Forexlive Americas FX news wrap: Dollar moves down and then up after ECB/Fed Minutes
Forex news for NY trading on Apirl 10, 2019.
- US stocks indices close higher. Dow hurt by Boeing/Unitedhealth
- UK May presser post EU Summit may moved forward a little. EU set to 9-12 month Brexit extension
- EU diplomats see a six-month Brexit extension coming together
- EU sense from meeting is that May open to long extension so long as it can be terminated early
- FOMC Minutes: Majority of policymakers said patience needed
- US auctions US$24 billion of 10 year notes at 2.466%
- ECB officials agree that the growth slowdown has not worsened
- Barnier: Any Brexit extension has to serve a purpose
- European share end the day with gains
- US EIA weekly oil inventories +7029 vs +2500K expected
- Draghi Q&A: It's too early to decide on tiered negative rates
- Draghi: Risks to the eurozone still tilted to the downside
- US March CPI +1.9% vs +1.8% expected
- Australia to call Federal election on Thursday - report
- The AUD is the strongest. The JPY is the weakest as NA traders enter
- ECB offers nothing new in latest meeting statement, all eyes on Draghi now
- ECB leaves key rates unchanged in April meeting as expected
- Gold futures (June) is up $3.65 at $1312.05.
- WTI crude oil is up $0.46 or 0.72% at $64.44
In the US stock market today, the major indices closed higher
- Dow rose 6.58 points or 0.03% at 26157.16
- S&P rose 10.01 points or 0.35% at 2888.21
- Nasdaq rose 54.96 points or 0.69% at 7964.24
The European shares are ending the day with gains. However, the changes are varied.
- German DAX, +0.51%
- France's CAC, +0.26%
- UK's FTSE, unchanged
- Spain's Ibex, +0.04%
- Portugal's PSI 20, +0.94%
- Italy's FTSE MIB, unchanged
IN the US debt market today:
- 2 year 2.321%
- 5 year 2.272%
- 10 year 2.465%
The US treasury auctioned $24B of 10 year notes at a high yield of 2.466%. The bid to cover was decent at 2.55x - above the 6 month average of 2.46x. The yield was the lowest since December 2017. Good auction at low rates is an indication of good demand.
From a fundamental standpoint, the US CPI came in a little higher on the headline but a little lower on the core reading. Headline CPI came in at 1.9% vs 1.8% expected. Core was 2.0% vs 2.1% expected. Although near the 2% Fed target, the Fed has made it clear, that they are more concerned that inflation is not picking up more as a result of the strong labor conditions.
ECB kept rates unchanged and Draghi was more dovish in his press conference. He did not give any hints at tiering or a TLTRO plan but he did say "We are ready to use all instruments. ALL instruments." That it's an exceedingly dovish hint, and perhaps even borders on the edge of negative rates.
The EURUSD moved lower moved lower and cracked below the 1.12543 level which was the high from last week and acted as a floor on Tuesday and again today (before being broken). The fall in the EURUSD took the pair to the 200 hour MA area at 1.1232 and a trend line at 1.1230 (low reached 1.1229), but once the presser was over, the pair started to see some short covering. The break back above the aforementioned swing level at 1.12543 led to even more covering. The high price reached 1.1278 at the NY afternoon peak.
Helping the dollar recovery was the FOMC meeting minutes which were perhaps not as dovish as thought. The key passage read:
"Several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments. Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year."
The expectations for rates at the end of the year has shifted toward the potential for an ease. This comment took some of the wind out of those sails, although it will not please Pres. Trump and Co who would rather see the Fed cut rates (by 50 bps). The game goes on.
In other pairs today:
- The GBPUSD traded up and down and up and down again. What is key on the topside is there is a key swing area at 1.3115-21. We are trading down at 1.3080 now, but if the price of the pair does go higher on pricing out a no-Brexit end game, breaking that level should solicit stops
- The USDJPY moved below the 100 day MA at 110.937 to a low of 110.83 before recovering into the close. The high off the low could only get to 111.00 which is the 38.2% of the move up from the March 25 low. If the pair is see more dollar buying (go higher) get above that 111.00 level will be eyed. If it cannot, and the pair starts to trade below the 100 day MA, the sellers could take the pair to test the 50% at 110.757. The 61.8% is at 110.51.
- For the AUDUSD, the pair moved above its 100 day MA today at 0.71418 today (trades at 0.7167 at the close). Stay above that MA will have traders targeting the 200 day MA at 0.7192 in the new trading day.
- The NZDUSD cracked above its 200 hour MA for the first time since March 27 (RBNZ goes dovish on that day). That MA comes in at 0.67657, but the momentum above quickly stalled and the pair closed below the key MA (trades at 0.6760). Stay below the 200 hour MA is more bearish/move above is more bullish in the new day.