Euro rose after positive statements from the Governor of the Bank of Austria and reaches the level of 1.2366
Chinese President Xi Jinping reiterated his pledge to open up sectors from auto manufacturing to banking in his keynote speech at the Boao Forum for Asia. Xi’s measured response to avoid an outright trade war saw a return to risk with stocks and commodities the main beneficiaries. The US Dollar was mostly lower with the resource currencies, Aussie, Kiwi and Loonie outperforming. The safe-haven Yen eased, the Russian Rouble fell anew.
The geopolitical events once again saw the equity markets take the lead while the currency moves were pretty consistent. The Euro rallied on the back of ECB Governing Council Member and Bank of Austria Governor Ewald Nowotny’s comments that the ECB would wind down its bond purchasing program by the year’s end.
The New York CRB (Commodity Research Bureau) Index (CRBX) which comprises the price of 19 commodities including Copper, Crude Oil, Nickel, Coffee, and Sugar closed at two months highs, 1.1%. This boosted the Australian, New Zealand and Canadian Dollars up versus the Greenback.
it’s interesting to note that the VIX (Volatility Index) while lower, still closed above the 20.00 level. Volatility in the equities remains elevated which looks set to continue.
While stocks had a decent rebound, yields were be-calmed mostly higher. The yield on the US Ten year bond closed up 2 basis points to 2.80%. Germany’s Ten Year Bund yield closed at 0.51% from 0.50%.
US Headline and Core PPI both beat forecasts while Canada’s Building Permits for March fell more than expected. US indicators continue to outperform.
Tonight sees the release of the all-important US Headline and Core CPI data as well as the latest FOMC Meeting Minutes.
The Dollar has continued to ease following Friday’s lower than expected Payrolls Gain. The CPI data and FOMC Meeting minutes could see this game change.
The Dollar Index (USD/DXY) extended its decline to close just above the next support level of 89.50, at 89.630, down 0.22%. The overnight low of 89.544 should hold today. Further support can be found at 89.30 which was the close on 28 March. Expect more consolidation today with a likely range of 89.55-90.05.
EUR/USD – While Nowotny’s comments lifted the Euro, the ECB Governing Council were clear when they stated that this view was his own and not reflective of the Council. The Bank of Austria Governor Ewald Nowotny is a known hawk and has continually been supportive of the Single Currency. ECB Governor Mario Draghi delivers a speech in Frankfurt at the Euro Student’s Award ceremony. His comments will be closely monitored. In relatively minor data releases yesterday French and Italian Industrial Production data both missed expectations. At the risk of sounding repetitive, Euro area indicators have continued to underperform since last year. And while there has been a reduction of speculative Euro long bets, they remain at multi-year highs. EUR/USD has immediate resistance at 1.2380 (overnight high 1.2377) and 1.2400. Immediate support can be found at 1.2320 and then 1.2280. Look to sell rallies, the air is too thin for the Single Currency up here. Likely range today 1.2300-1.2370. “What goes up must come down”.
AUD/USD – The Aussie has had a decent bounce after looking so soft near the base of 0.7650 this week. The jump in commodities led by Oil and base metals has lifted the Battler. Copper prices closed at monthly highs. The return to risk also buoyed the Aussie following the Chinese leader’s upbeat speech. Today the Aussie gets a test with RBA Governor Philip Lowe delivering a speech in Perth on the Australian and Global economies to the Australian-Israel Chamber of Commerce (GMT 5 am, April 11/Local Time 3 pm, April 11). Today also sees the release of Chinese Annual CPI and PPI data. AUD/USD has immediate resistance at 0.7770/80 (overnight high 0.7768). Strong resistance lies at 0.7800 cents. Immediate support can be found at 0.7730 and then 0.7700. Likely range today 0.7720-0.7780. Look to sell rallies.
USD/JPY – higher as the demand for a safe haven eased. Even with the increased risk aversion, the USD/JPY held its levels well with the base this week formed at 106.40. The Dollar rallied to an overnight high of 107.40 which has also been near the week’s high. The resistance between 107.40/50 is strong and that should hold on the day. Immediate support can be found at 107.00 and then 106.80. Expect the Dollar to consolidate its gains with today’s likely range 106.90-107.50. Look to buy dips.
GBP/USD – also boosted by a weaker US Dollar against Majors and hawkish comments by the BOE’s Ian McCafferty. McCafferty, who was one of two to vote for a rate hike in the latest BOE policy meeting, said that wage growth might prove stronger than most of his colleagues thought. Sterling soared to trade to a high of 1.4188 before settling at 1.4175. GBP/USD has immediate resistance at 1.4190/1.4200. Immediate support can be found at 1.4150 and then 1.4120. UK Manufacturing Production data for March as well as UK Goods Trade Balance are due out later. Sterling finished with a fresh two week high and it’s new found bullishness has seen the speculative community increase its long GBP bets to the biggest since July 2014. Likely range today 1.4120-1.4190. Prefer to sell rallies.
USD/ZAR – The rand is set for a rough ride this week, with concerns over the China/Trump trade tariff dispute and US sanctions against certain Russian oligarchs putting pressure on the currencies of emerging markets, including South Africa.
The local currency opened at R12.09 to the dollar and was trading 0.13% weaker at R12.11 to the greenback at 09:52.
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