There has been a tailwind to risk-assets due to upbeat sentiment surrounding U.S-China trade talks, this has taken the safe-haven bid from the dollar, lifting its pairs, write Bill Baruch, president of Blue Line Futures.
Euro (March)
Session close: Settled at 1.13655, up 43.5 ticks
Fundamentals: The Euro finished higher yesterday and more than a penny from Friday’s reversal low. There has been a tailwind to risk-assets due to upbeat sentiment surrounding U.S-China trade talks. On the currency front, this has taken the safe-haven bid from the dollar, lifting its pairs. Soft data from the United States helped to pull the U.S. Dollar Index from the highest level in two months despite dovish ECB talk. The British pound gained significant ground today on Brexit optimism while jobs data was unenthusiastic. Also bringing a bid to the euro was German and Eurozone ZEW Sentiment continuing to work their way out of the gutter. The minutes from the Federal Reserve’s latest meeting is due at 1:00 pm today. Fed officials have been trying to find a middle ground, pointing to the potential need to hike this year while saying the balance sheet should be run-off if the economy allows.
Technicals: Friday’s low of 1.1261 was defended by the bulls and brought a breath of fresh air into settlement for the euro. Although this reversal did not even register a penny on that day, the significance is due to holding the Nov. 12 low of 1.1245, which happens to be our major three-star support and a level that we said the euro would be vulnerable to trade down to upon a close below 1.13375-1.1353.
Japanese yen (JYH)
Session close: Settled at .90555, down 17.5 ticks
Fundamentals: Today, the Yen was the only major currency in the red against a broadly weaker U.S Dollar. Risk-on exuberance has been a headwind for the currency but fresh comments from the Bank of Japan certainly did not do it any favors. BoJ Governor Kuroda said the central bank is ready to add stimulus if the strengthening Yen proves to hinder potential growth or their 2% inflation target. Tonight, we look to Trade Balance data from Japan at 5:50 pm CT. Tomorrow’s FOMC Minutes bring an interesting caveat for the Yen; a surprisingly hawkish tone would strengthen the Dollar but likely do more harm to risk-assets thus supporting the Yen or a surprisingly dovish tone would weaken the Dollar and lift the Yen. Ironically, the currency also finds itself at a technical crossroads, see below.
Australian dollar (ADH)
Session close: Settled at .7172, up 29 ticks
Fundamentals: The Aussie traded higher in a broadly healthy risk-environment. Equity markets and energies have had a strong move over recent sessions but the metals both precious and base have traded extraordinarily strong. While the Aussie is a commodity currency and this has been supportive, the U.S. dollar’s weakness has also acted as direct support. Especially considering that that weakness is due to upbeat sentiment on trade talks between the U.S and Australia’s number one trade partner China.
Canadian (CDH)
Session close: Settled at .75735, up 22 ticks
Fundamentals: The Canadian gained ground again in what has been a constructive 2019. Positive sentiment around U.S and China trade talks along with strength in many commodity sectors has kept a bid under the currency. One key component here when compared to the Aussie is that the Bank of Canada has over recent years shown the willingness to raise rates, whereas the RBA has taken a dovish turn. The one thing traders must keep an eye on though is the inconsistent data out of Canada, this has been the ongoing case and last week’s Manufacturing Sales and Foreign Securities Purchases both missed. For now, and especially heading into tomorrow, the U.S Dollar will remain the driving force.
