Euro is falling after the ECB officials are concerned about the current euro levels
Recap: The US Dollar firmed against most of its Rivals as traders digested a hawkish Fed following its March meeting. A return to risk following Donald Trump’s U-turn on his trade stance toward China saw stocks rebound. Treasury prices fell and yields rose. ECB minutes revealed concerns on risks of a trade war with the U.S. and the negative impact of a strong Euro.
Outlook: “Now he said it, now he didn’t”. Questions on Trump’s trade policy, developments in Syria and the ongoing FBI investigation will see this day-to-day volatility in equities continue. At the end of the day, stocks are stuck in ranges.
Currencies set aside geopolitics and fixed their eyes on economic indicators and the central bank policy.The divergence between the Fed and ECB policies is emerging. Euro industrial data continue to underperform with Euro-Zone Industrial Production unexpectedly falling for a 3rd consecutive month.
Trading View: The FOMC meeting minutes saw officials leaning toward a slightly faster pace of tightening. The yieldon the US Ten Year Treasury rose 6 basis points to 2.84%. Germany’s Ten-Year Bund yield was up 2 basis points to 0.51%.
Claims for unemployment benefits in the US fell from the previous month, pointing to sustained labor market strength.
The ECB stuck a more dovish tone as policymakers expressed concern over the risks of an all-out trade war with the U.S. Policymakers saw the Euro’s strength as having a potentially harmful impact.
The Monetary Authority of Singapore (Singapore’s Central Bank) releases its semi-annual monetary policy review later today. The MAS has maintained a Zero appreciation for the SGD (Singapore Dollar) on a trade-weighted basis. In the current environment, there is no reason to change that. Expect the USD/SGD to grind higher. (See more below).
The RBA’s Financial Stability Review, Chinese trade data, and US University Of Michigan Consumer sentiment are due today.
The Dollar Index (USD/DXY) – closed 0.3% higher at 89.78 (89.52 yesterday). The Dollar Index held the 89.40/50 support level well with the overnight low traded at 89.443. Immediate support today lies at 89.50. The overnight high was 89.96. Immediate resistance lies at 90.00 and then 90.20. Expect consolidation today with a likely range of 89.70-90.10. The medium-term direction for the Dollar Index still looks up.
EUR/USD – closed at 1.2327 (1.2368 yesterday), down 0.37%. The dovish bent by the ECB given current conditions weighed on the Single currency. Officials are concerned about the current Euro levels. Euro-area economic data continues to underperform. Much of the momentum last year that carried the currency higher has slowed down. Yet the Euro remains doggedly at these levels. EUR/USD has immediate support at 1.2300 (1.2299 overnight low. The next support level lies at 1.2280 and then 1.2260. Euro long bets remain at multi-year highs. Look to sell rallies with today’s likely range 1.2280-1.2340.
GBP/USD – firmed against both the Dollar to close at 1.4227 (1.4182 yesterday). Sterling also rose against the Euro. The EUR/GBP cross closed down at 0.8665, down 0.68% (0.8728). Some analysts point to a break on the EUR/GBP cross as responsible for Sterling’s rally. It’s difficult to say. Expectations for a UK rate hike next month are building. The latest CFTC/Reuters report saw speculative GBP long bets increase to the largest since July 2014. This is a danger sign to me and Sterling is notoriously volatile. Immediate resistance can be found at 1.4250 and then 1.4280. Immediate support lies at 1.4200 and 1.4170. Likely range today 1.4180-1.4240. Look to sell any rallies on the “Quid”.
USD/JPY – Even with risk aversion dominating the trading environment yesterday, the low in the USD/JPY was 106.70. The Dollar finished up 0.44% against the Yen at 107.30. The rise in the US Ten year yield buoyed the Dollar. USD/JPY traded to an overnight high of 107.428. Immediate resistance lies at 107.50 which is strong. Immediate support can be found at 107.10 and then 106.90. Look to buy dips in today’s likely range 106.80-107.50
USD/SGD – the Singapore Dollar has been on a strengthening trend against the US Dollar since late 2016. USD/SGD peaked near 1.4550 following the Dollar’s meteoric rise after Trump won the US presidential election. USD/SGD fell to a low of 1.30528 in late March, closing at 1.3120 this morning. The MAS has its semi-annual policy review later on today. The Singapore central bank is different from other central banks in that it fixes its monetary policy on the Singapore Dollar on a Trade Weighted basis. The MAS does not reveal the breakdown of this TWI to the public. But it is based on trade with Singapore’s main partners (US, China, Australia, ASEAN). Current MAS policy maintains a zero appreciation for the Singapore Dollar. A global trade war would disrupt on Singapore’s trade-dependent economy and the currency. There is no reason to see the MAS shift policy at present. Immediate resistance lies at 1.3130 and 1.3150. Immediate support can be found at 1.30 70 and then 1.3050. Look to buy dips with a likely range of 1.3070-1.3170.
USD/ZAR – The rand may have been the world’s most volatile major currency over the last year, but traders think that’s going to change as price swings surge in Mexico, Russia and Turkey.
The South African currencies implied, or expected, volatility over the following three months is below that of the peso, ruble and lira for the first time since at least 2005, according to data compiled by Bloomberg. It's a turnaround from just two weeks ago when investors priced the rand's future volatility higher than any of its peers.
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