in risk assets following breaking news that clinical trials of a drug (Gilead’s Remdesivir) showed success through “rapid recoveries” in Covid-19 patients taking part in the trial. Meantime Australian PM Scott Morrison and his Cabinet signalled an exit strategy for the current lockdown although current restrictions would remain in place for at least 4 weeks. Australia has made significant progress in the battle against coronavirus, with the daily infection rate curve flattening.
AUD/USD has immediate support at 0.6320 followed by 0.6280 (overnight low traded was 0.6364).
Immediate resistance can be found at 0.6400 and 0.6450. The Battler looks like its building a base to test higher. It will need to see an overall US Dollar weakness as well as a rally in Asian and Emerging Market currencies. The spotlight today is on China’s Q1 GDP and trifecta of economic reports, Industrial Production, Retail Sales and Fixed Asset Investment. Although traders are often sceptical on the data, there are still reaction in the currency. Look for a likely range today between 0.6250 and 0.6450. Prefer to buy dips, the US Dollar will not remain “king” of FX for too long in the current environment.
EUR/USD – Trading Heavy, Bounces Off 6-Day Lows – 1.0810-1.0980.
The Euro stayed under pressure, finishing in late New York trade to 1.0840 before rallying in early Sydney to its current 1.0860. The shared currency was the worst performing currency amongst the majors against the Dollar. We highlighted two weeks ago the net market positioning in Euro long bets hit their biggest total since October 2018. The Euro has had difficulty rallying as many of those longs have exited their positions. Where do we go from here?
Markets have yet to see the extend to Europe’s economy, where the coronavirus infections were the second major-hotspot. Most of the data released have been from February and March. European nations are restarting business activity sooner than the US which can be a positive for the shared currency.
EUR/USD has immediate resistance at 1.0880 and 1.0910 (overnight high). Immediate support lies at 1.0810 and 1.0780. The move lower in the Euro in the past 6 days has seen many of those speculative long bets exit. Against the USD, the Euro has more room now to advance. Look for a likely trade today between 1.0810 and 1.0980. Prefer to buy dips.
