The dollar is fluctuating after the policy of chaos in the White House and gold settles above the 1320 level
The Dollar ended mixed, up against the Euro, down against the Yen and Aussie. Risk aversion rose due to trade war worries, a chaotic White House policy and tepid inflation data. Treasuries rose, global yields eased with the benchmark US Ten year down 3 basis points. US Retail Sales fell for the third consecutive time.
ECB Head Mario.
Drahi stressed the negative risks from trade tariffs while reiterating a gradual path for inflation and policy.
Outlook: While the Core Retail Sales missed expectations Producer Prices rose slightly higher than
the market expected. The Dollar Index (USD/DXY) ended flat at 89.784 (89.743 yesterday). The fall in the US Ten Year yield (3 bps) was matched by lower global yields. Germany’s Ten Year Bund yield was down 2 basis points to 0.59%. The yield on Australia’s Ten Year bond dropped to 2.73% from 2.80%.
President Trump named Larry Kudlow, economist and CNBC contributor as his top economic adviser. Kudlow, a known Trump loyalist, openly advocates free trade and growth although he does see the justification in targeting specific countries.
While the risk aversion theme lifted some currencies higher, there was no real uniformity in the net movements. While the Yen rallied against the Dollar, the Aussie, normally a risk currency also rose. Chinese data released yesterday beat expectations and this provided some support. Metals prices stabilized. Australian bond yields pushed lower though.
USD/JPY fell to 106.25 from 106.50 yesterday. Sterling was little-changed, finishing at 1.3968 (1.3963).
Draghi retained his dovish tone on policy. Draghi also said that “Euro strength could weigh on inflation down the line”.
Economic data and events today:
New Zealand’s Q4 GDP released just a few minutes ago missed expectations (0.6% from 0.8%). The Kiwi dropped 30 points, from 0.7335 to 0.7305. NZD/USD current sits at 0.7315.
The Swiss National Bank has their Interest Rate Decision and Monetary Policy Assessment. The SNB will likely keep their Libor Rate unchanged at -0.75%. (GMT 8.30 am, Mar 15/Local Time 7.30 pm, Mar 15). The US sees their Empire State and Philly Fed Manufacturing PMI’s as well as the latest Jobless Claims (GMT 12.30 pm, Mar 15/Local Time 11.30 pm, Mar 15).
USD/DXY – The Dollar Index traded in a relatively narrow range between 89.561 and 89.891. Immediate resistance can be found at 89.90 and 90.10. USD/DXY has immediate support at 89.60 and then 89.40. With the Euro taking almost 60% of its weight, expect the Dollar Index to grind higher with today’s likely range 89.70-90.10.
EUR/USD – Draghi and his colleagues are telling the markets “Read my lips”. Given his comments yesterday, the line in the sand for Mario is around the 1.2500 area. The speculative market community continues to persist with long Euro bets. While the latest CFTC/Reuters report saw a paring of the longs, they remain at multi-year highs. EUR/USD has immediate resistance at 1.2400 and then at 1.2415. Immediate support lies at 1.2350 and 1.2330 (overnight low was 1.2347). In Euro area data yesterday, the final read on German CPI was flat (0.5%), Euro Zone Industrial Production fell lower than forecast. If not short, gotta be a seller on any rallies with today’s likely range 1.2320-1.2390.
USD/JPY – Grinded itself lower to finish down 0.26% as risk aversion rose and the US Ten Year yield eased. The yield on Japan’s Ten-year JGB was flat at 0.04%. The Dollar-Yen has immediate support at 106.10 (overnight low 106.06). The next support level is at 105.90. Immediate resistance can be found at 106.40 and then 106.70 (overnight high 106.747). We can expect Japanese officialdom (Japan Inc) to stay vigilant on the Japanese currency particularly if we fall back toward 105. Verbal opposition to any further Yen strength will appear if we get back to 105. The Japanese March financial year end sees strong repatriation flows which have also kept a lid on USD/JPY. That said, much of those flows are normally done by the middle of the month. There has been little talk too of Japanese importers (who are natural purchasers of Dollars). Their interest would certainly be around current levels. Likely range today 106.10-107.10. Prefer to buy dips.
AUD /USD – Upbeat Chinese Industrial Production, and Fixed Asset Investment lifted the Aussie to trade above 0.79 cents briefly (overnight high 0.79164). AUD/USD drifted lower to close at 0.7883 in NY, up 0.27% from 0.7845 yesterday. Base metal prices stabilized, finishing a touch higher. A souring of risk sentiment failed to weigh on the Aussie. While global yields were lower, the gap between the US and Australian Ten year yields doubled to 8 basis points from 4 bps. This will keep the Aussie’s topside capped at the 0.7900/20 area which is immediate resistance for today. Immediate support lies at 0.7850 and then 0.7820. Look to sell rallies with today’s likely range 0.7830-0.7900.
GBP/USD – closed virtually flat at 1.3968 (1.3964 yesterday). Sterling traded to an overnight high of 1.39957. Strong resistance lies at the 1.4000 psychological level. Immediate resistance lies at 1.3980. The Pound has immediate support at 1.3940 and then at 1.3925 (overnight low). The current UK Russian crises over the gassing of a former Soviet spy had no effect on Sterling… so far. The UK expelled 23 Russian diplomats as a result. The speculative community remains long of Sterling bets and Brexit will continue to constrain the Pound’s topside. Likely range today 1.3920-1.4000.
USD/ ZAR: The rand continued to trade marginally stronger against the dollar on Wednesday, after firming 0.25% against the greenback on Tuesday.
At 12:00 the rand was trading 0.37% stronger at R11.77/$ after firming to an intraday low of R11.73/$ earlier in the session. It had opened at R11.81.
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