Summary: The Dollar ended lower in high volatile trade following a swirl of intervention talk to bring down the rampaging U.S. currency which has jumped 7% in the last 15 days. Reuters reported that Japanese Finance Minister Taro Aso made a rare comment on the US Dollar’s singled handed rises against other currencies, most likely due to investor anxiety over the coronavirus outbreak. In a separate Reuters report, Goldman Sachs analyst Zach Pandl said “Further Dollar appreciation would be harmful to both US and global growth. If the Dollar were to continue rising, we would see a reasonably strong case for coordinated and targeted intervention.” Yesterday the Greenback slipped after the U.S. Federal Reserve introduced unprecedented QE. The Dollar Index (USD/DXY) which hit 102.95 on Friday, January 2017 highs, slipped further to 101.94, down 0.54%. The Euro jumped to an overnight high at 1.0888 before retreating to finish at 1.0755, little changed from yesterday’s 1.0750. The Australian Dollar extended its recovery to finish at 0.5930, up 1%. Sterling soared 1.1740 from 1.1520 on the broadly weaker Greenback. USD/JPY rallied to 111.60 (111.20) as equity markets soared as US lawmakers said they were close to a deal on a USD 2 trillion stimulus bill to provide aid to distressed companies and workers. Against the Canadian Loonie, the US Dollar eased to 1.4460 (1.4530). The latest Commitment of Traders/CFTC report (week ended 17 March) saw speculators cut short currency, long USD positions across the board. The result was a net short USD position for the first time since June 2018. The biggest change was in the Euro where a huge reduction of Euro shorts saw a swing to a net speculative long Euro position. We look at the breakdown in the Trading Perspective and individual currencies. Wall Street stocks jumped. The Dow soared 11.4% to 20,725 (18,149). The S&P rallied 9.8% to 2,430 (2,228). Bond yields were higher with the benchmark US 10-year yield up 8 basis points to 0.84%.
With the focus on stimulus measures and the coronavirus, economic data were relegated to the sidelines. Global Flash Manufacturing PMI’s emerged better than forecast for most countries while Services underwhelmed.
On the Lookout: All eyes are focussed on Washington and the US lawmakers agreeing a fiscal package aimed a battling the economic impact from Covid-19.According to ANZ Bank analysts, the global enormous stimulus unleashed to battle the economic slump won’t stop it but “t does provide a safety net going forward.” Meantime the coronavirus toll in the US continues to grow rapidly. This will weigh on the Dollar as the impact will certainly batter the economy.
Economic data releases today see UK Headline and Core CPI, PPI Input and Output, and HPI. US reports on its Headline and Core Durable Goods Orders for March. A big negative is forecast for the US Headline DGO. Traders will be keeping an eye on this. A larger negative could see further USD selling.
Tomorrow the US Weekly Unemployment Claims is the biggest report which will be closely watched. Jobless claims are forecast to surge to 1.5 million from the previous week’s 281,000.
Trading Perspective: The global short-term US Dollar company funding requirement has eased. Measures for Euro-dollar FX swaps for 3-month maturities stabilised around 8 basis points after blowing out to more than 100 bps last week, according to Reuters.
Overnight the Emerging Market currencies, battered by the surging Greenback in the past week, all managed to record strong gains versus the US Dollar.
Meantime the latest Commitment of Traders/CFTC report from Saxo Bank saw Net speculative positioning for the week ended March 17 turn short Dollars as a result of aggressive position reductions. The net short US Dollar position was the first time since June 2018.
The Euro saw the biggest reduction which turned the position from a net short Euro to a long one. Despite the slide in the Aussie last week, shorts were aggressively trimmed. We look at the various currencies, Euro, Aussie and the Canadian Dollar.
AUD/USD – Jumps Anew, the Rally Extends, 0.6000 Next Barrier
The Aussie jumped 0.91% overnight on the broad-based US Dollar slump and surge in Emerging Market currencies. The market’s risk-on stance also boosted the Battler. AUD/USD closed in New York at 0.5920 from 0.5785 yesterday. In early Sydney, as I write this, AUD/USD is currently trading at 0.5988 it’s highs so far. The next barrier is the psychological 0.60 cent barrier. Expect some resistance between 0.6000-0.6020.
The latest Commitment of Traders/CFTC report (week ended March 17) saw net speculative Aussie short bets cut from -AUD 54,013 in the previous week to – AUD 28,733. The speculative market is still short of Aussie, unlike the Euro where the specs have turned long. This means we can see more violent upward moves should the US Dollar fall further.
Trading in the Aussie was volatile with the overnight low recorded at 0.58114. Expect more of the same today. Immediate support can be found at this morning’s opening of 0.5920 followed by 0.5870. If the immediate resistance at 0.6020 is broken, the next resistance level is at 0.6060. Look for a choppy session today with a likely range of 0.5880-0.6030. Prefer to buy dips still but be prepared to trade the range.
EUR/USD – Lifts on US Dollar Weakness, Spec Longs to Cap Gains
The Euro benefitted from the broad-based US Dollar weakness, lifting to a NY close at 1.0755, a modest gain of 0.1%. EUR/USD had a highly volatile session trading to an overnight high at 1.08881 and low at 1.07218. In early Asia, the Euro lifted to its current 1.0815 as the Greenback fell further against all of it’s rivals.
Euro area PMI reports saw Manufacturing PMI’s beat expectations, but the Services sector all underperformed. EUR/USD had a subdued finish although the weaker US Dollar will keep the shared currency buoyed. Meantime, the latest COT report for the week ended March 17 saw a huge reduction of net speculative Euro short bets from -EUR 12,667 in the previous week swing to a long +EUR 32,495 contracts, its first in 18 months.
EUR/USD has immediate resistance at 1.0900 followed by 1.0950 and 1.1000. Immediate support lies at 1.0750 (NY close) and 1.0700. Look for another volatile trading day with a likely range of 1.0730-1.0930. Just trade the range shag on this one.
USD/CAD – Caught Between Weak Oil and Weak US Dollar
The US Dollar eased against the Canadian Loonie to 1.4480 from 1.4530 yesterday. USD/CAD traded to an overnight low at 1.4375 before bouncing to its close. In early Sydney, the Dollar trades at 1.4440 Canadian. Overnight Brent Crude Oil prices stabilised at USD 29.40, after its plunge to USD 25.00 earlier this week. This is keeping the USD/CAD supported at the 1.4350 area, for now.
The latest COT report (week ended March 17) saw net speculative short CAD bets increased to -CAD 9,623 from the previous week’s -CAD 1,990. With the speculative market short of Canadian Dollars, a further USD drop will see the USD/CAD retreat.
USD/CAD has immediate resistance at 1.4500 followed by 1.4540. Immediate support can be found at 1.4410 followed by 1.4370. Look to trade USD/CAD from the short side with a likely range today of 1.4370-1.4510.
