USD/JPY Rises; AUD, NZD, Risk Climb on Hopes of Slowing Virus Death Toll
USD/JPY Rises; AUD, NZD, Risk Climb on Hopes of Slowing Virus Death Toll Stocks Rise, VIX Falls; Europe, US, Covid-19 Losses Ease as Asia Cases Rise
USD/JPY Rises; AUD, NZD, Risk Climb on Hopes of Slowing Virus Death Toll
Stocks Rise, VIX Falls; Europe, US, Covid-19 Losses Ease as Asia Cases Rise
Summary: The Dollar extended its rise against the Japanese Yen while it stalled against other rivals while risk appetite rose lifting the Australian, New Zealand and Canadian Dollars higher. Markets digested the latest reports that saw Covid-19 death rate slow in Europe and the US while deaths in Japan and Asia quickened. USD/JPY rose 0.67% to 109.20 (108.47) as reports surfaced that Japan is preparing to declare an emergency today. The Euro was moderately lower at 1.0797 (1.0812) ahead today’s Eurogroup meeting to discuss options to support their economy during the coronavirus epidemic. Sterling eased modestly to 1.2242 (1.2270) after UK Prime Minister Boris Johnson was moved to an intensive care unit as his Covid-19 symptoms worsened. The Australian Dollar climbed 0.73% to 0.6090 (0.6002) while the CBOE VIX Fear Index slumped to its lowest level in 2 weeks to 45.24, still at elevated levels. Wall Street stocks bounced on the increase in risk appetite. The DOW climbed 6.5% to 22,525 (21,058) while the S&P 500 rose to 2,650 from 2,491. Treasury yields were higher with the key US 10-year rate at 0.67% from 0.59% yesterday. Germany’s 10-year Bund yield was up two basis points to -0.43%.
Germany’s March Factory Orders dropped to -1.4% from a downwardly revised +4.8%, beating expectations of -2.7%. The Eurozone Sentix Investor Confidence Index underwhelmed at -42.9 against median forecasts at -30.5. UK March Construction PMI slipped to 39.3 from 52.6, lower than expectations of 44.0.
On the Lookout: While markets finished with a positive risk mood on a slowing coronavirus death rate in Italy, Spain and New York, the numbers are still far from encouraging. It does appear as lockdown measures are working. Meantime, in Asia, Japan and Singapore are bringing in tighter measures as the daily number of confirmed cases start to rise again. Confirmed cases in Indonesia, Southeast Asia’s largest country with a population of around 273 million, continued to rise.
On the economic front, today’s main event sees the RBA rate policy meeting (2.30 pm Sydney). The RBA is widely expected to keep its Official Cash Rate at 0.25%. The Eurogroup, composed of Euro area member states meet to discuss measures to aid its member economies to soften the impact of the coronavirus. Australia also reports its Trade Balance, ANZ Job Advertisements, and AIG Services Index. Japan reports its Average Cash Earnings, Household Spending and Leading Economic Indicators. European data kick off with Swiss Unemployment Rate, German Industrial Production, and Italian Retail Sales. The UK reports on its Halifax House Price Index. Canada’s Ivey PMI and the US JOLTS Job Openings round up the days data.
Trading Perspective: The Dollar’s advance stalled against many of its Rivals as volatility eased and risk appetite climbed. Coronavirus data will continue to be the main catalyst for FX.
Market positioning will also remain a factor. The latest Commitment of Traders/CFTC report for the week ended March 30 saw an increase in net total US Dollar shorts. While the Dollar’s weakness was more broad-based, the bulk of USD shorts came via a continued build up of Euro longs. Total speculative Euro long bets were the largest since mid-2018. We look at the specific currencies and their numbers.
AUD/USD – Risk Rally Extends in Early Asia, RBA Eyed, 0.6150 Caps
The Aussie Battler jumped in early Sydney from its New York close of 0.6091 to a high at 0.6122. Overnight the AUD/USD pair gained 0.73% to 0.6090. The market’s risk on mode lifted the Australian Dollar and other resource currencies higher. Gold and other metal prices rallied while Oil steadied.
AUD/USD traded to an overnight low at 0.59912 before its strong bounce.
The latest Commitment of Traders report (week ended 30 March) saw speculative Aussie short bets climb to -AUD 31,664 contracts from the previous week’s -AUD 25,207. This is a supportive factor for the Aussie, which saw a remarkable climb of its 2002 lows at 0.5506 to 0.6214 in just over 2 weeks.
The RBA is expected to maintain its Official Cash Rate at its policy meeting today (2.30 pm Sydney time). This should keep the AUD/USD pair capped around this morning’s high at 0.61226. Immediate support lies at 0.6080 followed by 0.6050. Look for a likely range today of 0.6050-.6130. Just trade the range shag on this one today.
EUR/USD – Unable to Rally Above 1.0800 as Longs Continue to Build
The Euro finished around the 10800 level, not far from over 1-week lows despite an improvement in risk appetite and a fall in the coronavirus death toll in Italy and France. Germany saw its fourth daily drop in new cases. While the Dollar eased against risk currencies like the Aussie, Kiwi and Canadian Loonie, the Euro struggled to advance against the Greenback.
The latest Commitment of Traders/CFTC report for the week ended March 30 saw leveraged funds increase their total net Euro long bets to +EUR 74,247 contracts from the previous week’s +EUR 61,290, an increase of 21%. Market positioning will continue to exert its influence on the shared currency and the short-term risk remains lower. Only a broad-based US Dollar fall will support the Euro.
EUR/USD has immediate support at 1.0775 followed by 1.0720 and 1.0680. Immediate resistance can be found at 1.0840 (overnight high 1.0835) and 1.0870. Look for a likely range of 1.0740-1.0870 today. Prefer to sell rallies.
USD/JPY – Above 109 as Japan Struggles to Fight 2nd Covid-19 Wave
The Dollar rose against the Yen as Japan announced a state of emergency as it struggled to battle an alarming rise in Covid-19 cases. Japanese Prime Minister Shinzo Abe reportedly said that he would increase fiscal spending with an unprecedented stimulus worth JPY 108 trillion (equivalent to USD 989 billion) or 20% of economic output. USD/JPY traded to an overnight high at 109.381 before easing to settle at 109.20 in late New York.
USD/JPY traded to 109.28 in early Asia this morning. Currently USD/JPY trades at 109.05. Immediate resistance can be found at 109.40 followed by 109.80. Immediate support lies at 108.50 followed by 108.20. The latest COT report saw speculative JPY long bets trimmed to +JPY 18,282 from +JPY 23,863. Look for a likely trade today between 108.40 and 109.40. While Japan’s outlook appears dire, that of the US and Europe are still far from settled. And risk appetite can easily turn on a sixpence. Prefer to sell rallies in the current market environment today.
Reporting by Michael Moran. Filed 7 April 2020, 03:26 GMT.
