Volume Data

Dollar Retreats, US Job Openings Drop, Coronavirus Spread Slows

Summary: The Dollar Index (USD/DXY), a popular gauge of the Greenback’s value against a basket of 5 foreign currencies, retreated for the first time in 5 sessions to finish at 98.724 from 98.827. The US Labour Department reported that it’s JOLTS (Job Openings and Labour Turnover Survey) dropped in December to 6.42 million, the lowest reading since December 2017, and widely missing forecasts at 6.93 million. In his testimony to the US Congress, Jerome Powell said the Fed was positive about the American economic outlook, while keeping a close eye on the fallout from the coronavirus epidemic. Reports that the spread of the COVID-19 (coronavirus) may be slowing down saw safe-haven assets ease and Treasury yields climb. The death toll in mainland China from the outbreak climbed past 1,000, but the number of new confirmed cases fell.

JOLTS - US Job Openings Chart - FX Factory - 12 Feb 2020
JOLTS – US Job Openings Chart – FX Factory – 12 Feb 2020

The Euro, under selling pressure for most of the day, climbed off its lows at 1.08913 to finish modestly higher at 1.0922. Against the Yen, the US Dollar was little changed at 109.77 from 109.72. The Australian Dollar extended its bounce from decade lows to 0.6715 (0.6682 opening yesterday). Ahead of today’s RBNZ rate policy meeting and monetary policy statement, the Kiwi was moderately higher at 0.6403 (0.6388).  Sterling rallied for the 2nd consecutive day to 1.2965 (1.2920) despite mixed UK data which failed to impress. The Dollar was lower against the Emerging Market currencies. Against the South African Rand, the Greenback (USD/ZAR) slumped 1.04% to 14.7860 (14.9650). USD/CNH (Dollar/Offshore Chinese Yuan) fell to 6.97 from 6.9870.
Wall Street stocks pared gains. The DOW ended flat at 29,281. The S&P 500 was up 0.16% to 3,358.
The US 10-year bond yield climbed to 1.59% from 1.56%. Germany’s 10-year Bund rate was up 2 basis points to -0.39%.
UK Preliminary Q4 GDP matched forecasts at 0.0% while January GDP rose 0.3%, against expectations of 0.2%. Manufacturing Production rose to 0.3% against forecasts of a 0.5% rise.

EUR USD 1H Chart – Investing.Com – 12 February 2020
  • EUR/USD – the shared currency was under constant selling pressure, hitting an overnight, 2020 and four-month lows at 1.08913 before bouncing to close at 1.0922 in New York.
  • USD/DXY (Dollar Index) – the Dollar Index retreated to 98.72 from 98.827 yesterday, down 0.11%, the first drop in 5 trading sessions. USD/DXY topped out at 98.952.
  • AUD/USD – The oversold Aussie extended its rebound off decade lows at 0.66645 yesterday. Short covering boosted the Australian Dollar to 0.67368 before easing to settle at 0.6715 at the New York close.
  • USD/JPY – The Dollar ended little changed at 109.77 from 109.70 yesterday. USD/JPY topped out at 109.965, just failing to hit the 110 level.

On the Lookout: The fall in US Job Openings to the lowest in 2 years suggest that the recent acceleration in job growth is unlikely to succeed. Fed Chairman Jerome Powell expressed his cautious optimism about the US economic outlook, noting the potentially disruptive impact of the coronavirus. Powell affirmed the view that the US central bank is unlikely to adjust interest rates in the near term. Today sees New Zealand’s RBNZ rate policy meeting, statement and Press Conference. (12 noon, Sydney time). The RBNZ is expected to maintain its Overnight Cash Rate at 1.00%. Japan reports on its Annual Preliminary Machine Tool Orders for January. Euro area sees Eurozone’s Industrial Production (annual and monthly). The UK reports on its Conference Board Leading Index. Jerome Powell address the US Senate Banking Committee in his second testimony on the Semi-annual Monetary Policy report in Washington DC.

Trading Perspective: The Dollar’s short-term uptrend may be turning and with the speculative market long of the US currency, the risks are to the downside. While Fed Chairman Jerome Powell downplayed the effect of the coronavirus on the US economy, the effects are still unknown. While the impact may be limited, many factories in China supplying US businesses remain shut.
We highlighted yesterday that net speculative US Dollar long bets increased 65% to their biggest level in 5 weeks. A corrective move lower for the Greenback may be on the cards.

  1. EUR/USD – The Euro has been sold down hard this past week from 1.1020 to last night’s low at 1.08913, levels not seen since October 2019. The shared currency is the most oversold among the major IMM currencies against the Dollar. With low volatility, speculators have piled into the short Euro trade. Look for the Euro to extend its gains with a likely range today of 1.0900-50. Prefer to buy dips.
FOREX.COM - US Dollar Index (USD-DXY) Chart - 12 February 2020
FOREX.COM – US Dollar Index (USD-DXY) Chart – 12 February 2020
  1. USD/DXY – The Dollar Index retreated 0.11% to 98.724 from 98.827 yesterday. While most of the loss in the Dollar Index was due to the Euro’s rally, the Dollar’s fall last night was broad-based. The weaker than expected US JOLTS Job Opening survey drained the Greenback of its strength near the highs. We may have seen a short-term top to the USD/DXY just under 99.00. The risk is for 97 lows for the Dollar Index. Look to sell rallies with a likely range today of 98.50-98.80.
  2. AUD/USD – The Aussie’s bounce off its decade lows saw an overnight high trade at 0.67368. The “high risk” currencies (Aussie, Kiwi, Canadian Dollar) and EM’s were heavily sold on the coronavirus risk. While the risk remains, these currencies are oversold. And the US fundamentals took a hit with the poor US JOLTS report. AUD/USD closed at 0.6715, up 0.35% from yesterday 0.6685. Look to buy dips in a likely trade today of 0.6700-0.6750.
  3. USD/JPY – The Dollar retreated to close at 109.77 off 109.965 overnight highs, just failing to breach the 110 level. News reports that the spread of the China virus is slowing should be supportive of the USD/JPY. The weak US JOLT report will keep USD/JPY capped. The latest COT/CFTC report saw speculators trim their short JPY bets to -JPY 21,818 from the previous week’s -JPY 35,945. Market positioning (short JPY) will weigh on the US Dollar. Look to sell USD rallies in a likely range today of 109.35-109.85.

Happy trading all.