The dollar is falling against most currencies and Gold is rising to the 1340 level
The Dollar drifted lower mainly due to a narrowing of interest rate differentials with those of its Rivals. The Aussie, Kiwi and Asian Currencies outperformed as the two Koreas agree to meet and talk peace. South Korea said that its northern neighbor is willing to hold talks with the US on denuclearization.
US Factory Orders in February fell, missing forecasts while Canada’s IVEY PMI beat expectations with a strong rise. The Canadian Dollar reversed losses, climbing 0.8% at the close.
With lots of news coming out of the woodwork (left, right and center) there was no single narrative that saw the Dollar broadly lower. However, in the Ten-year yield space, while that of the US stayed flat at 2.88%, those of its Rivals advanced. The yield on the Ten Year Australian bond rose 7 basis points (2.82%) while that of Germany climbed to 0.67% from 0.64%. Kiwi Ten year yield hit 3% (2.98% yesterday). This was the clincher for me.
The North Korean initiative for peace talks with the South their willingness to talk denuclearization with the US lifted the Asian, Emerging Markets and risk currencies.
Expect more to-ing and froing from traders are more mouths join in the fray. Not to forget the ones who matter, central bank heads. RBA Governor Philip Lowe has just come through the wires and said that it would be helpful to have a lower Aussie although the currency is not broadly overvalued. Lowe also said that the next move in rates is likely to be up, not down. The net effect, AUD/USD is still trading at 0.7823 where it closed as the markets await the Aussie GDP data.
Last night, Dallas Fed President Kaplan said that 3 rate hikes are appropriate and the US is at or near full employment. FOMC members Dudley, Brainard and Bostic are all due to speak later today.
Economic data released today by Australian Q4 GDP, Japanese Leading Indicators and UK Halifax House Prices.The US reports it’s ADP Non-Farms Employment Change.
The Bank of Canada holds its policy meeting with its accompanying statement (GMT 3 pm, March 7/Local Time 2 am, March 8). The BOC is expected to keep its overnight rate at 1.25%.
At the end of the day, it’s interest rate differentials that matter and that’s what drove the Greenback lower.
The Dollar Index (USD/DXY) – reversed its gains, breaking back down through 90.00 to close at 89.603, down 0.44%. The Dollar’s drop was broad-based this time. Immediate resistance lies at 89.80 and then at 90.00. Immediate support can be found at 89.50 which was the overnight low. We would need the Dollar Index to trade back above 90.00 to see the uptrend stay alive. Otherwise, we could be in a range between 89-90. Traders await more central bank policy meets and the US Payrolls Friday.
EUR/USD – rallied on the back of the broadly weaker US Dollar, closing up 0.55% at 1.2408. The Euro shrugged off the Italian election result with traders choosing to focus on the ECB policy meet tomorrow. Overnight, German ten year Bund yield rose 3 basis points to 0.67% while it’s US counterpart was flat at 2.88%. EUR/USD has immediate resistance at 1.2420 (overnight high). Strong resistance can be found at 1.2460. There is immediate support found at 1.2380/90 and then at 1.2330. Looking like we are back in a range again with today’s likely to be 1.2360-1.2460. Look to sell rallies.
AUD/USD – bounced back to life again in true Aussie fashion (like a kangaroo that was kicked on its behind) to close at 0.7825 (0.7760 yesterday). The RBA left rates unchanged but Governor Lowe did say the next move in rates was likely up and not down. The yield on the Ten-year Australian bond advanced 7 basis points to 2.82%. With the US Ten Year yield flat at 2.88% the differential has narrowed to 6 basis points. It was as wide as 16 BP at the end of February. Metals were mostly higher and the initiative of North Korea to talk peace with South Koreas also buoyed the Aussie. Immediate resistance lies at 0.7840/50 and then 0.7880. Immediate support can be found at 0.7800 and 0.7780. Aussie Q4 GDP is forecast to match that of the previous quarter at 0.6%. Anything less than that could see the Aussie drift lower, while a figure of 0.8% or better would see 0.79 cents in the snap of a finger. Likely range 0.7780.-0.7880. JTRS.
USD/JPY – finished little-changed in spite of the move in the other currencies. That’s because the fall in the Dollar in the previous days was much more pronounced than others. Yesterday the VIX Index dropped just over 2 % as risk sentiment improved. The BOJ has its policy meeting this coming Friday. As markets open in Asia, the Dollar takes a dive against the Yen as stock futures plummeted. USD/JPY slumps to 105.55 from its 106.08 close in New York with the action fast and furious once again. Last night, the yield on the Japanese Ten-year yield rose 1 basis point to 0.04%. US 10 year yield was flat. Let’s not ignore this. USD/JPY has immediate support at 105.30 (near yesterday’s lows). Immediate resistance can be found at 105.80 and then at 106.00. Expect a wild ride in this puppy with the likely range today 105.30-106.30. Prefer to buy dips with Japan Inc vigilant at these levels.
GBP/USD – GBP/USD higher, supported by the weaker US Dollar to finish at 1.3895 (1.3830 yesterday). This morning Sterling opens at 1.3902. The European Summit which is likely to bring some conclusion to the trade deal between the EU and the UK has been set for March 22. UK Halifax House Prices are due out tonight with the closely watched Manufacturing Production released on Friday night. Until then expect volatility to resume given all that is happening around the Pound. Immediate resistance lies at 1.3920 and 1.3950. Immediate support can be found at 1.3870 and 1.3830. While the speculative community is long GBP bets, would prefer to sell into any rallies. Likely range today 1.3830-1.3930.
USD/ZAR – The rand strengthened by 8 cents to the dollar on Tuesday morning, after Stats SA announced that SA GDP in 2017 grew at a higher rate than predicted.
The South African economy grew by 1.3% in 2017 compared to 2016, exceeding National Treasury’s expectation of 1% growth announced during the National Budget Speech in February
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