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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 / 12 April 2018 at 23:19 GMT

US Wrap: Headlines spin drives markets into yo-yo trading

FX Trade Strategist / www.Loonieviews.net
Canada
  • Mediocre US data muddled the economic message 
  • The trade landscape improved; US may join the TPP trade pact after all
  • Tensions eased after US, France and Russia toned down rhetoric on Syria
  • Traders will be wary of any weekend drama and may want to book profits
By Michael O’Neill

NY Focus: The US dollar bobbed around like a row boat during a typhoon on Thursday. Prices rallied and plunged with every headline and tweet. It was a great day for scalpers, but when the closing bell rang, the greenback had not strayed very far from its opening levels.

President Trump’s fingerprints were everywhere, but he didn't seem to be picking a fight. Early in the morning, he tweeted “Never said when an attack on Syria would take place. Could be very soon or not so soon at all!". Russia was a tad less feisty as well. According to The Washington Post, a Russia spokesperson said: “We still believe that it is very necessary to avoid any steps which can trigger an escalation in tensions in Syria.

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It was another roller-coaster ride for Wall Street on Thursday, but stocks finished in positive territory in the wake of an upbeat tone on trade discussions. Photo: Shutterstock

Humble pie must have been on the menu when the President met with Republicans from farm states. Trump told them that the US was considering rejoining the TransPacific Partnership trade pact, and negotiating with China on trade; he also said that the Nafta negotiations were going great.

US data releases were largely ignored.

EURUSD traded down from 1.2345 to 1.2300 by mid-morning. Weaker than expected Eurozone Industrial Production data undermined the currency pair. A cautious tone in the European Central Bank policy meeting minutes supported the downside.

USDJPY liked the risk on tone and climbed from ¥106.90 to ¥107.42 by 1000 hours (1500 GMT) option cut and then spent the rest of the session bouncing between ¥107.10 and ¥107.30. Higher US Treasury yields underpinned prices.

GBPUSD had dropped from 1.4193 to 1.4167 when New York opened, then climbed to 1.4244 by mid-morning, powered by renewed US dollar weakness. It held on to most of the gains and closed at 1.4225

The commodity currency bloc (that is, the Australian, New Zealand and Canadian dollars) rose and fell in line with broad US dollar direction, but all three were close to unchanged at the end of the day.

Wall Street rode another roller-coaster and finished on a positive note due to the upbeat tone of trade discussions. Oil prices dropped in the morning but rallied from $65.97/barrel to $67.19/b by the close. Prices were supported by talk of rising demand, lower supply and Middle East tensions.

Friday Focus: The week will end without any top-tier data on the agenda. The US dollar has lost a lot of ground since last Friday’s close, led by a 1.6% gain in GBPUSD.

Traders will be very wary of any weekend drama and may want to book profits and trim positions. The USDX held support in the 89.00-10 area and could rebound to the 8970-80 area.

30 minute USDX chart
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– Edited by Robert Ryan

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

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