Forexlive Americas FX wrap: Buyers take the USD higher as correction continues
Forex news for NY trader on February 7, 2018
- Volatile session ends with selling. Major indices end lower on the day
- RBNZ's Spencer says no reason to change forecasts after equity volatility
- NAFTA comments from the US - Cornyn says encouraged Trump won't leave NAFTA
- US consumer credit for Dec 18.447B vs 20.0B expected
- RBNZ keeps OCR rate unchanged at 1.75%
- US crude oil futures settle at $61.79. Tests key support.
- USDCAD trades at day highs. Approaches some tough resistance though.
- White House says pleased Congress has reached two-year spending deal
- Some concerns about the stocks re-enters in the market.
- Soft Treasury auction will get US yields moving higher again
- The US dollar is on a tear. It's nearing breakouts on a few fronts.
- More Evans: Speaking to reporters after speech
- Swiss regulators say they're in contact with Credit Suisse regarding VIX-related products
- EURUSD continues the steps lower...
- Wells Fargo downgraded to A- from A by Standard & Poor's
- WTI crude oil falls below $62 as US production jumps. Canadian dollar at session low
- ECB's Nowotny drops a bomb: says US deliberately trying to keep dollar low
- Fed's Evans sees a hint inflation pressures may be coming
- Be aware. USDCHF hits a key target area.
- US EIA weekly crude oil inventories +1895K vs +3150K expected
- Donald Trump says it's a 'big mistake' that stock markets went down
- Former Fed vice-chair Donald Kohn takes another three-year term at BOE's FPC
- More from Dudley: Fed is focussed on feedback loops in markets
- After falling 70%, Bitcoin is up 40% from the lows despite Goldman Sachs warning
- Merkel says difficult German coalition talks were worth it
- US Fed's Dudley pleased there has been progress in bank culture
- Canada December building permits +4.8% vs +2.0% expected
- The JPY is the strongest, while the CHF is the weakest as NA trader enter
A snapshot of other markets is showing:
- Spot gold down $-5.96 or -0.45% at $1318.10
- WTI crude oil futures are down $-1.87 or -2.87% at $61.57. Crude oil inventory data showed a larger than expected add in the current week.
- Bitcoin futures recovered, but still stalled against the 200 hour MA (using Coinbase). The price was trading above the 100 hour MA (blue line) but below the 200 hour MA (green line below) into the NY session close (see chart below)
- US yields moved higher after a sloppy 10 year auction. 2 year 2.123%, up 1.8 basis points. 5 year 2.556%, up 1.7 basis points. 10 year 2.8321%, up 3.0 basis points. 30 year 3.109%, up 4.3 basis points
- US stocks ending down in a volatile session. S&P -13.48 points or -0.50%. NASDAQ -63.89 points or -0.90%. Dow -19.42 points or -0.08%. See the closing report HERE.
The USD rose today and is ending as the strongest currency for the day.
The NZD was the weakest currency on the day. That currency was lower into the NY session, but fell even more after a more dovish RBNZ statement in the NY afternoon.
The USDs move higher continues the corrective move started on Friday. The US employment did show stronger than expected gains and higher earnings. Interest rates have gone higher and stocks have certainly had their share of volatility. The has led to up and down markets, but the greenback has seen more upside.
Ironically (or coincidently), ECBs Nowotny, dropped a bit of bombshell when he said the US Treasury Department is deliberately putting pressure on the dollar and wants to keep it low. Recall at Davos, Treasury Secretary Mnuchin caused a bit of a stir when commented about a weaker dollar. Those comments were later retracted and said it was taken out of context, but it did push the dollar lower. The Nowotny comments did not really cause much of reaction in the forex market at the time, but the USD is ending higher.
Fed's Evans spoke and although he did say that current data warrants Fed on hold until mid-year, he did say he would support further hikes if inflation picks up and that his dissent in December was a close call. He also said he sees unemployment at 3.5% by the end of the year. So although he kept his dovish bias, that bias did come with some caveats, and some aggressive expectations for employment too.
Then there was the 10 year note auction. Recall, the treasury increased the auction sizes for this quarterly's auction of 3, 10 and 30 year issues, and given the back up in rates, one would think that there would be ample demand. However, that was not the case. Not only was there a 1.1 basis point tail from the WTI to the auction results, but the bid to cover was also light at 2.34x ve 2.69x at the prior auction. 10 year yields moved up and that too helped the dollar stay bid.
Some technical levels into the new trading day:
EURUSD. The EURUSD trended lower and at the lows fell below a lower trend line. Sellers could not keep the momentum, so there was a little corrective mover higher. That has stalled and the price is back down retesting that old trend line. A break targets 1.2223 and then 1.2166 (swing low from mid-December and trend line on the daily chart - not shown).
USDJPY. The USDJPY did not really follow the dollar stronger trend (it was near unchanged). The price did move above the 100 hour MA at 109.535 but came back lower on end of day stock selling (to the 200 hour MA at 109.239.
GBPUSD. The GBPUSD moved lower, but at a slower pace than the EURUSDs move (EURGBP moved lower. The low for the week bottomed at 1.38348 on Tuesday before bouncing up to just below key resistance at 1.4000 today (the high reached 1.3993). The fall back down in the London/NY session saw the price move to 1.3847. A move below the 1.38348 and then the 50% of the move up from the Dec 15 low at 1.38217, should solicit more selling. Holding will give shorts a couple reasons to buy back, and dip buyers a level to lean against for a quick bounce. Watch 1.3822-34 on a test in the new trading day.