Dollar Falls, Gold Raises as Safe Haven after Trump Threats to Strike Syria
The Dollar Index (USD/DXY) erased losses from geopolitical risks following the FOMC meeting minutes that revealed a hawkish leaning Fed. Earlier, Donald Trump warned Russia of imminent military action over the suspected Syrian gas attacks. Fed minutes revealed that all FOMC members were upbeat about the economy and agreed to raise rates gradually. US Core CPI matched forecasts, rising to its highest since 2017. Stocks fell, Treasuries rallied. Brent Crude Oil rose 1.2%.
Geopolitical risks are moving the markets, any kind of war a threat to synchronised global growth. Equity markets continue to bear the brunt of the currencies traded within ranges. The VIX Volatility Index slipped 0.23% but remained above the 20.00 level.
While market reactions were more measured volatility remains elevated. The safe haven Yen rightly outperformed although the USD/JPY is also forming a range. The Euro and Sterling finished little-changed. USD/CAD slipped further as the Loonie benefitted from strong Oil prices. The Aussie and Kiwi finished flat. The Russian Rouble and Turkish Lira continued to lose ground against the Greenback.
US indicators continue to outperform. While the Headline CPI for the month of March was lower than forecast, annual Core inflation picked up from the previous number.
Global yields were all a few basis points lower on geopolitical concerns.
UK Manufacturing Production and Construction Output were both lower, missing forecasts.
Since the start of the year Business Sentiment indicators from the larger Euro area countries have come down from the high levels in 2017.
Italy begins a new round of coalition talks today in a bid to form a government following last month’s inconclusive election results.
The Dollar Index (USD/DXY) – closed slightly down at 89.516 (89.63 yesterday). Immediate support can be found at 89.35 (overnight low) with 89.20 strong support. Immediate resistance lies at 89.80 and 90.00. Likely trading range today 89.40-89.80. Prefer to buy dips.
EUR/USD – rose to trade up to an overnight high of 1.23961, just short of the 1.2400 level. The hawkish bent from the FOMC meeting minutes saw the Euro drop back under 1.2350 before settling to close at 1.2368. Immediate resistance today lies at 1.2385-1.2400. Expect the resistance level at 1.2400 to be strong. Immediate support can be found at 1.2340/50 and then at 1.2320. The ECB releases its monetary meeting policy accounts minutes later today. Given all the individual comments from ECB officials recently, an insight into the Governing Board’s thinking will be closely monitored. Likely range today 1.2320-1.2390. Look to sell rallies.
USD/JPY – slipped off its highs following the rise in geopolitical risk on Trump’s threats. USD/JPY closed down 0.35% at 106.82 from 107.20 yesterday. A few weeks ago we would be trading down to the 105 area given the recent news headlines. The Dollar-Yen is forming a base to trade higher with US rates set to rise. BOJ Governor Kuroda speaks a little later at a BOJ Branch manager’s meeting in Tokyo. USD/JPY has immediate resistance at 107.00 and 107.20. Immediate support can be found at 106.60 and 106.40. Look to buy USD/JPY dips with today’s likely range 106.60-107.20.
GBP/USD – Sterling fell off its highs following the FOMC minutes. Both UK data releases last night missed forecasts. The British Pound traded to an overnight high of 1.4223 before dropping to 1.4180 (1.4175 yesterday). The resistance level between 1.4200 and 1.4220 is strong and that should hold any rallies. Immediate support can be found at 1.4150/60 and then 1.4120. We highlighted that the speculative community increased their long Sterling bets to the largest since July 2014, pre-Brexit days. A lot of confidence in the Pound at these levels has been built due to expectations of a BOE rate increase in May. Brexit talks are far from over and remain a headwind. And we can add market positioning to that. Look to sell rallies with today’s likely range 1.4120-1.4220.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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