The USD was the weakest of the major currencies today. The CHF was the strongest.

The strongest to weakest of the major currencies

The declines in the greenback were supported by the US yields which moved lower (and are well off their recent cycle highs). Admittedly, the yields are off the lows for the day but are still negative.

A look at the yields shows:

  • 2 year 2.619%, -4.7 basis points. The recent cycle high extended up to 2.857% on May 11
  • 5 year 2.847%, -4.4 basis points. It's recent cycle high extended to 3.107% on May 9
  • 10 year 2.8496%, -3.4 basis points. It's recent cycle high peak that 3.203% on May 9
  • 30 year 3.0614%, -1.2 basis points. It's recent cycle high peaked at 3.309% on May 9

The dollar weakness may also be a function of tighter monetary policy abroad. Canada's producer price index came in much higher than expected today and is likely to keep the Bank of Canada firmly in a tightening mode. Meanwhile, in Europe, the beaten-down EUR has gotten some relief from ECB policymakers who were a bit more anxious to start the tightening cycle (with chatter of even if 50 basis point move).

Traders may also be discounting slower growth in the US going forward as a result of a quicker Fed ramp-up in rates. The playbook is designed to lower inflation expectations from the demand side of the equation versus the supply side which the Fed cannot control (i.e., supply chain from China lockdown and port issues, oil rise from Ukraine war, a housing market that has supply issues as well).

Economic data today was weaker:

  • Initial jobless claims came in higher 218K vs 200K estimate
  • Philadelphia that index was weaker 2.6 versus 16.0 expected. The Empire State index released earlier this week was also much weaker than expectations
  • Existing home sales were also marginally lower (down for the 3rd month) although supply remains a concern and prices remain elevated.

A snapshot of other markets are showing:

  • Spot gold followed the dollar lower and trades up $25.94 or 1.43% at $1841.50
  • Silver is up $0.52 or 2.3% at $21.91
  • WTI crude oil futures for July delivery are at $109.46. That's up $2.40 or 2.24% on the day
  • Bitcoin is trading right around the $30,000 level. That is up on the day but off its highest level of $30,505.14. The low price today reached $28,656.46. Technically, the price is just above its 100 hour moving average at $29,878 the 200 hour moving averages below that at $29,660. Stay above both keeps the buyers modestly in control, but the digital currency remains in an up and down trading range between $28,600 and $31,400

In the US equity markets today, the Dow industrial average opened lower and was the biggest decliner today but recovered off of their low levels. The NASDAQ index traded above and below the unchanged levels and above and below its 50% midpoint of the range since the pandemic low. That midpoint level since March 2020 comes in at 11449.29. The price is closing just below that level which tilts the bias marginally to the downside.

The final numbers are showing:

  • Dow industrial average closed down -236.94 points or -0.75% at 31253.12. The high reached 31569.13, up 79.06 points or +0.25%. The low was at 31016.41, down -473.66 points or -1.5%
  • S&P index closed down -22.89 points or -0.58% at 3900.78. The high price reached 3945.92, up 22.24 points or +0.57%. The low was at 3877.17, down -46.51 points or -1.19%
  • NASDAQ index closed down -29.65 points or -0.26% at 11288.51. The high price reached 11562.82 up 144.67 points or +1.27%. The low was at 11313.31, down -104.84 points or -0.92%
  • Russell 2000 bucked the trend and is closing up 1.37 points or +0.08% at 1776.22. The high price reached 1797.23. The low price extended to 1759.66.

In the forex market some technical levels in play going into the new trading day for the major currency pairs:

  • EURUSD: The EURUSD based near its 100 hour MA at the lows today at 1.0464. The low in the London morning session reached 1.0466 - just ahead of that low. The price ran higher into the US afternoon session with the high price extending to 1.0606. That is a solid 142 pips to the upside. The EURUSD did move above a swing area 1.0592 and 1.0598 on the run up, but is trading currently below that swing area at 1.0590. In the short term, longs would like to see the 1.05728 level hold support on a dip (or stay above). That is the 38.2% of the move down from the April 21 high to the low from last Friday. If the price can stay above that level, the buyers remain in control with a move above 1.0600 opening the door toward the May 5 high at 1.0642.
  • GBPUSD: The GBPUSD - like the EURUSD - based near the 100 hour MA earlier today and that opened the door for further upside momentum. The 100 hour MA was at 1.2338 when the low price tested that MA at 1.2341. The holding above that level opened to door for a run up to a high of 1.2524. That extended above the highs from Tuesday and Wednesday at 1.2500, and the 38.2% of the move down from the April 21 high at 1.2511, but momentum could not be sustained and the price is trading at 1.2472 into the close. There is support close support at 1.2448 into the new trading day. Stay above that level and the buyers can make another run to and through the 38.2% at 1.25116.
  • USDJPY: The USDJPY found sellers on the back of the yields moving lower. When the yields were at the lows, the USDJPY was near lows as well. The low reached 127.01 just above natural support at 127.00. However, with the rise in yields, the USDJPY also moved higher. TI is trading at 127.81. That is still down on the day, but back above the 38.2% of the move up from the March 31 low at 127.508. That retracement level will be a barometer in the new trading day. Move below is more bearish (by the way, that level was also the low from May 12). Stay above and move above 128.00, could see more buying into the week end.