Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 03 April 2018 at 23:28 GMT

US Wrap: Greenback gains with Wall Street rally

FX Trade Strategist /
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By Michael O’Neill

NY Focus: The US dollar opened a tad softer compared to Monday’s close but recouped those losses by the close. There wasn’t any economic data of note, leaving traders to look for market direction elsewhere.

The Canadian dollar was the outperformer, recording a 0.50% gain. USDCAD opened at 1.2870 and dropped rapidly until finding a floor at 1.2783.

President Trump’s reported interest in having a deal outline ready to announce in Peru next week fueled the move down.

 The Canadian dollar was the real outperfomer overnight, up half a percent. Photo: Shutterstock

Support in the 1.2780 area held because Mr Trump also threatened Mexico that Nafta was at risk if they didn’t stop a migrant caravan before it reached the US border.

EURUSD was at the session peak of 1.2313 at the open. Prices found the bottom of 1.2254 just as Wall Street opened and then the single currency spent the rest of the day in a 1.2254-1.2275 range.

Sterling was as range-bound as the single currency. GBPUSD opened at 1.4069, dropped to 1.4022 at breakfast and then bounced in a 1.4030-75 range for the rest of the day.

The currency pair tracked EURUSD moves and was undermined by broad US dollar strength which offset the better than expected UK Manufacturing PMI data released earlier in London.

USDJPY rallied from the open, rising from 105.70 to 106.64, supported by gains in US Treasury yields, the Wall Street bounce and by general US dollar demand.

The positive tone to the greenback lifted WTI oil prices off the mornings $62.94 low and took them to $63.77 before prices eased back to $63.55 at the close.

Rising Russian output and rumours of Saudi price cuts appear to have been forgotten today. The American Petroleum Institute said weekly crude inventories dropped 3.28 million barrels.

Wall Street traders turned yesterday’s frown upside down. Well not exactly.

It’s more a grimace than a smile. The Dow Jones Industrial average rallied 1.65%, S&P 500 gained 1.26% and the Nsadaq rose 1.04% which was not enough to recoup all of yesterday’s losses.

Profit-taking, bottom picking and a Bloomberg story saying the White House does not have any plans to go after Amazon, helped to lift prices.

Wednesday Focus: Eurozone inflation data and UK March construction PMI data will be the focus, followed by US ISM Non-Manufacturing and Factory Orders data.

Even though it is a poor, leading indicator for nonfarm payrolls, traders will still look to the ADP employment report for clues.

The question is if March Eurozone CPI (forecast 1.1%, y/y ) can break EURUSD out of its 1.2240-1.340 range.

EURUSD 1 hour chart
Source: Saxo Bank 

-- Edited by Adam Courtenay

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.


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