Summary: The Dollar Index (USD/DXY), a measure of the value of the US Dollar relative to a basket of 6 currencies, eased 0.34% to 102.467 after the Federal Reserve took unprecedented steps to shore up credit across the US in an attempt to support the economy. The Euro advanced 0.45% to 1.0745 (1.0695) after slipping to 1.0636 overnight. Against the Yen, the Dollar rose 0.58% to 111.20 with demand for the Greenback still strong. The Australian Dollar maintained its gains to finish at 0.5820, up 0.4%. Sterling slumped 0.72% to 1.1520 (1.1600) after British Prime Minister Boris Johnson reluctantly instructed Britons to stay at home and admitted that the UK National Health System will be unable to handle the spread of Covid-19. The USD/CAD pair soared to 1.4560, easing to 1.4535 in late New York trade as Oil prices stayed soft. The Loonie ended as worst-performing major against the Greenback. Equities were not impressed as US lawmakers struggled to reach an agreement on a coronavirus stimulus package after falling short on a deal over the weekend. Wall Street stocks closed mixed. The Dow was flat at 18,648 (18,978). The S&P 500 lost 3.05% to 2,228 (2,274). Bond yields dropped. The benchmark US 10-year yield finished 9 basis points lower to 0.76%. In contrast, Germany’s 10-year Bund yielded -0.38% from -0.33%.
On the Lookout: The Fed’s unlimited QE announcement shows the commitment of to bring order after days of chaos. Markets took notice as the move is unprecedented. However, US lawmakers need to get their act together and provide fiscal support which the Fed cannot do. The Dollar finished mixed, weighed by lower US bond yields, while supported by short term demand.
Today sees the release of global flash manufacturing and services PMI’s for March.
Australia’s Flash Manufacturing-PMI, just released was at 50.1 in March, from February’s upwardly revised 50.2 (49.8). Flash Services fell to 39.8 in March from 49.0 in February. Japan follows with its PMI report. European PMI releases today are from France, Germany and the Eurozone. The UK and US also release their Manufacturing and Services PMI reports. US Richmond Manufacturing PMI and New Home Sales round up today’s data.
Trading Perspective: According to a CNBC report, Net speculative US Dollar bets (among hedge funds and large speculators) turnaround to net short from an overall long position based on the latest Commitment of Traders/CFTC report. This writer will look for the data and provide more information.
While the Dollar Index (USD/DXY) was a touch lower, it ended mixed against various rivals. Expect more of this today. High volatility eased but is still a feature of FX markets looking ahead.
Meantime Covid-19 continues to spread in the United States of America. The latest report saw total US cases rise to 41,700 (worldwide cases 372,500). Italy reported fewer cases and deaths for the second day in a row. The US Dollar will continue to ease on this.
Stay safe, happy trading.
USD/CAD – Bid, but Struggling to Breach 2016 Highs
The USD/CAD continued to climb and trade near 2016 highs. Last night USD/CAD traded to 1.4560 before easing to 1.4535 in late New York on the overall weaker US Dollar. The Dollar slipped further in early Asia to 1.4485. The Loonie was the worst performing currency among the Majors. Short term USD demand kept the Canadian Dollar under pressure. A summary in the IG Client Sentiment report saw traders net short USD/CAD. The USD/CAD move higher in the past week has been due to short covering. This may have run its course and the USD/CAD may soon reverse lower.
USD/CAD has immediate resistance at 1.4550-65 which will be difficult to breach under the current circumstances of an overall weaker US Dollar. Further resistance lies at 1.4670. Immediate support can be found at 1.4460 and 1.4400. The next support level can be found at 1.4300. Look for a likely range today of 1.4420-1.4550. Prefer to sell rallies as the US Dollar begins another corrective move lower.
USD/JPY – Hitting Topside Objective, Resistance at 111.60-112.00
The Dollar closed higher against the Yen, finishing at 111.20 from 110.90 yesterday. The overnight high traded was 111.60 before easing in late New York. The latest Fed QE measure put pressure on the USD/JPY pair with the key US 10-year treasury yield dropping 9 basis points to 0.76%. In contrast, Japanese 10-year JGB yields were up one basis point to 0.05%.
News that Japan is considering plans to delay the Olympics by less than a year to early 2021 has had little effect on the US Dollar Yen pair so far. Dollar demand against the Yen is still evident but appears to be waning. This may be the result of speculative short USD covering as well as retail interest ahead of the Japanese fiscal year-end (31 March).
USD/JPY has immediate resistance at 111.60 followed by the 112.00-20 region. Immediate support can be found at 110.90 followed by 110.20 and 109.30. Look for a likely range today of 109.80-111.50. Prefer to sell rallies with the view of a broad-based US Dollar decline looming.
AUD/USD – On the Mend, Base Rising on USD Weakness, Gov’t Stimulus
The Australian Dollar battled to extend its gain for the second day running, finishing above 0.58 cents at 0.5835 (0.5800 yesterday). The Aussie strengthened on the back of a generally weaker US Dollar and proactive Australian government. While the US Senate failed to pass the much-awaited Covid-19 bill, Australian PM Scott Morrison announced the government’s second stimulus measure yesterday.
AUD/USD traded to an overnight high at 0.5845. Immediate resistance for today is found at 0.58650 and 0.5900. The next resistance level lies at 0.5950 and 0.6000. Immediate support can be found at 0.5770 followed by 0.5720 and 0.5660. Markets took little notice of Australia’s Flash Manufacturing and Services PMI’s for March released this morning. Both were basically in line with expectations.
FX will continue to focus on the virus outbreak data and macro stimulus. Look for a likely trade today of 0.5740-0.5920. Prefer to buy dips, the Battler is headed higher after some consolidation.
