The dollar is rising against the currencies awaiting the non-farm payrolls report on Friday
The Dollar rose against the Yen, fell against the Canadian Loonie and Resource currencies. Wall Street rebounded, the Dow gained back .56%. Treasuries slipped, yields climbed back to their pre-holiday levels. The yield on the benchmark US Ten Year bond was up 5 basis points to 2.78%.
The first full trading day of the month and quarter following the long holiday saw trading volumes and conditions normalise.
China announced tariffs of its own on US$ 3 billion on selected US imports which saw risk aversion soar and the Greenback fall yesterday. Déjà vu, it was shrugged off. Markets will keep a wary eye out on further trade drama between China and the US. Trade isn’t the only game in town, rates matter.
The Dollar Index (USD/DXY) managed to hold its gains and put in a mild rally to close 0.18% higher at 90.18 (90.04 yesterday). Some analysts believe that US protectionist measures mask the Trump administration’s preference for a weaker Greenback.
While this may be so, interest rates and policy divergence matter. Yesterday, the yield on the US Ten-year bond rose to 2.78% from 2.73% yesterday, it’s highest in a week.
Market positioning also matters. The speculative community has kept their US Dollar short bets at multi-year highs against most of the major currencies. This cannot last forever.
US Payrolls are up next and a strong number will ignite speculation for 3 more rate hikes this year.
Last night, FOMC Board member Lael Brainard, a note “dove” said that gradual rate increases are appropriate. Federal Reserve President Jerome Powell is due to speak following the release of the US Payrolls.
The Dollar Index (USD/DXY) finished with mild gains to close at 90.18 (90.04 yesterday). Most of those gains were in the Euro which slipped 0.2% to 1.2270. The Dollar Index traded to a low of 89.849 last night, which remains strong support. Immediate support lies at 90.00. Overnight high traded was 90.275. This puts the immediate resistance at 90.30 with strong resistance at 90.50/60. Likely trading range today for the USD/DXY is 90.00/40, look to buy dips.
USD/JPY – “I wanna take you higher”… The rise in the US Ten year bond yield and improvement in risk sentiment lifted the Dollar 0.71% against the Yen. Meantime Japan’s Ten-year JGB yield fell 2 basis points to 0.02%. Overnight, the Dollar slipped to a low of 105.692 in early Asia before settling just above 106.00. In overnight trade, USD/JPY rose to a high of 106.66, settling currently at 106.51.
USD/JPY – The USD/JPY has immediate resistance at 106.70/80 and then 107.10. Immediate support can be found at 106.40 and 106.10. Look to buy dips with today’s likely trading range 106.20-106.90.
EUR/USD – lost ground against an overall stronger Dollar, closing at 1.2270, of 0.2%. Euro-area manufacturing PMI data was mostly lower yesterday. The yield on the German Ten Year Bund was up one basis point to 0.50%. The Euro traded to an overnight high of 1.23356. The 1.2330/40 level now becomes a strong resistance level. Immediate resistance can be found at 1.2300. Overnight EUR/USD traded to a low of 1.22536. This is where immediate support lies, 1.2250/60. Strong support can be found at 1.2230. Euro Zone inflation numbers are due out later with an improvement expected in both Core and Headline numbers. Look to sell into any rallies with today’s likely range 1.2240-1.2310.
AUD/USD – The RBA left its Official Cash Rate unchanged at 1.5% at its policy meeting yesterday. In its statement, the RBA gave heed to the US trade policy uncertainty while further progress toward its jobless and inflation objectives remain intact. The Aussie held its ground against the Greenback on the improved risk sentiment and the overall rise in resources (gold, grains, oil, copper). AUD/USD traded to an overnight low of 0.7652 before settling to close 0.4% up at 0.7685. Overnight high traded was 0.7707. AUD/USD has immediate resistance at 0.7700/10. Immediate support can be found at 0.7650. Any sustained US Dollar strength could see the Aussie head back to 0.75 cents. For now, consolidation should keep it within a 0.7650-0.7700 trading range. An improvement in Australian Retail Sales for March is expected in its release today. Prefer to sell rallies above 0.77 cents.
USD/CAD – the Canadian Dollar (“Loonie”) outperformed, lifted by NAFTA hopes, higher oil prices, and a return to risk-on. Bloomberg reported that US President Trump was looking to reach a deal on NAFTA in two weeks. USD/CAD slumped to a one month low of 1.2781 overnight before settling at 1.2803 at the New York close. Canada’s Ten-Year bond yield rose 3 basis points to 2.14%. USD/CAD has immediate support at 1.2780/90. The next support level can be found at 1.2760 which is strong. Immediate resistance lies at 1.2840 and then 1.2860. Canada has its own Employment data on Friday released at the same time as the US Payrolls. “Live by the sword, die by the sword”. USD/CAD is susceptible to any headline news on NAFTA. At the end of the day, the Loonie will be driven by the Greenback. Likely range today 1.2780-1.2880. Prefer to buy dips.
USD/ZAR – The rand (USD/ZAR) opened at R11.85 to the dollar on Tuesday following the Easter break, with analysts saying it remains vulnerable to global events, including the trade war between the US and China and the release of US economic data on Friday.
The currency was trading at R11.81 to the greenback by 10:15 and weakened to R11.85 against the greenback by 11:30.
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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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