Forex news for NY trading on May 13, 2020.
- Major US indices end lower. S&P and NASDAQ close lower for the 2nd straight day
- US CDC total cases rise to 1,364,061 from 1,342,594
- Italy's government signs off on 55 billion stimulus package
- Fed's Mester on CNBC: We could see some improvement in the 2nd half of the year
- BOE Bailey: Signalled the BOE likely to increase government bond purchases
- US treasury sells $22B of 30 year bonds at high yield of 1.342% vs WI level of 1.334%
- China taking measures against some members of US Congress, Missouri, etc
- China's Global Times: China mulling countermeasures on US individuals
- New York reports 340,661 virus cases up 2176
- Did Powell pass the baton to Congress?
- ECB's De Guidos: Economy has hit the bottom in terms of contraction
- Weekly US oil inventories -745K vs +4000K expected
- Powell Q&A: The Fed's view on negative rates has not changed
- Powell Q&A: We've learned about inflation behavior with rates low
- Fed's Powell: Additional policy measures may be needed to avoid lasting damage
- Gold rises to the highs of the week as bull flag stretches
- OPEC sees 2020 global oil demand down 9.07 mbpd vs -6.85 mbpd prior
- US April PPI -1.3% m/m vs -0.5% expected
- The AUD is the strongest and the NZD is the weakest as NA traders enter for the day
A snapshot of other markets for the day is showing:
- Spot gold, +1229 points or 0.76% at $1715.60. The low price reached $1699.31. The high extended to $1718.53
- WTI July crude oil futures fell $0.30 or -1.14% to $26.04. The high price extended to $26.96. The low price fell to $25.25. Like the day the energy Department said that they would buy up to 1 million barrels of crude for the strategic petroleum reserve.
The big event today was the virtual event with Fed chair Jerome Powell. In the event Powell warned that there is more danger ahead from the coronavirus. He added that "The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems".
He also passed the baton to Congress by saying:
Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This trade off is one for our elected representatives, who wield powers of taxation and spending.
Having said that, Fed's Powell is not going to sit idly aside. He did let's to do whatever is necessary within the Fed's mandate. That mandate may be limited however. He also indicated that moving rates to negative territory was not being considered, although he did stop short of completely ruling going negative.
On the economic front, the producer price index for April tumbled by greater than expected -1.3% (versus -0.5% estimate). Ex food and energy fell by -0.3% and ex food and energy, trade fell by -0.9%.
The comments from Powell (and lower producer prices) did not sit well with the stock market. The major indices moved to the downside with the the Dow industrial average faring the worst. The final numbers are showing:
- S&P index, -1.75%. The low reached -2.68%
- NASDAQ index, -1.55%. The low reached -2.78%
- Dow industrial average, -2.17%. The low reached -2.93%
European indices also ended the session lower with the France's CAC leading the climate -2.85%.
In the US debt market, yields were mostly lower as well and the yield curve flattened. The 2 year yield did eke out a small 0.2 basis point gain. The 30 year bond fell by -2.7 basis points to 1.343%, but was off the days lowest level at 1.315% after a sloppy 30 year auction.
The 2-10 year spread contracted to 49.16 basis points from 50.62 basis points at the close yesterday.
In the forex market, the NZD was the runaway weakest currency (and biggest mover) as it continued its negative reaction after the RBNZ nearly doubled QE to NZ$ 60B. The NZDUSD pair did fall below the 0.6000 level to a low of 0.5979. There is a trendline support on the hourly chart and a swing low from April 24 at 0.5975. Move below and the trend to the downside continues. A move above the 0.6000-0.6010 could see some short covering in the new day.
The JPY and the USD were the strongest of the major currencies.
Some technical comment heading into the new day:
- EURUSD: The EURUSD had a up and down trading day. The initial low into the early European session stalled against the 100 hour moving average. The price bounced from 1.0830 to a a New York session high of 1.0896 (just below the 1.0900 level). The subsequent fall did crack below the 100 hour moving average currently at 1.0835 and is ending the session near lows for the day at 1.0819. It would take a move back above the 100 hour moving average to tilt the bias more to the upside in the new trading day. On the downside, getting below 1.0808 and an upward sloping trendline at 1.0798 would open the door to a retest of yesterday's lows at 1.0784.
- GBPUSD: The GBPUSD was another pair that initially saw upside momentum in trading today. However, resistance ahead of its 100 hour moving average stalled the rally (the 100 hour MA is currently at 1.2337) and the Asian session low and swing low going back to April 21 was broken at 1.2246-50. In the new day there is support at the natural 1.2200 level and resistance against the aforementioned area at 1.2246 – 50.
- USDCHF: The USDCHF (another pair which whipped around today), initially move down to test the low price from yesterday at 0.9664. Buyers leaned against the low level and push the price back above technical levels including the 100 day moving average at 0.96857, the 200 hour moving average at 0.97027 and the 100 hour moving average at 0.97106. It will take a move back below the 100 hour moving average to hurt the bullish bias. On the topside the pair is testing a topside trend line at 0.9722 currently. A move above that level would be more bullish with 0.9736 and the high from yesterday at 0.9749 as the next upside targets
Below is a snapshot of the percentage changes of the major currencies versus each other along with the rankings of the strongest to weakest for the day. If you cumulated the percentage changes for each of the majors, the New Zealand dollar was the only pair with a cumulative decline.
