Dollar Wins Despite Record US 6.6 Million Jobless Claims, Payrolls Loom

Summary: The Dollar ended higher against most majors despite another dreadful spike in Weekly US Jobless Claims to a record 6.648 million, from 3.3 million the previous week. It was a new all-time high and bigger than the median estimate of 3.5 million from economists. The Euro fell 0.92% to 1.0848 (1.0955) as total Covid-19 cases surpassed 1 million with the death toll above 50,000. Four European countries (Italy, Spain, France and the UK) account for 60% of deaths. The fall in the shared currency lifted the Dollar Index (USD/DXY) 0.49% above 100 to 100.163 (99.487 yesterday). The Australian Dollar retreated to 0.6047 from 0.6080 after dropping to an overnight low at 0.6007. Against the Yen, the Dollar climbed to 107.90 (107.00). Sterling was little changed in late New York at 1.2390 (1.2395). Canada’s Loonie had another volatile trading session, USD/CAD climbing to 1.42982 overnight high before falling to 1.4135 at the New York close as Oil prices surged.  Brent Crude Oil prices jumped over 20% to USD 30.38 (USD 25.55) after President Trump tweeted that he spoke to his Russian counterpart Putin and the Saudi Crown Prince to work on cutting oil production. Saudi Arabia called for an emergency OPEC+ meeting. The Dollar eased against the Emerging Market currencies after recording strong gains this week. The higher Oil prices boosted Wall Street stocks. At the close of New York trade, the Dow was up 2.2% to 21,360 (20,960). The S&P 500 rose 2.5% to 2,525 (2,475). Global bond yields steadied. The key US 10-year yield closed unchanged at 0.61%. Germany’s ten-year Bund yielded -0.44% (-0.47%). Japan’s 10-year rate dipped to -0.03% (-0.01%).
Other data released yesterday saw Spain’s number of unemployed people surge to 302,300, far surpassing forecasts of 27,700. Eurozone PPI slumped to -0.6% in March from +0.4% previously. Canada’s Trade Deficit eased to -CAD 1 billion in March from February’s -CAD1.7 billion, bettering forecasts of -CAD 2.3 billion. US March Factory Orders were flat at 0.0%, below expectations of 0.2%.

MarketWatch Initial US Jobless Claims Chart - Past Few Weeks - 03 April 2020
MarketWatch Initial US Jobless Claims Chart – Past Few Weeks – 03 April 2020

On the Lookout: The spotlight turns to the US Payrolls report for March which is expected to show the first contraction of jobs since 2010 as coronavirus lockdowns spread. Economists expect the Non-Farms Payroll to decline 100,000 from February’s addition of 273,000 jobs. March’s Unemployment rate is forecast to climb to 3.8% from 3.5%. Wages (Average Weekly Earnings) are expected to drop to 0.2% from 0.3%.

Business Insider - US NFP March Projection - 03 April 2020
Business Insider – US NFP March Projection – 03 April 2020

Other data released today are: China’s Caixin Services PMI report, and Australia’s Final Retail Sales. Europe sees Euro area (Spain, Italy, France, Germany) and the Eurozone Services PMI reports. Eurozone Retail Sales follow. The UK releases its Final Services PMI report. Other US data released today are Final Services PMI and the ISM Non-manufacturing PMI. Watch this last number, the job losses in the service industry is forecast to see ISM Non-manufacturing PMI’s fall to 43.5 from 57.3.

Trading Perspective: The Euro underperformed the majors, falling to an overnight low at 1.08206, before climbing to settle at 1.0847. Against the Emerging Market currencies, the Dollar eased following its strong rally this week as the costs of raising US funds stabilised further. Confirmed cases of Covid-19 in the United States rose to over 200,000, the most worldwide.
Against this backdrop, the latest Commitment of Traders/CFTC report for the week ended 24 March saw net speculative USD shorts increase to a total USD 6.6 billion. The negative US Dollar increase was due strong buying in the Euro, which saw Euro long bets climb to +EUR 61,290 contracts or the equivalent of USD 8.3 billion, the highest since June 2018, according to Saxo Bank’s report. Which is one of the reasons for the Euro’s fall overnight. With much uncertainty around, no FX trader wants to keep a position for any length of time.

AUD/USD – Holds Above 0.60 Cents, Recovery Fragile

The Australian Dollar retreated for the fourth day in a row to finish 0.56% lower at 0.6050 after falling overnight to 0.60067. The Battler got caught up in the USD rally against the Majors despite an easing of USD/EMS. This morning Australia’s AIG Construction Index dropped to 37.9 in March from the previous month’s 42.7. Chia releases its Caixin Services PMI today which could provide the Battler short term direction.

AUDUSD Daily Chart - 03 April 2020
AUDUSD Daily Chart – 03 April 2020

A generally weaker US Dollar should result in the Australian Dollar holding the 0.6000 cent mark. The US continues to suffer the effects of the coronavirus impact on its economy. Tonight’s Payrolls report is expected to see a median of 100,000 jobs lost, the first fall since 2009. Next month’s US Payrolls will be worse. The latest COT report saw speculative total Aussie short bets trimmed a touch to -AUD 25,207 from -AUD 28,733.

AUD/USD has immediate support at 0.6000 followed by 0.5960. Immediate resistance can be found at 0.6100 and 0.6150. Expect some consolidation today with a likely 0.6010-0.6110 range until the US Payrolls release.

EUR/USD – Slip-sliding away to 1.0800 as Speculative Longs Bail

The Euro underperformed the majors in FX, extending its fall to 0.92% at the New York close, to 1.0847. The shared currency’s rally that started this week saw the EUR/USD pair hit 1.11472, before retreating to last night’s low at 1.08206. The fall in the Euro, which takes almost 60% of the weight in the Dollar Index, enabled the USD/DXY to rally above 100. (100.163).

Euro USDollar Hourly Chart - Daily FX - 03 April 2020
Euro USDollar Hourly Chart – Daily FX – 03 April 2020

While US claims for Unemployment benefits almost doubled in the latest week, the US Dollar benefited from its relative safe-haven status. Long market positioning in the Euro almost doubled in the latest Commitment of Traders/CFTC report to +EUR 61,290 from the previous week’s +EUR 32,945. Global Covid-19 confirmed cases surged to beyond 1 million. The total death toll exceeded 50,000. Four European countries (Italy, Spain, France and the UK) account for 60% of the death toll.

EUR/USD has immediate support at 1.0805 followed 1.0770. Immediate resistance can be found at 1.0900 and 1.0950. Much depends on tonight’s US Payrolls report and the latest coronavirus toll.
Meantime look to trade a likely 1.0800-1.1000 range today.

USD/JPY – Holds 107, 108.50 Resistance to Hold Until US Payrolls

The Dollar rallied against the Yen to an overnight high at 108.09 after holding an overnight low at 107.015 despite the awful US Jobless Claims report. Japanese 10-year JGB yields slipped to -0.03% while US 10-year rates were unchanged at 0.61%. The 20.6% surge in Oil prices boosted USD/JPY higher to finish just under 108.00

FXCM USDJPY Hourly Chart – 03 April 2020

USD/JPY could rally further if oil prices continue to climb. A Russian spokesperson this morning denied that Russia agreed to President Trump’s request which he tweeted earlier. The market also moves ahead with the spotlight on the US Jobs report. A rise of more than 100,000 jobs lost will see USD/JPY challenge 107.00 again.

Immediate support for today lies at 107.50 followed by 107.00 and then 107.50. Immediate resistance can be found at 108.10 followed by 108.50. Look for consolidation today with a likely 107.20-108.20 range until the Payrolls report.