Forexlive Americas FX new wrap: Risk on flows drive the forex
Forex news for North American trading on June 2, 2020
- Major US indices close near session highs
- US CDC reports 761 new deaths
- Crude oil futures settle that $36.81. Price getting closer to its 100 day moving average
- New York Gov. Cuomo: NYC Mayor underestimated problem
- European stocks end the day with solid gains
- New Zealand GDT price index +0.1%
- Emerging market currencies are surging
- Central banks are dialing down the negativity
- May ISM New York business conditions 19.5 vs 4.3 prior
- Yen swoons as coronavirus fears fade
- The AUD is the strongest and the JPY is the weakest as NA session begins
- ForexLive European FX news wrap: Dollar slumps as stocks push higher again
In other markets;
- Spot gold is trading down $13 at -0.75% at $1726.66
- WTI crude oil futures trading up $1.51 or 4.26% at $36.96. Just out there was a surprise draw of 0.5 million barrels vs. expectations for a 3 million barrel build in the weekly crude oil inventory from the private data API data
In the US stock market today, the major stock indices gain for the 2nd day in a row in June. The Dow industrial led the game with a 1.05% increase. The S&P index and NASDAQ index have risen in 6 of the last 7 trading days. European stock indices today close higher as well with the German DAX rising by 3.75%. The UK FTSE 100 was the weakest of the gainers with a gain of 0.87%.
In the US debt market today my yields were higher with a inching up of the yield curve as well. The 30 year bond rose the most by 3.5 basis points. The 2 – 10 year spread widened out to 51.89 basis points from 50.27 basis points at the close of trading yesterday.
Each morning at the start of the North American session, I take a snapshot of the rankings for the major currency pairs. In this morning's post the AUD and the NZD were the strongest, while the JPY and the CHF were the weakest. The rankings are determined by cumulating the snapshot of percentage changes of each currency vs. each other. Below is how that ranking looked:
Rarely at the end of the day, the rankings remain the exact same. There tends to be some jumbling of the rankings. Today, the rankings were exactly the same, but the cumulated changes of the strongest and weakest were nearly double and more than doubled. The AUD had a cumulated gain of 4.61% at the start of the day and a total gain of 8.94% at the end of the day. The JPY had a cumulated decline of -4.07% at the start of the day and a greater than double cumulated decline of -10.9% at the end of the day. For the USD the cumulated decline was -2.11 at the start and weakened but only by 0.33% to -2.44% at the end of the day.
The movements in the currencies followed a "risk on". Fundamentally, the market continues to price in a recovery from the coronavirus. That is helping pairs like the AUD, NZD and GBP, and hurting the safe haven currencies like the JPY, CHF and USD. The JPY crosses also tend to do better in a "risk on" environment.
Taking a look at some individual pairs a look at the technicals are showing:
- AUDUSD. The AUDUSD was moved to the highest level since January 17 and looks toward the next topside target at 0.69377 (swing high from December before the run lower. The high price today has reached just short of the 0.6900 level so far at 0.6897. A lower channel trend line cuts across at 0.6848 on the hourly chart and moving higher.
- NZDUSD: The NZDUSD raced above - end away - from its 100 day moving average at 0.6308. The pair is going out at 0.6365, near the highs for the day. The price traded to the highest level since March 9. Technically the closest risk going into the new day comes in at the rising 100 bar moving average on the 5 minutes chart at 0.6351. The price has trended higher today and has kept a safe distance away from that moving average level for most of the London/New York session. A move below its could see some corrective activity with a New York session corrective low at 0.6341 as another downside target on more weakness. Absent that and the buyers remain in control with the next major target around the 0.6445 level (high price from March 9)
- GBPUSD: The GBPUSD spent the New York session moving up and down with a ceiling against its 100 day moving average at 1.2569. The high price in the New York session stalled right at that level. The pair is closing the day at 1.2550. In the new day if the price is to extend higher and keep the upside momentum going, moving above the 100 day moving average is paramount. Failure to do that and we should see a further probing back to the downside with the closest support target at 1.2524.
- EURUSD: The EURUSD - like the GBPUSD - spent the NY session trading up and back down. The hi for the day stalled just ahead of the 1.1200 level at 1.11954. The low corrective level in the London session, stalled at 1.1153. The swing high from yesterday was also at that level. The hi from Friday was at 1.11465. The area 1.11465 to 1.1153 is support going into the new day. Stay above and the bulls remain in control.
- USDJPY: The USDJPY up sharply in the New York session, moving from 107.78 to a high of 108.76 (so nearly 100 pips). In the process the pair moved above converged 100 and 200 day moving averages at around the 108.30 level. There was some stall near the those moving averages, but as the market move toward the London fixing, buyers entered and push the pair higher. The pair is trading at 108.65 at the end of the day. It will take a move back below the 100 and 200 day moving averages to turn the bias more in the favor of sellers. Until then, the buyers remain in control