USD Is Giving Up the Latest Gains

The SP500 is in all-time-highs. Nothing to see here, let’s move on.

The Dow Jones is inside a flag formation, close to all new all-time-highs.

Gold is possibly trying to create the right shoulder of the inverted Head and Shoulders patterns, but it may only be wishful thinking.

The EURUSD on the other hand is definitely drawing a right shoulder.

The EURCHF is heading higher and aiming for the upper line of the flag, after a bounce from an ultra-strong support.

The GBPUSD is in bouncing from a crucial horizontal resistance, continuing the negative sentiment.

The EURGBP is inside a falling wedge pattern, a breakout to the upside quite probable.

The EURNZD has continued to drop after a false bullish breakout.

The GBPCHF, on the other hand, is in a fresh false breakout pattern with a great potential for a further huge slide.

For a look at all of today’s economic events, check out our economic calendar.

American Dollar Retaliates

Yesterday’s FOMC brought havoc to the market. The vast majority of the instruments quoted against the USD are going down. Stocks are mixed…with this amount of money on the market that is indeed a great occasion for a correction but definitely not a major sign for a reversal.

The SP500 is still safely above the main uptrend line.

The Dow Jones on the other hand broke the major uptrend line but I do not think it will be permanent.

The DAX is doing great, it’s in a channel up formation above the major support.

Gold dropped like a rock. It’s back inside the flag and the sentiment is negative.

The USDCAD climbed higher with a sweet long-term buy signal.

The EURCHF is fighting for a bullish engulfing on the weekly chart. That is possibly a great occasion to go long.

The AUDUSD broke the lower line of the triangle is aiming lower.

The GBPUSD broke the crucial horizontal support and long-term up trendline, it’s is an invitation to go short.

For a look at all of today’s economic events, check out our economic calendar.

Buyers Do Not Have Enough

Indices are firm in the middle of the week with the SP500 flirting with all-time-highs and the Nasdaq coming back above major supports. Two main indices are slightly behind: the DAX and Nikkei but we cannot say that there is a major bearish situation there. At least not yet.

Gold protected the crucial mid-term up trendline and saved its positive sentiment.

Brent Oil escaped from a few days long consolidation and is aiming for new long-term highs.

The USDCAD consolidated above the strong long-term horizontal support, which may indicate willingness for a breakout.

The ERUCHF keeps dropping but the price is getting closer to the mother of all supports, where the situation can get very interesting.

The EURAUD is in a very clean price action setup, where the price bounces from a combination of two horizontal and one dynamic resistance. As long as we stay below, the sentiment is negative.

For a look at all of today’s economic events, check out our economic calendar.

Dollar Slides to Multi-Month Lows as Fed Rate Hike Fears Fade

By Stephen Culp

U.S. Treasury yields stalled as market participants grew increasingly confident that the Federal Reserve will hold off on hiking interest rates for the time being, despite worrisome near-term inflation spikes.

“We’re seeing this dollar weakness against numerous pairs and the market is starting to believe the Fed that we’re going to have low interest rates a lot longer,” said Edward Moya, senior market analyst at OANDA in New York.

“That’s going to be bearish for the dollar. You’ll eventually see commodity-based currencies outperforming,” Moya added.

A spate of Fed policymakers are expected to speak this week and the U.S. central bank is due to release the minutes from its April policy meeting on Wednesday, which will be parsed for any signs of a shift in its economic outlook and monetary policy.

“Normally everyone gets excited for the Fed minutes, but these minutes are old,” Moya said. “We had a disappointing payrolls report and very hot CPI and PPI that happened after the meeting, most are focused on the raft of (Fed) speakers.”

The dollar index was last down 0.41% at 89.799.

The progress of COVID-19 vaccine deployment and easing of measures to contain the pandemic has lifted higher-risk currencies that stand to benefit most from economic revival.

For an interactive graphic on worldwide vaccine rollout and access, click here https://graphics.reuters.com/world-coronavirus-tracker-and-maps/vaccination-rollout-and-access.

The euro gained 0.51% to $1.2214, passing its highest level since Feb. 25, and the dollar fell 0.24% to 108.935 Japanese yen.

The British pound, buoyed by the lifting of COVID-19 restrictions, rose past the $1.42 level for the first time since Feb. 24. [GBP/]

“What really has helped the pound is reopening momentum and willingness to become vaccinated,” Moya said. “It’s suggesting (the UK) recovery is going to stick. They’re finally getting on the other side of Brexit.”

Rising oil prices supported the Norwegian crown and helped boost the Canadian dollar to a six-year high. [O/R]

Bitcoin edged higher but remained near the three-month low it hit after Tesla Inc boss Elon Musk dampened enthusiasm for the cryptocurrency over the weekend.

Rival digital currency ether jumped 3.62% to $3,404.

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Currency bid prices at 9:47AM (1347 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

89.7990 90.1840 -0.41% -0.202% +90.2040 +89.6890

Euro/Dollar

$1.2214 $1.2152 +0.51% -0.03% +$1.2234 +$1.2153

Dollar/Yen

108.9350 109.1750 -0.24% +5.44% +109.2750 +108.8550

Euro/Yen

133.04 132.73 +0.23% +4.83% +133.1600 +132.7000

Dollar/Swiss

0.8969 0.9033 -0.70% +1.38% +0.9035 +0.8961

Sterling/Dollar

$1.4199 $1.4139 +0.43% +3.94% +$1.4220 +$1.4135

Dollar/Canadian

1.2043 1.2068 -0.19% -5.41% +1.2071 +1.2014

Aussie/Dollar

$0.7795 $0.7770 +0.31% +1.31% +$0.7813 +$0.7765

Euro/Swiss

1.0952 1.0974 -0.20% +1.34% +1.0982 +1.0954

Euro/Sterling

0.8600 0.8593 +0.08% -3.77% +0.8609 +0.8582

NZ

Dollar/Dollar $0.7253 $0.7216 +0.51% +1.00% +$0.7271 +$0.7211

Dollar/Norway

8.1985 8.2570 -0.73% -4.55% +8.2580 +8.1795

Euro/Norway

10.0120 10.0345 -0.22% -4.35% +10.0530 +10.0019

Dollar/Sweden

8.2855 8.3285 -0.01% +1.09% +8.3434 +8.2750

Euro/Sweden

10.1219 10.1225 -0.01% +0.45% +10.1486 +10.1170

(Reporting by Stephen Culp; Additional reporting by Ritvik Carvalho; Editing by Paul Simao)

Sellers on Gold Have Appetite for More

Buyers on Gold struggle to hold above the crucial support on 1765 USD/oz. If broken, the target is on the 1680 USD/oz and in theory, this level looks extremely solid.

Nasdaq finishes the head and shoulders pattern and is ready to break the neckline.

DAX is still fighting on pre-Covid February highs.

EURUSD with a sharp reversal but still with a positive sentiment.

NZDCAD with a potential very dangerous false bullish breakout.

EURCHF corrects the recent surge.

Two safe haven currencies, CHFJPY test the 117.7 again. As long, as we stay below, the sentiment is negative.

For a look at all of today’s economic events, check out our economic calendar.

Did Elon Musk Tweet Anything About the Euro?

Experts say, that fundamentally, many traders are anticipating rates to increases soon. Furthermore, investors are pricing in the swift recovery in the Euro Block nations.

The first instrument is the main currency pair, the EURUSD. Here, we have a beautiful inverse head and shoulders pattern. At the beginning of the week, the price broke the neckline of this pattern and later used that neckline as a support. The upswing from today’s morning, gave the ultimate confirmation and left no doubts about the long-term direction for the pair. In the short-term, we can expect a small bearish correction but in the long-term, the sentiment is definitely positive.

Now the EURCHF, where the pair is so far having one of the best weeks on record. It all started with a breakout from the symmetric triangle pattern and a breakout from the horizontal resistance at 1.087. What happened next is just pure momentum, and stop losses-activation, spiced up by the general weakness of the Swiss Franc. In the short-term some form of a correction can happen but in the long-term, the sentiment is very bullish.

I will finish this with the weekly chart of the EURJPY, where the price is above two major supports. The first one is the broken downtrend line, which was connecting lower highs from 2014 and the second one is at 127, which was respected many times as a support and resistance since 2015. As long as the price stays above those two supports, the long-term sentiment remains positive.

For a look at all of today’s economic events, check out our economic calendar.

Swiss Franc in Troubles

Gold holds above the 1765 USD/oz.

Silver on it’s way to test crucial horizontal resistance.

Nasdaq traditionally with a V-shape reversal.

DAX bounces of previous bull market highs and aims for the ATH.

The EURUSD pushes higher after the breakout of the neckline and the horizontal resistance.

The USDCHF with a long-term buy signal after major bullish breakout.

The EURCHF surges after price broke the key horizontal resistance.

The EURPLN escapes from the rectangle and aims for new mid-term highs.

For a look at all of today’s economic events, check out our economic calendar.

Weekly Round Up – February 21st, 2021

AUD/USD broke its long standing and much written line at 0.7821 and traded 57 pips to 0.7877. Above 0.7821, AUD/USD ranges between 0.7821 to the 10 year average at 0.8305 or 484 pips. Below 0.7821, AUD/USD trades 0.7821 to 0.7308 or 513 pips. Below 0.7821 exists 0.7605.

DXY last week maintained its 148 pip range between 89.95 to 91.43. Above 91.43 next targets 92.78 in a 135 pip range.

GBP as written in the last post maintains deep overbought status across all GBP pairs except GBP/NZD. Watch 1.9136 this week for best moves.

EUR/USD opens in fairly perfect neutrality however ranges continue to compress. Problem pair EUR/JPY and all JPY cross pairs maintain deeply overbought status for week 4. EUR/CAD, EUR/NZD and EUR/AUD open the week massive oversold. EUR/CAD and EUR/AUD will provide the best moves.

Stand clear EUR/CHF as AUD/CHF and NZD/CHF will provide better movements.

NZD/USD 0.7267 then 0.7356 Vs 0.7267 and 0.7990. NZD/CAD is overbought while NZD/JPY heading into week 4 maintains richter scale overbought status.

Overall, NZD/USD traded 200 pips from 0.7100’s to 0.7300’s for the past 2 months and provided support to GBP and AUD to allow both to move higher. Explains the divergence seen in EUR/NZD Vs GBP/NZD this week.

USD/JPY watch 104.97 and USD/CAD 1.2587 Vs 1.2826.

 

 

Dollar Comes Back to the Bearish Territory

Nasdaq is still below dynamic and horizontal resistance

SP500 is on a good way to break crucial levels and go higher

DAX sharply bounces from the 12960 points

Dollar Index ignores the inverse head and shoulders and creates a flag. Situation here is bearish

EURUSD are flirting with important dynamic resistance

GBPUSD are one step from breaking 1,3 – the most important level in the past few weeks

AUDUSD with a small bullish correction but the main sentiment is very negative

EURAUD makes another attempt to escape from the long-term rectangle

EURCHF breaks crucial support and later tests it as a resistance. Pretty standard price action move

Gold tries to go higher but the upper line of the pennant looks well defended

Indices Take a Break. Time for The USD to Shine

After the surge on Monday, Indices are taking a rest.

Nasdaq is creating a small head and shoulders pattern.

SP500 is drawing a wedge pattern.

FTSE is flirting with a crucial dynamic resistance.

EURUSD came back below crucial horizontal support and broke the lower line of the flag.

GBPUSD is back below 1.3.

EURCHF is attacking the lower line of the pennant.

For a look at all of today’s economic events, check out our economic calendar.

Daily Forex Briefing 29/07/2020

In today’s Daily Briefing, we found those amazing setups we thought you’d find interesting!

EUR/PLN bouncing from a crucial support on the 4,4.

Brent with a possible false bearish breakout and an upswing but still below important resistance.

EUR/USD awaits the FOMC inside of a pennant.

USD/JPY is getting ready to test the 106 as a resistance.

EUR/CHF bouncing from the upper line of the flag.

GBP/NZD with a major, long-term buy signal.

EUR/JPY finishing a big inverse head and shoulders pattern.

EUR/NZD with a double bottom formation but still below important resistance.

SP500 drawing a head and shoulders pattern but buyers have an appetite for an upswing.

CAC in a slightly worse position but still fighting on a major up trendline.

For a look at all of today’s economic events, check out our economic calendar.

Trading Sniper: Three Best Setups on the Market Right Now

What counts in trading is the desirable risk to reward ratio and unfortunately buying Gold now does not have the risk/reward ratio that would thrill most traders. In addition to that, the risk of a very deep, bubble-bursting correction is quite significant. Instead of focusing on Gold, for FXEmpire viewers, we exclusively prepared three trading setups, worth looking at right here, right now.

The first one is SP500, which right now is below the crucial horizontal support on the 3235. That should have been a negative sign but I feel somehow optimistic about the future of this index. The reason why is the emerging inverse head and shoulders pattern. We are currently finishing the right shoulder and the neckline of this formation is…yes, you guessed right – 3235. Price closing a day above that resistance will be a buy signal.

A similar pattern can be spotted on DAX.  Here, we also do have an inverse head and shoulders pattern but on this German Index, it is additionally present on a combination of two crucial supports. The first one is the horizontal one on the 12800 and the second is the dynamic up trendline. As long as we stay above them, the sentiment is positive.

I will finish with the EURCHF, where I want to show You two of the best things in technical analysis. The first one is the power of the 38,2% Fibonacci and the second is the power of the false breakout. As You can see, EURCHF was testing the 38,2% many times and it was flawlessly defended as a support. This week, started with a bearish gap and a breakout.

The price reversed very sharply straight away, which left sellers only with the false breakout and losing positions. Once market participants established that the early breakout was fake, they started buying, which resulted in a bullish takeoff. The sentiment on EURCHF is definitely positive.

Tomasz Wisniewski, CEO Axiory Intelligence.

Twitter: https://twitter.com/wisniewskifx

Markets Finding it Difficult to Rebuild Bullish Momentum

Asia Pacific equities were mixed, though, of note, China, Hong Kong, Taiwan, and Indian markets rose. European bourses are down small, and US stocks have turned lower as well. Bond markets firm, though and peripheral bonds are outperforming after the results of the ECB’s TLTRO operation. The US 10-year yield is hovering around 71 bp.

The dollar has a firmer bias. The currency market showed little reaction to the Swiss National Bank and Norway’s Norges Bank leaving policy unchanged, while sterling is around 0.5% lower ahead of the Bank of England meeting outcome. Emerging market currencies are firm.

The South Korean won recouped most of yesterday’s losses, and the Indian rupee and Indian bonds shrugged off Fitch’s decision to cut its outlook to negative from stable (BBB-). Gold has edged up but is flat on the week, and oil prices are recovering from yesterday’s decline. July WTI is near $38.40, putting it up about $2 on the week.

Asia Pacific

There is too much being made of the fact that China did not appeal the WTO decision that it is not automatically a market economy. On procedural grounds, we have to recognize that the appellate process has been eviscerated by the US, blocking the appointment of new judges. On substantive grounds, nothing changes. Europe and the US act as if China is not a market economy, which means it is easier to take anti-dumping action against it.

The US tariffs, mostly still in place under the two-year Phase 1 agreement, seem to make China’s market status a moot point. While Europe has not erected new tariff barriers, it is tightening its direct investment rules, making it more difficult for (Chinese) state-owned businesses. Meanwhile, US officials have indicated they will change their WTO tariff schedule. The real take away is that in the new Cold War will be waged on many fronts, including the multilateral institutions.

Some link the demand for yen that saw the dollar fall to JPY106.70 to approach last week’s lows in early Tokyo to the news that Softbank may repatriate the proceeds from its sale of 2/3 of its holding in T-Mobile (~$20 bln). Separately, the Nikkei reported that the Japanese government may lift its economic assessment that will be issued tomorrow.

Australia’s jobs data was worse than expected. The country lost almost three times more jobs than economists projected. Employment fell by nearly 228k jobs in May. It has lost a revised 607k jobs in April. The unemployment rate was revised to 6.4% in April from 6.2% and rose to 7.1% in May. The participation rate fell to 62.9% from 63.6%. The job losses were concentrated among part-time positions (~-138k), but the 89k loss of full-time positions was greater than the total job loss economists forecast. Separately, New Zealand reported Q1 GDP contracted by 1.6% compared with forecasts of a 1% decline.

It is the seventh session that the dollar has not traded above JPY108, and today it is struggling to sustain upticks above JPY107.00. Below the JPY106.70 session low are the one-month lows set last week a little under JPY106.60. However, stronger support is not seen until closer to JPY106.00. The Australian dollar recovered from the initial selling that took it to about $0.6840.

The week’s low, seen Monday near $0.6775, and the 20-day moving average is around $0.6825 today. Resistance is seen ahead of $0.6925, where a A$530 mln option is set to expire. The PBOC set the dollar’s reference rate a little above the bank models, but the greenback is softer for a third consecutive session. Hong Kong Monetary Authority continues to intervene to support the dollar at the lower end of the band. Still, the smaller amount may be among the first signs that pressure is easing following the recent IPOs.

Europe

The Bank of England is expected to keep its base rate at 10 bp, but increase the amount of bonds it is buying. While two dissents last month favored a GBP100 bln increase, many expect a larger amount to be agreed upon shortly. Note that the earlier this week, the Bank of Japan boosted the zero-rate loans it will make to corporations from JPY75 trillion to JPY110 trillion. The Federal Reserve announced the launching of the Main Street lending facility for small and medium-sized businesses, and its corporate bond-buying program would include individual issues (not just ETFs) according to a new index it created. And then there is the ECB.

The ECB allotted 1.31 trillion euros in its three-year targeted lending program. The three-year loans will be at a rate of minus 100 bp if certain lending targets are achieved. The loans can also be repaid after one year. Banks rolled previous loans into this new generous facility, but there was net new borrowing of 548.5 bln euros, which was a bit more than expected (~400 bln). The ECB’s balance sheet will rise by this net figure.

The Swiss National Bank left its policy rate at minus 75 bp and underscored that its main tool to counter the franc’s strength will be intervention. The euro found support near CHF1.0660, just above the low for the month near CHF1.0650 seen last week. Norway’s Norges Bank also did not change policy and indicated that it anticipated neither asset purchases nor negative rates. However, the forward guidance it provided implies no change in rates for two years. Separately, recall that the central bank sells krone every day. Here in June, it sells NOK2.3 bln a day after NOK2.1 bln a day in May. The krone rallied after the central bank announcement.

The euro is trading in a 15-tick range on either side of $1.1245, where a 640 mln euro option expires today. Another option for a little more than 710 mln euros is struck at $1.1260 and also expires today. The narrowing peripheral bond premium over Germany coincides with a firmer euro. Yesterday’s high was a little below $1.13, and that may be sufficient to cap the single currency today. Sterling is slipping through $1.25 ahead of the outcome of the BOE meeting.

The week’s low was set Monday near $1.2455, but then it was above the 20-day moving average, which now is near $1.25, which is also the (50%) retracement objective of the rally since May 25. The next retracement is near $1.2415, but we suspect sterling will stabilize after the BOE meeting.

America

The US formally announced it was withdrawing from negotiations on efforts to coordinate a digital tax. It is important because it is a front in the US-Europe trade confrontation that is simmering below the surface. It erupted recently as part of the US decision to withdraw troops from Germany. The geopolitical signal was exaggerated. The US troops act as a tripwire, and the precise number is not so important. The importance of the move lies in how it was done (unilaterally) and the reasons (German not respecting its commitment to boost NATO spending, the gas pipeline from Russia, and unspecified German trade practices).

Most countries considering a digital tax are in Europe, but there are a few, including India, which broadened theirs a couple months ago, Indonesia, and Brazil. The US appears to be blocking efforts to coordinate under the OECD. Countries want to tax internet companies based on the sales within their borders and have a minimum global tax to minimize incentives for tax arbitrage.

While Canada and Mexico’s calendars are light, the US reports the June Philadelphia Fed manufacturing survey, which is expected to rise for the second consecutive month, and the weekly jobless claims that will likely continue to decline from still high levels. May’s Index of Leading Economic Indicators is expected to have jumped by around 2.4%. During the session, OPEC will report is compliance assessment, and it should improve now that Iraq seems to be adhering to the agreement. Lastly, we note that as anticipated, Brazil delivered a 75 bp rate cut yesterday and seemed to suggest that there was still room for another small cut. Talks between Argentina and its creditors stalled again.

The US dollar continues to trade within Tuesday’s range against the Canadian dollar (~CAD1.3505-CAD1.3625). The week’s high was set on Monday, near CAD1.3685. The intraday technicals suggest the greenback’s upside may be favored in the early North American activity. Meanwhile, the US dollar is near the middle of this week’s range against the Mexican peso (~MXN21.8950-MXN22.75), and that range is likely to hold.

Lastly, turning to the S&P 500, we note that the gap created by the lower opening a week ago remains unfilled and casts a pall over the market. The gap extends to 3181.50. Also adding to the technical caution is the fact that the five-day moving average has slipped below the 20-day moving average for the first time since early April, illustrating the corrective/consolidative phase it has entered.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Marc Chandler, MarctoMarket.

Three Great Bullish Occasions With the Euro!

Are there still any bears on the market? Will, we will give them some rest and time to reflect on the decisions they made in the past few weeks. In our videos, we warned them many times not to go against the FED. We said that they should not seek for logic or sense out there. Trading these days is crazy and we just have to adjust to the fact that markets and the strict macroeconomic approach are broken.

In today’s analysis, we will focus on the Euro, where traders have been enjoying a flawless upswing.

On the weekly chart the EURJPY created a double bottom formation, which looks very promising for long-term buyers. One long-term down trendline was already broken and currently buyers are aiming for a second one. Before they get there, they’ll have to break the horizontal resistance at the 38,2% level, which has been extremely powerful so far. Powerful enough to initiate a bearish reversal, or at least a small correction.

Next is the EURCAD, where the price is inside a long-term flag formation. It seems like that flag is coming to an end as the price doesn’t want to go lower than 1.505, which is currently a crucial support. As long, as the price stays above this area, the sentiment is positive and traders can think about a great risk to reward ratio.

We’ll end this with the EURCHF, which has been enjoying three great weeks. The price broke two crucial down trendlines and is currently aiming at a strong horizontal resistance, created by two Fibonacci levels: 23,6% and 38,2%. Furthermore, this area is strengthened by 2019 lows, so it seems like a great occasion to take profit action, for some at least.

For a look at all of today’s economic events, check out our economic calendar.

SNB stops CHF’s Growth and Breaks it as an Indicator

In this case, more than 1.2% growth in a day is probably due to the Swiss National Bank, which protects the Franc from strengthening.

The Swiss Franc against the Euro rose by 4.5% since December last year, showing equable growth during the first four months of this year. However, about a month ago, the EURCHF found its bottom in the area just above 1.05. This is slightly below the 2017 low. The last time such levels were observed about five years ago.

There are several reasons behind the appreciation of the Franc to the Euro. The economy of the European region started slowing down right after the first volleys of trade wars. The currency market reacted even earlier, beginning to sell the Euro right after the first Trump threats. In two years, the Euro lost 12.5% to the Franc. The decline accelerated after the ECB started to soften the policy. At the same time, the SNB remained in the same positions, keeping a profoundly negative rate.

Earlier, from September 2011 the SNB introduced a ceiling for EURCHF at 1.20, which was abolished only in January 2015. Back then, this benchmark formed a pattern of behaviour of traders who bought EURCHF, earning on the interest rate difference and having the SNB as an ally on their side.

This story ended tragically for many traders and some brokers when the SNB suddenly gave up this peg. This time it operates without declaring precise support levels, but more and more traders seem to have caught the new pattern.

These SNB interventions also have other consequences. The Swiss Franc is often an indicator of demand for protective assets, showing growth at a time of high uncertainty in the markets. Extension of the Euro against the Franc pushes up the single currency, which in normal conditions corresponds to an increased demand for risks.

Now, this indicator looks broken. The current rebound of EURCHF from 1.0500 to 1.0650 may be due to the favourable market dynamics, as well as purchases of Euro and Dollar for the Franc by the country’s central bank. And it is weakly combined with the period of healthy and free moving markets, causing doubts that the markets have finally turned to growth.

by Alex Kuptsikevich, the FxPro senior market analyst.

The Currency Market Tuned for Positive

Growth in the number of cases on April 27 was the lowest in more than a month. Besides, the number of recoveries is increasing, and the number of patients in critical condition is falling. Australia, which has avoided a significant spread of the disease and many deaths, is beginning to ease restrictions for businesses.

This news spurred demand for risk assets and helped the Australian currency to rise to a 6-week high, recovering three-quarters of its decline from the peak levels of March.

Aussie

The positive dynamics of the Australian currency may be a manifestation of a broader business recovery process in the Asia-Pacific region, which was the first to suffer from the new coronavirus. Also, in 2008 AUDUSD reversed towards growth shortly before the beginning of a broader markets reversal. Then the driver for the Australian dollar was an extensive stimulus program in China. Now there are many smaller programs, but they are supported by softening of credit conditions from the People’s Bank of China. So the experience of 2009 may well apply to the current situation, making AUDUSD an indicator.

Swiss Franc

Elsewhere there is an interesting turn in the European currency market. EURCHF in the previous two weeks found its “bottom” near 1.05. Considering the nature of the movement, it was managed by the Swiss National Bank. SNB may use ceiling for EURCHF in attempt to stop the strengthening of the franc above 5-year highs against the euro. Earlier, on March 9 the USDCHF also turned sharply up from the lower bound of its 5-year trading range.

EURCHF rose yesterday by 0.8% as speculators may act on the SNB side selling the franc along with the markets. However, with tightening credit conditions on the markets, a fundamental stream may push EURCHF down again, forcing the central bank of a small country to protect its economy from an excessive strengthening of the franc.

It is interesting to know how many monetary authorities of other countries will perceive direct interventions at a time when everyone would like to push the competitiveness of their exports through currency depreciation

by Alex Kuptsikevich, the FxPro senior market analyst.

Trading the EUR as Markets Re-Focus on Economics

S&P500 futures now reside 0.8% lower, with June WTI -1.5% and this should weigh on broader Asian equity indices, even if the moves should be less dramatic than opens gone by.

Keep an eye on the ASX 200 as price action is certainly looking less favorable for bullish upside and after a solid run, we’re seeing the daily ranges contract and indecision to push price higher. A rising wedge in the mix for the pattern traders out there, married with a stochastic shift in momentum.

Can the Aussie market lead a potential reversal?

So, one to put on the radar, even if the lead from Wall Street continues to be positive, with the S&P500 closing +2.7% and the Russell 2000 +4.3%. despite a 2% closing decline in June crude.  US equity indices aside, we saw a largely unchanged move across the US Treasury curve, while breakevens (inflation expectations) fell 4bp, resulting in 5- and 10-year ‘real’ yields gaining 4 and 5bp respectively.

Gold was hit hard, with a downside move of 2% and the weekly chart closed with a rather ominous looking candle, with spot -0.3% on open today. One to watch for a kick lower that may resonate with price action traders, even if the fundamentals for gold are solid, and perhaps the Fed announcing it was halving the daily pace of bond-buying to $15b is playing into the move – recall, this is one-fifth of the initial size of Fed asset purchases.

Gold bulls will say $15b is still a huge number and ultimately the Fed’s balance sheet has moved to $6.36t, taking excess reserves to $2.64t and these actions should support gold.

Copper is 0.2% lower on open, after gaining 2.2% on Friday and is another that hasn’t gone unnoticed and the daily shows how ‘The Doc’ is at a very delicate stage in the run. I am compelled to sell this move, especially when you look at the 20-year chart and how price is pushing on the former trend.

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Is copper just following the S&P500 or did the market price in too much bad news for 2020/21?

Personally, I fail to see economics lifting the fortunes of the metal and I know many are looking at 2021 and suggesting better times are ahead. However, we are coming into the eye of the storm and as the market starts to focus less on virus headlines, or at least will be less sensitive to better news, we will focus more on the lasting effects on the economy and solvency. US earnings season should go some way to highlighting this as well.

There is little doubt that last week saw an accelerant in the debate around the disconnect between the financial markets and the real economy. Awful Chinese Q1 GDP, US retail sales, NY manufacturing, and Aussie business and consumer confidence – to name a few – and this week that view will be pushed further with traders eyeing German ZEW, EU consumer confidence, EU PMI’s, weekly US jobless claims and German ifo.

That’s ahead of US ISM and NFP’s on 2 and 8 May respectively, where I am already seeing calls for as many as 28 million job losses in April.

It’s hard not to think this week’s data will be ugly though, and with so much data out of Europe this week, it’s fitting that we also get a Eurozone Head of State meeting (23 April). Expectations for this meeting to be a volatility event are low, with a focus on near-term clues around debt mutualisation. There is also speculation (source: FT) that the ECB is pushing for a so-called bad bank, which would ring-fence the bad loans on the balance sheets of EU banks. Whether this gets much airplay at this meeting is yet to be seen, but with the EU Stoxx bank index at such precarious levels, it is something EUR traders will be keen to watch.

As will be the case for Italian debt, with a new fiscal stimulus expected from the Italian govt, and narrative from the credit rating agencies, with S&P and Moody’s due to review on Friday and 8 May respectively. Few expect a sovereign ratings downgrade at this juncture, but any widening of the BTP-German bund yield spread could weigh on the EUR.

Trading the EUR this week

Trading the EUR will be interesting this week then, especially when taken into context of the debate being had as to where to for the USD. Funding markets aside, you still pay carry to be short the USD and that often gets overlooked.

Options markets often give good insight, and I see EURUSD 1-week risk reversals (1-week call volatility minus 1 week put vol) headed into -0.84. This shows a slight increase in put vol buying, which offers sentiment that traders are seeing modest downside risks. 1-month RR sit at -0.94 and shows a rising belief in downside potential. Spot EURUSD has found sellers into the 20-day MA and the bears need EURUSD to clear 1.0816 for a test of the 1.0766 swing. It’s a tough pair to trade now, and EURCHF is perhaps the cleaner trade – that is, if bearish EU assets.

Certainly, we’re seeing that in risk reversals (white line), where options traders are big relative buyers of EURCHF downside volatility. The moves in spot into the low 1.05 shows the momentum here and options traders are betting on greater downside…the question is whether this is too much of a consensus trade. Price will tell, of course, although I have no position at this stage, but a number of savvy traders have told me they are expecting a bullish reversal this week.

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Chris Weston, Head of Global Research at Pepperstone.

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Why Euro Is So Strong?

A lot of people are wondering why the Euro is surging in the past few weeks. Coronavirus is spreading heavily across the Old Continent and nobody really have a strong plan how to stop it. What is more, many of the leading European companies will be heavy hit by the situation in China, where for example the demand for the new cars absolutely collapsed. And what is Euro doing here? Climbing to the highest levels since July.

Sometimes movements on the market does not really have an explanation. It is foolish to assume that every market movement needs to have a reason. Sometimes it is a combination of various factors. In the media, the recent strength of the EURUSD is contributed to the few factors.

First one, it is a weakness of the USD itself. FED cut rates and traders are expecting that it will cut those rates even further in the nearest future. On the other hand, ECB is doing nothing, saying that the stimulus to fight the virus should be fiscal, not a monetary one.

What is more, some traders are saying that it comes from the fact that investors from Wall Street are taking profits, selling stocks and in the same time, planning to move part of their capital outside of the US.

In addition to this, some experts say that rising Euro has to do with the reverse of the carry trades. During happy times, traders often engage in the carry trades, so buying currencies with higher rates (usually EM currencies) and selling those with lower rates (Euro in this case). Now, in times of uncertainty, traders want their money back and they are simply closing those trades, so in consequence, buying back the Euro. Good example of this can be seen on the Euro with Mexican Peso.

Furthermore, I would add a technical reason here. This week, EURUSD managed to break two major, long-term down trendlines, which definitely triggered some pending orders, accelerating the original movement.

On the other hand, Euro did not become a safe haven asset overnight. Some part of the movement can be contributed to the escape towards liquidity but Euro did not replace the Swiss Franc or Yen. At least for now and this can be clearly seen on the EURJPY and EURCHF charts, which are still close to the long-term lows.

Not all Safe Havens Equal Amid Coronavirus Outbreak

Gold has certainly lived up to its billing as a safe haven asset, testing the $1690 resistance level after having surged to levels not seen since Q1 2013. At the time of writing, Gold has advanced by about eight percent so far this year.

Bullion bulls have only gotten more tenacious over the past week, as the coronavirus’ spread outside of China prompts market jitters about the duration and global footprint of this outbreak.

Ultimately, market participants would want to know how much the coronavirus would impact global economic growth. Until the spread of the coronavirus is contained, investors are likely to continue seeking shelter in Gold until the Covid-19 storm clouds disperse.

Coronavirus-related concerns to keep EURCHF’s downward trend intact

Covid-19 has given the Swiss Franc yet another reason to strengthen against the Euro, with EURCHF finding a floor around the 1.06 long-term support level for the time being. Serving as a barometer of risk sentiment on the continent, the currency pair has weakened by over two percent so far in 2020. The Franc also boasts of a year-to-date advance against all G10 currencies except for the US Dollar.

With the China-dependent EU economy struggling to overcome these global challenges, it is unlikely that the Euro can stage a meaningful rebound against the safe haven CHF, which suggests that EURCHF is expected to remain suppressed over the near-term.

Covid-19 erodes Yen’s safe haven status

However, Covid-19’s spread in Japan has eroded the Yen’s status as a safe haven asset, with JPY having weakened against all G10 and Asian currencies so far in February, except for the Malaysian Ringgit. Although USDJPY has moderated since breaching the psychological 1.12 level, the pair is still trading around levels not seen since May 2019.

With the number of confirmed cases in Japan now exceeding 130, the coronavirus is compounding Japan’s economic outlook. Investors will closely scrutinize Japan’s latest data on inflation, industrial production, jobs, and retail sales, all due this Friday, and set usd/jpythem against the latest domestic developments around Covid-19, in determining the Yen’s next move.

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Written on 02/25/20 08:00 GMT by Han Tan, Market Analyst at FXTM


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Not All Safe Havens Equal Amid Coronavirus Outbreak

Gold has certainly lived up to its billing as a place of refuge, surging to levels not seen since Q1 2013 and is now testing the $1660 resistance level. Using the price action from 2012-2013 as reference, another leg up may bring the $1690 region into focus.

Bullion bulls have only gotten more tenacious since last week, as the coronavirus’ spread outside of China prompts market jitters about the duration and global footprint of this outbreak. Ultimately, market participants would want to know how much the coronavirus would impact global economic growth.

As things stand, Gold is on course for five consecutive days of gains, having climbed over nine percent so far this year. Until the spread of the coronavirus is contained, investors are likely to continue seeking shelter in Gold until the Covid-19 storm clouds disperse.

Coronavirus-related concerns to keep EURCHF’s downward trend intact

Covid-19 has given the Swiss Franc yet another reason to strengthen against the Euro, with EURCHF now testing the 1.06 psychological mark. Serving as a barometer of risk sentiment on the continent, the currency pair has weakened by some 2.3 percent so far in 2020. The Franc also boasts of a year-to-date advance against all G10 currencies except for the US Dollar.

With the China-dependent EU economy struggling to overcome these global uncertainties, it is unlikely that the Euro can stage a meaningful rebound against the safe haven CHF over the near-term.

Covid-19 erodes Yen’s safe haven status

Covid-19’s spread in Japan has upended the Yen’s status as a safe haven asset, with JPY having weakened against all Asian currencies so far in February, except for the Malaysian Ringgit. Although USDJPY has moderated since breaching the psychological 1.12 level, the Yen is still trading around its weakest levels against the US Dollar since May 2019.

With the number of confirmed cases in Japan now exceeding 130, the coronavirus is compounding Japan’s economic outlook. Investors will closely scrutinize Japan’s latest data on inflation, industrial production, jobs, and retail sales, all due this Friday (Feb 28), and set them against the latest domestic developments around Covid-19, in determining the Yen’s next moves.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.