The Dow Jones is sliding to levels close to the support points and Gold is rising to 1344 level
Wall Street kicked-off Q2 by dumping stocks in low volume, holiday-thinned markets. Retaliatory tariffs by China and renewed criticism by Donald Trump on the online retailer Amazon saw the S&P 500 slump 2%. With most of Australasia and Europe closed, currencies were tamer. The Yen rallied 0.6% as the risk-off theme extended while the Dollar Index (USD/DXY) finished flat.
While the Dollar Index (USD/DXY) finished flat, it lost 2.1% in the first three months of the year. Against the Euro, the Greenback has dropped almost 3%, down 1.2% in March. The slide in equities and the risk-off theme that followed saw the USD/JPY fall almost 6% in Q1 in spite of a 0.5% gain in March.
The Dollar has managed to hold its levels in spite of the stock sell-off. This week it’s back to basics. The US Payrolls data on Friday should determine the path for future rate increases. Today, the RBA has its policy meeting and rate statement.
The media exaggerated China’s “retaliatory” tariffs which saw the already shaky equities slide in thin volume markets. Currencies took the news more in stride and were relatively calm.
Wall Street’s sell-off did little to treasuries and yields were little changed. The yield on the US Ten Year was off 1 basis point to 2.73%.
The Dollar gained versus the Euro, Aussie, Kiwi and most Emerging Market Currencies. The Yen, Sterling, and Canadian Dollar were higher against the Greenback.
The Euro is neither a safe-haven (JPY, CHF) or export-oriented currency (AUD, CAD, MXN, NZD). It will be key in determining the next Dollar move.Euro-area economic data has under-performed and speculative market positioning remains at multi-year highs.
The RBA is expected to keep it’s cash rate unchanged at 1.5% at its policy meeting today. Expect RBA officials to remain optimistic on the global and domestic economic outlook. Germany releases Retail Sales data for March. The UK has its March Manufacturing PMI’s released.
The Dollar Index (USD/DXY) closed virtually flat at 90.039 (90.073). Overnight traded high for the Dollar Index was 90.154. Immediate resistance lies at the 90.20/30 level. Immediate support can be found at 89.80/90 (overnight low was 89.822). For today, 89.80-90.20 should cover it.
EUR/USD – The EUR/USD slip sliding away, The Euro slipped 0.15% to 1.2302 in New York. EUR/USD traded to an overnight high of 1.2345. Immediate resistance lies at 1.2325 and then 1.2345. The 1.2360/80 level remains strong and should cap any rallies. Immediate support lies at 1.2280 (overnight low was 1.22817). A break of 1.2280 should see 1.2250 initially. Euro area data continues to under-perform and the speculative community is long of Euro bets near multi-year highs. Look to sell any rallies with today’s likely range 1.2280-1.2330.
USD/JPY – After Thursday’s Japan fiscal year-end fix saw a spike in the Dollar, we’re now back at familiar levels. USD/JPY traded to an overnight high of 106.449 before slipping into thin markets to close just under 106.00. The overnight low traded was 105.66. The risk-off theme should keep the USD/JPY under pressure but expect these lower levels to hold. Yesterday, Japan’s Tankan Manufacturing and non-manufacturing Index’s both missed expectations. The recent document-tampering scandal involving PM Abe’s government saw concern expressed by over half a dozen local governments. USD/JPY has immediate support at 105.80 and 105.65. Further support can be found at 105.30/40. Immediate resistance lies at 106.20 and then 106.40. Likely range today 105.60-106.60. Prefer to buy USD dips
AUD/USD – The Aussie managed to hold its ground, consolidating within a 0.7650-0.7695 range. Metals were mixed. Precious metals rose while base metals were mixed. Much of the Aussie’s support comes from a lackluster US Dollar. The RBA is not expected to change its cash rate of 1.5% at its policy meeting today. Market’s will focus on the Statement following the meeting particularly in the light of recent global events. Immediate support for the Aussie can be found at 0.7640/50. A break of 0.7640 could see 0.7610 and eventually 0.7550. Immediate resistance can be found at 0.7690/0.7700. Likely range today 0.7640-0.7710. Prefer to sell rallies.
GBP/USD – pretty much side-lined, although Sterling managed to gain versus the Greenback. The British Pound closed at 1.4045, up 0.2% (1.4025 Friday). GBP/USD held above the 1.4000 psychological level and traded to an overnight high of 1.40776. Immediate resistance lies at 1.4070/80. The resistance at 1.4100 is strong. UK Manufacturing PMI data is due out tonight. While substantial progress has been made on Brexit negotiations in recent weeks, both sides have made it clear that nothing is agreed until everything is agreed. Likely range today 1.4010-1.4090. Look to sell rallies.
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