Forexlive Americas FX news wrap: Hopes for a coronavirus cure and German/Franco proposal

Author: Greg Michalowski | Category: News

Forex news for NY trading on May 18, 2020

In other markets:

  • Spot gold was trading up about $11.81 at the start of the New York session, but reversed lower as investors exited the relative safety of gold. The price is currently trading down $-11.20 or -0.64% at $1732.47
  • WTI crude oil futures are trading up $3.41 or 11.59% at $32.84 for the June contract. The contract expires tomorrow. The July contract was also higher and trades up $2.88 or 9.69% at $32.38
The big moving stories in the New York session was the Moderno announcement that phase I tests of their coronavirus vaccine were positive. That sent stock futures in premarket trading higher. The rise continued after the opening with the Dow industrial average at 1 point reaching over a 1000 points higher.

For the day, the Dow industrial average rose by 3.5%. The S&P index rose by 3.15% and the NASDAQ index lagged with a 2.44% gain. Outpacing all the major US indices was the Russell 2000 which surge by 6.10% as investors rotated into the more riskier small cap stocks.

The other big news item was a proposed €500 billion coronavirus reconstruction plan put forth by Germany and France. That too supported stocks.  The German DAX closed up 5.67% while France's CAC rose by 5.16%. 

The German/France news also helped to send investors scurry into the risk assets including Italian BTPs.  The benchmark Italian 10 year yield fell by -19 basis points on the day.  However yields in the less risky German, France and UK markets were up as investors rotated at of safety into the more risky issues from Spain, Italy, and Portugal.

Below are the changes in ranges for the benchmark 10 year yields from the major European countries:

The benchmark 10 year yields for European countries
Below is a look at the percentage gains for the major stock indices. The Canadian TSX/S&P lagged at  +0.89% as the loonie strengthens with the weakening dollar.  The other indices all rose by greater than 2.4%.

US stocks and European stocks all rallied sharplyIn the forex market today, the risk on trade was in full force. The NZD and AUD moved sharply higher while the safe-haven JPY, CHF and USD were all sharply lower. Below is a look at the strongest to the weakest. 

The strongest and weakest currencies for the day

 Some key moves and technical levels into the new trading day:

  • EURUSD. The EURUSD started the New York day with a 28 pip trading range and is ending the day with a 127 pip range.  The pair initially rallied off of the Moderno news and flows out of the safety of the USD, and was later shoved higher off the German/France stimulus news.  Technically, the pair surge away from its 100 and 200 hour moving averages at 1.0825 area and ultimately above the high from last week at 1.0896 and the 50% retracement of the move down from the May high to the May low. That level came in at 1.08920.  That area between 1.0892 and 1.0896 is close risk for longs looking for more upside momentum. The 61.8% retracement of the May trading range comes in at 1.09218. Getting and staying above that level would be the next upside hurdle for the pair.
  • GBPUSD:  The GBPUSD did extend above its 100 hour moving average for the 1st time since May 12, but found sellers near the 38.2% retracement of the trend move lower from last week's high. That level came in at 1.2222. The high price reached 1.2226 but quickly reversed the lower. The pair is closing the day just below its 100 hour moving average 1.2199. That level should be the barometer for both the buyers and sellers into the new trading day. Move above is more bullish. Stay below tilts the bias more to the downside.
  • USDJPY: The USDJPY initially move higher on the stronger stocks and flows into the JPY crosses, but reversed with the general USD selling.  Nevertheless, the price moved further away from its 100 hour moving average at 107.132. The current price is trading at 107.298. Take a move back below the 100 hour moving average, to hurt the bullish bias.
  • USDCAD: The USDCAD trended lower and lower and lower today. In the North American session the price tumbled below its 100 hour moving average at 1.40643, its 200 hour moving average 1.40371, it 50% retracement of the move up last week at 1.40194 and did not stop all day long. The pair is making new lows into the close at 1.39408. The range for the day was an oversized 172 pips vs. the 22 day average of 129 pips. The next major targets below come in at swing low area from to 8th at 1.3923 and the low for the pair from May 11 at 1.3899 (call it 1.3900).

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