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Hopeful Virus Signs Lift Risk, US Stocks Up, Dollar Down

Summary: The market’s spotlight remained on the coronavirus curve which continued to flatten mainly in Europe and the United States. Which underpinned risk sentiment and lifted stocks, while the US Dollar traded lower against the majors. China’s Trade Balance returned to a Surplus in March, from February’s Deficit, but fell short of expectations in CNY terms. The Australian Dollar rallied above the 0.6400 mark, settling at 0.6442 in late New York, up 0.65%. Sterling extended its advance to 1.2633 from 1.2580. The Euro approached 1.1000, finishing near two-week highs at 1.0987 from 1.0910. USD/JPY slipped 0.46% to 107.20 (107.75) on the broad-based Dollar weakness. Against the Canadian Loonie, the US Dollar was modestly lower at 1.3885 (1.3900) after Brent Crude Oil prices slumped 5.45% to USD 32.30 (USD 33.55). Despite the OPEC deal reached over the weekend to cut output, supply concerns amidst falling demand due to the coronavirus weighed on oil prices. Gold prices soared anew with the precious metal hitting late 2012 highs (USD 1,747) before easing to settle at USD 1,726 in late New York. Wall Street stocks lifted on the positive risk sentiment. The Dow added 2.5% to 24,035 (23,425) while the S&P 500 climbed 3.05% to 2,855 (2,770). Treasuries were steady. The key US 10-year bond yield closed at 0.75% from 0.77%. Germany’s 10-year Bund yield dipped to -0.38% from -0.36%.

CNY - China Trade Balance - FX Factory - 15 April 2020
CNY – China Trade Balance – FX Factory – 15 April 2020

China’s Trade Balance rose to +CNY 139 billion in March, improving from February’s -CNY 43 billion, but lower than expectations of +CNY 175 billion. Australia’s NAB Business Confidence Index slumped to -66 in March from February’s upwardly revised -2 (from -4).

On the Lookout: The coronavirus curve continued to flatten in most of Europe and parts of the US and lifted the market’s mood. In the US, President Trump and his advisers are looking to ease lockdowns and get the economy in parts of the country to re-open. Meantime economic data in the coming months due to the virus outbreak is expected to be horrible. The US earnings season kicks off this week. Traders sold US Dollars against the Majors for on the positive risk sentiment while tonight’s US Retail Sales data and Fed Beige book will be much worse than the previous month’s reports. The Bank of Canada meets on interest rates as well and is expected to keep policy unchanged. With the deep slide in Oil prices, and a large loss of jobs last month, the BOC will remain accommodative, keeping a dovish slant.
Other data releases are: New Zealand’s March Food Price Index, Australia’s Westpac Consumer Sentiment from Australasia. European reports see France’s Final CPI. US data released today are: Headline and Core Retail Sales (March), Empire State Manufacturing PMI, Capacity Utilisation, and Industrial Production. The Bank of Canada is expected to keep policy unchanged and its Overnight Rate at an all-time low of 0.25%.

Trading Perspective: While the US Dollar fell against the Majors and Risk currencies (AUD, NZD), the Greenback fared better against the Emerging Market currencies. USD/EMS were mostly higher for the second day running. There have been Covid-19 flare-ups in countries that eased restrictions early, China, Korea and Japan. In the more densely populated Asian countries like India, Indonesia, and the Philippines, a lack of testing kits keep official statistics on the low side and a much larger breakout in these countries is possible.
These factors are all supportive for the US Dollar, and an uneven performance of the Greenback, ie lower against the Majors, but higher against EM currencies cannot continue. One side will have to give, as my Emerging Market trading experience has taught me. We take a look at the latest market positioning to give us further clues.

USD/CAD – Flat; Weak USD vs Weak Oil, BOC Next – 1.3870-1.4130

The US Dollar finished modestly lower against the Canadian Loonie after Oil prices slid anew despite OPEC’s weekend agreement to cut production by almost 10 million barrels/day, a historic cut. The production cut failed to impress traders, as it fell short of expectations, only just. However global demand due to the coronavirus outbreak has been greatly reduced. The overall weaker Greenback saw a modest dip in USD/CAD to 1.3885 from 1.3900 yesterday.

Forex Live Charts - USD CAD H1 - 15 April 2020
Forex Live Charts – USD CAD H1 – 15 April 2020

The Loonie gets a big test when the Bank of Canada announces its monetary policy report following the conclusion of its interest meeting tonight. The BOC is widely expected to maintain policy and keep its overnight rate at a record low of 0.25%. Lower economic data readings in the IVEY PMI which fell to a record, while the country lost more than a million jobs last month. The Bank of Canada will remain dovish and stay accommodative.

USD/CAD has immediate support at 1.3850 followed by 1.3820. Immediate resistance lies at 1.3900 and 1.3940. Look to buy USD dips with a likely range today of 1.3870-1.4130.

AUD/USD – Lifts on Weak USD, Spotlight Next on Data – 0.63-0.65

The Australian Dollar extended its advance against the overall weaker Greenback and market’s improved risk sentiment. AUD/USD hit fresh 5-week highs at 0.64446, settling at 0.6440 in late New York. Overnight low traded was 0.63745. The extended rebound in risk assets and equities has kept the Battler on strong footing. Investors shrugged aside the start of the US earnings season, which will show the extent of the Covid-19 damage on businesses.

AUDUSD Forex Live Chart - H1 - 15 April 2020
AUDUSD Forex Live Chart – H1 – 15 April 2020

The US Dollar extended its decline against the Asian and Emerging Market currencies for the second day running. While talk emerged of an economic restart in the US, France and India have extended lockdowns. In Korea, experts warned of “reactivation” in previous patients. China reported its highest number of cases in 6 weeks. Singapore saw its Covid-19 new cases jump to its biggest yesterday.  Australia’s Employment report for March is released tomorrow. All factors that will limit the Aussie’s topside today and may see it under pressure again.

Immediate resistance lies at 0.6450 and 0.6500. Immediate support can be found at 0.6410 and 0.6370. Look for a likely range today of 0.6350-0.6450. Prefer to sell rallies.

EUR/USD – Extends Rally, Spotlight on US Data, 1.09-1.10 Likely

The Euro extended its advance against the broadly weaker US Dollar even as France extended its lockdown. EUR/USD traded to 1.09907 in late New York, its highest in two weeks, easing to settle at 1.0982 in early Sydney.

Forex Live EUR USD H1 Chart - 15 April 2020
Forex Live EUR USD H1 Chart – 15 April 2020

Without any big economic numbers out of Europe this week, traders will focus on the latest coronavirus updates as well as today’s US Retail Sales report and Fed Beige book. In Europe, while there has been continued improvement in Covid-19 related numbers, most have extended lockdowns until early May. Russia warned that it could run out of hospital beds as cases spread around the large country.

EUR/USD has immediate resistance at 1.1000 and 1.1030. This level is strong and should hold while the markets await US Retail Sales and Fed Beige Book. Most traders are not expecting anything good to come from these reports. Which remains to be seen. Immediate support can be found at 1.0960 and 1.0910. Look for a likely range today of 1.09-1.10.