The dollar is weakening slightly ahead FOMC tomorrow and Pound is rising after news of a European deal
The Dollar eased against the Majors as traders adjusted positions ahead of the FOMC’s policy meeting where they are widely expected to raise interest rates. Sterling soared on reports that the EU and Britain agreed to a post-Brexit transition deal. Technology stocks slumped, leading global equities lower as social media giant Facebook faces regulatory scrutiny. Trade fears kept risk aversion elevated. The VIX (Volatility Index) jumped to close up 20.3%.
The British Pound was the top performer, soaring 0.73% to 1.4035 (1.3945) as the European Union and Britain agreed to a 21-month transition period (end 2020). This cleared the way for both sides to focus on their trade relationship after Britain leaves the EU next year.
The Euro rallied to 1.2343 (1.2289) following a Reuters story saying that all ECB officials agree to end bond purchases this year.
While the Dollar Index (USD/DXY) slid 0.3%, it’s fall was not broad-based. The Dollar rose against the Emerging Market currencies which are susceptible to higher US rates and the latest trade tariffs.
The Greenback has been weighed by twin deficits, US trade tariffs, White House politics and Wall Street falls. The negative Dollar sentiment is clearly seen in the market’s positioning. The latest CFTC/Reuters report saw net total speculative short Dollar bets climb to 5-month highs.
In the midst of the stock sell-off global yields were steady. The yield on the US Ten Year bond climbed one basis point to 2.85%. The two-year US bond yield climbed 2 basis points to 2.31%. Germany’s Ten-Year Bund yield was unchanged at 0.57%.
While the verdict on the Dollar is still out there… Market positioning and interest rate differentials matter.
Economic data and events today include: The RBA releases the minutes of its last policy meeting which was in February. Australian House Price Index is also released with a small gain forecast. The UK sees the release of its annual CPI which is forecast to slip from the previous read. Germany releases its ZEW Economic Sentiment Index.
The Dollar Index – (USD/DXY) lost ground to close down 0.3% at 89.878 from 90.186 yesterday. The Euro and Sterling combined take up 69.5% of the weight in the Index. The Japanese Yen’s weight is 13.6%. The Dollar Index traded to a high of 90.345 before falling as both the Euro and the Pound rallied. USD/DXY has immediate resistance at 90.00 and then 90.15. Immediate support can be found at 89.70 (overnight low 89.76) and then at 89.50. Likely range today 89.75-90.05.
EUR/USD – rallied off its lows to a high of 1.23587 before settling to close at 1.2336 where it sits in early Sydney. The Reuters report that all ECB officials are in agreement that bond purchases will end this year fueled speculation that they will raise rates sooner than some expected. German yields did not move on the report. EUR/USD has immediate resistance at 1.2360 and then at 1.2390. Immediate support lies at 1.2330 and then at 1.2310Likely range 1.2290-1.2360. Sell rallies.
GBP/USD – The Pound outperformed jumping through the 1.40 barrier after languishing between 1.37-1.39 for almost a month now. Sterling soared on the Brexit transition deal agreement which paves the way for the important post trade negotiations. The BOE is also expected to lay the ground for a May rate increase in their policy meeting later this week (Thursday). GBP/USD has immediate resistance at 1.4060 and then at 1.4090 (overnight high 1.4088). Currently, it sits at 1.4035. Immediate support can be found at 1.4010 and then 1.3980. Likely range today 1.4010-1.4090.
AUD/USD – looked down and out at the 0.77 cent level until the US Dollar weakness came to the rescue. AUD/USD traded to a low of 0.76867 before rallying 0.05% to close at 0.7720 in New York. The Aussie is also a proxy for some of the Asian Emerging Market currencies and any weakness in those puppies will drag the Aussie along with it. Which is why it has failed to rally further in spite of the gains in Sterling and the Euro. That said, the Aussie always looks most offered near its base and most bid near its peak. Market positioning is pretty flat. AUD/USD has immediate support at 0.7695 and then at 0.7685. Immediate resistance lies at 0.7730 (overnight high 0.77247) and then 0.7750. Likely range today 0.7690-0.7740. Prefer to buy dips on this one.
USD/JPY – closed little-changed at 106.10. While risk aversion remained high and stocks plummeted, the USD/JPY was pretty steady. Japanese rates were steady with the Ten Year JGB yield unchanged at 0.03%. Overnight low for the USD/JPY was at 105.677. The support at 105.60/70 is strong and that should hold well. Immediate support can be found at 106.00 and 105.80. Immediate resistance lies at 106.30 and 106.50. Likely range 105.70-106.50. Look to buy dips.
USD/ ZAR: About the USD/ZAR, the rand started out the week on the back foot against the dollar, trading above R12 to the greenback.
At 10:10, the local currency was trading at R12.04 against the dollar, after opening at 11.97/$.
Now is your chance to make a profit!
Open an account here!
***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.
HIGH RISK WARNING:
Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.
© Copyright 2015 – CM Trading – All rights reserved