Forexlive Americas FX news wrap: Lots of Fed speak today. Initial claims hit 50 year low

Author: Greg Michalowski | Category: News

Forex news for NY trading on April 11, 2019

Other markets:

  • Gold futures (June) fell -$18.45 or 1.4% to $1295.45
  • WTI crude oil futures fell $.90 or -1.39% to $63.71
In the US stock market today, the major indices closed little changed.

  • The Dow fell -0.05% or -14.17 points to 26142.99
  • The S&P closed unchanged at 2888.32
  • The Nasdaq fell -0.21% or -16.88 points to 7947.35

The European shares ended the session mostly higher
  • German DAX, +0.25%
  • France's CAC, +0.66%
  • UK's FTSE, -0.05%
  • Spain's Ibex, +0.41%
  • Portugal's PSI 20, +0.36%
  • Italy's FTSE MIB, +0.6%
IN the US debt market today:
  • 2 year 2.354%, +2.7 basis points
  • 10 year 2.499%, +2.2 basis points
  • 30 year 2.929%, + 2.5 basis points
The US treasury completed their refunding this week by auctioning off $16 billion of 30-year notes at a high yield of 2.93% (previous auction came in at 3.014%).  That was a touch higher than the 2.924% that traded WI at the auction time.  The bid to cover was 2.25x - which was the same from the last auction and also the average over the last 6 auctions.  The auction was not as good as the 10 year yesterday but the Treasury still has no trouble auctioning off US paper.

Economic data today showed higher PPI inflation and impressive initial jobless claims.

For PPI, the YoY rose 2.2%.  That was well above the 1.9% expected and the 1.9% last month.  The ex Food and energy came in at 2.4% which was as expected.  What was not so great was the ex food, energy and trade came in at 2.0% vs 2.3%, the lowest level since August 2017.  Gasoline did rise by 16% YoY and tarriffs also skewed the numbers. Absent those influences, the core readiings were not so great.

What was great was the weekly initial jobless claims which fell to a nearly 50 year low at 196K (expected 211K). The continuing claims were also at near 50 year lows. The job engine keeps chugging along, with inflation near Fed target levels, but staying steady.

That has Fed officials feeling like policy is where it should be.  There were a number of Fed speakers today:
  • Fed's Clarida: Patient stands to rate changes remains appropriate. The US economy is in a "good place"
  • Fed's Williams: From a pure monetary policy perspective, this is a healthy economy" but "Wants inflation to hit 2%, does not want to undershoot"
  • Fed's Bullard (a dove) spoke a little more cautiously: 
    • Fed needs to tread carefully to sustain expansion
    • Market-based inflation expectations point to inflation being below the Fed's target in 2019 and in next 5 years
    • Treasury curve has flattened significantly. Meaningful, sustained inversion would send bearish signal
    • Changes to monetary policy will owe to new data and not normalization strategy
  • Fed's Brainard would like to see productivity increase and added that the Fed needs to be patient.
  • Fed's Kashkari said there is still slack in the labor market and inflation is still below target, so no need to tap the brakes.
In the forex market, the USDJPY was the big mover today, trending higher for most of the day.
The EURUD and GBPUSD moved modestly lower in choppy but down price action.   The AUDUSD and NZDUSD moved lower and the USDCAD moved higher.

Technically,
  • The USDJPY kept taking out higher and higher levels including the 100 and 200 hour MAs at 111.27 and 111.37. The 100 daymA at 111.487, the high from Tuesday at 111.572 . The Monday high for the week (first hour of trading) is the next target at 111.73, followed by the high from last Friday (employment day) at 111.818.   Honestly, it sounds like a long way but for the week the price has moved from 111.73 to a low on Wednesday at 110.838 (90 pips). We are now back up toward the highs. Overall, it is 90 pips down and near 90 pips up.  Nevertheless today, the pair moved 81 pips in total.  
  • The EURUSD fell in the early NY session to the 100 hour MA and near the lows from Tuesday and Wednesday at 1.12543. The price based there and rallied 20 pips to 1.1275 before reversing back lower. The pair is closing back below the rising 100 hour MA at 1.1259 and the swing area at 1.12543 as well. Stay below in the new day would be more bearish.
  • The GBPUSD had another day of seemingly alternating red and green candles (downs and ups) with a small bearish tilt. The price in the last few hours dipped below the 100 hour MA and an upward sloping trend line on the hourly at 1.3067 area (trading at 1.3053 at the end of the day).   Stay below oule be more bearish. For the week, the GBPUSD has a 97 pip range. That is the most narrow since August 2014. The low was 1.3023 on Monday.  The high was 1.3120 on Wednesday. We currently trade closer to the low at 1.3023. Will we extend the range on Friday?  Last week, the EURUSD had a 71 pip trading range - also a record going back to 2014.  
  • The USDCAD move higher and nearly retraced to the Monday highs at 1.3402 and 1.3398. The high today reached 1.3395 (and settling at 1.3381 area).  The low for the week was on Tuesday at 1.3283.  In the new day the 1.3400 area will be a key barometer for bulls and bears. Stay below keeps the sellers hopeful. Move above and we could see more buying
  • The NZDUSD is trading just below its 200 day MA at 0.6730. The low from last week is at 0.67179. Get above the 200 day MA would tilt the bias more to the upside. Until then, the sellers remain in more control with the 0.67179 the next target to break.

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