Home Daily Commentaries It’s reckoning time for the US dollar; the Greenback is falling this morning

It’s reckoning time for the US dollar; the Greenback is falling this morning

Daily Currency Update

Market participants traded the US dollar, pushing it to new highs in yesterday's trading session. However, it only seems to be a rearrangement of positioning before the ISM Nonmanufacturing and Services Composite data is released at 10am EST.

One of the catalysts for a stronger US dollar was the continuation of dovish tones from more central banks. For instance, yesterday, market participants focused on the AUD/USD pair because of expected rate cuts in August and potentially in September from the RBA. Until yesterday, it seemed that the US dollar was “winning the race of the doves” after the Fed triggered recession fears. The US dollar still has decent growth rates for a developed market.

This morning, the US dollar index is falling 0.29 percent.

Key Movers

The Loonie has erased most of its gains since Monday's trading session due to a temporary price correction of the crude oil WTI and some pessimistic views of the global economy. According to IMF Managing Director Christine Lagarde, the global economy is in a "precarious" position as global growth around the world slows, but she added that a recession isn't likely in the near-term. Furthermore, the WTO seemed to echo the negative sentiment by saying that there has been a "synchronized deceleration," slashing its global trade growth forecast.

This morning though, the Loonie is trading strongly after the crude oil WTI trades slightly to the upside. The USD/CAD is falling (stronger Loonie) 0.22 percent, and it was helped by a weak US dollar, while crude oil gained.

Technically speaking, the USD/CAD pair is touching an important support at the 1.3300 handle this morning and the rally of crude oil WTI seems exhausted. However, some intraday levels to watch are level supports at 1,3286 and 1.3270, with the strongest one being at 1.3237. Some resistance levels to watch in case we see weakness in the Loonie are 1.3316 TaTnd 1.3326, with the strongest one being at 1.3340.

The euro has once again dropped against the U.S. dollar as investors analyze the economic growth prospects within the two areas. The euro is now at a 3 week low against the U.S. Dollar with further weakness expected when service PMI’s are out later today.
Survey data on Monday showed factories in the Eurozone had their worst month in almost six years in March and based on current evidence, there is no certainty that these will improve.

It looks as though more poor data is expected to come out of the Eurozone in the coming months, however a large part of this may have already been priced into the currency. Employment and wage data has been a big market mover in the past, especially in the midst of a potential global economic slowdown.

Still to come on Wednesday are various PMI data from around Europe and the US, with official Crude Oil inventory levels from the Department of Energy also due.

Tuesday was a mixed day for sterling as it remained in the red at close of play of the European session as it moved closer to the psychological supports of 1.30 against the US Dollar. Coupled with weaker than expected UK construction PMI data (49.7 vs a forecast of 49.8) left sterling under further downward pressure, particularly as the data remained under the 50 threshold for the second straight month.

However despite another negative start to the weak for sterling, it’s resilience against large negative market movements is remarkable. With such a flurry of negative data/news coming from the UK, many expected sterling to be in a far worse position than current.

However sterling rose sharply just after the close of the European session after PM May outlined her alternative approach to Brexit. May plans to further delay Brexit and enter discussions with the Labour party in order to find a workable solution that may win a majority in Commons. This is expected to be far more aligned with the Labour Party’s alternative Customs Union proposal. It will be interesting to see how UK services PMI comes in at 9.30 however this data is not expected to weaken sterling to a great extent, no matter the figure.

The Australian dollar is weaker this morning, falling to an overnight low of 0.7052, the lowest in three weeks, following yesterday’s Reserve Bank of Australia’s (RBA) monetary policy announcement. The RBA left the cash rate unchanged at 1.5% as expected, although a dovish statement heightened expectations of a rate cut in the coming months.

On the data front today we will see the release of the AIG Performance of Services Index for March, previously at 44.5, followed by February Retail Sales forecast up by 0.3%. Also today we will see the February trade data with expectations of a monthly surplus at 3,800M.

From a technical perspective, the AUD/USD pair is currently trading at 0.7068. We continue to expect support to hold on moves approaching 0.7055 while now any upward push will likely meet resistance around 0.7090.

The New Zealand dollar is weaker this morning when valued against the Greenback. The kiwi is currently down about 1% overnight as NZ’s quarterly survey of business opinion showed weaker confidence and activity indicators. The market now pricing in a 25bps rate cut at next month’s RBNZ meeting, and with a nearly 50% chance of two cuts by August priced in. The GDT dairy auction last night showed a smaller gain in prices (+0.8%) than expected, but the price index continues to trend higher.

Looking ahead today in NZ and It should be another quiet session today. The only release monthly ANZ Commodity Prices

From a technical perspective, the NZD/USD pair is currently trading at 0.6756. We continue to expect support to hold on moves approaching 0.6730 while now any upward push will likely meet resistance around 0.6800.

Expected Ranges

  • USD/CAD: 1.3285 - 1.3340 ▼
  • EUR/USD: 1.1215 - 1.1250 ▲
  • GBP/USD: 1.3090 - 1.3195 ▲
  • AUD/USD: 0.7101 - 0.7150 ▲
  • NZD/USD: 0.6775 - 0.6790 ▲