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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 / 02 April 2018 at 22:46 GMT

US Wrap: Tariffs, Trump and Tesla drive post-Easter selloff on Wall St

FX Trade Strategist / www.Loonieviews.net
Canada
  • China tariffs and Trump's tweets weighed on equities 
  • The US dollar managed to grind out gains against the other FX majors, except the yen
  • But FX volumes were light due to Easter Monday holidays in Europe, the UK
  • WTI oil prices took a 3.0% tumble on news about Russian output, Saudi prices
By Michael O’Neill

NY Focus: Wall Street traders were in a selling mood at the open and stayed that way all morning. A lunch-time rally ran out of steam quickly. The selloff resumed until just before the close. The day ended with the Dow Jones Industrial Average down 1.90%, the S&P 500 off 2.24% and the Nasdaq losing 2.74%. China’s retaliatory tariffs on pork, wine and aluminium, Trump’s anti-Amazon (AMZN: NASDAQ) tweets and Tesla’s issues (TSLA: NASDAQ) fuelled the move lower.

The Japanese yen was the only major currency to scratch out a gain against the greenback during New York trading. It drifted to ¥106.43 just after breakfast and declined to ¥105.67 in concert with Wall Street’s woes.

EURUSD started the session with a positive tone and inched to the day’s peak of 1.2344 in the early going. The break of minor support at 1.2310 led to some stop-loss selling. FX volumes were lighter than normal due to Easter Monday holidays in Europe and the UK. Canada was partially closed. Government employees had the day off as did schools. Trading rooms were lightly staffed. Monday was a public holiday in Australia, New Zealand and Hong Kong as well.

Sterling was firm at the open in part because of Bank of England rate hike hopes. Risk aversion dollar demand took GBPUSD from 1.4076 to 1.4022 before profit-taking lifted prices to 1.4047 at the end of the day.

The commodity currency bloc was under pressure due to broad US dollar strength and soft commodity prices. USDCAD retreated from the day’s high of 1.2943 to 1.2913 when President Trump reportedly said he expected a Nafta deal within two weeks.

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News that Opec kingpin Saudi Arabia may be cutting its crude prices for exports to Asia weighed on WTI prices. Photo: Shutterstock

WTI oil prices dropped from $65.39/barrel to $62.98/b, undermined by news that Saudi Arabia may be cutting crude prices to Asia. Also reports that Russia’s oil production rose to 10.97 million barrels in March (up from 10.95 mln barrels in February) didn’t help sentiment, even though the difference is tiny.

Tuesday Focus: Eurozone and UK Markit Manufacturing PMI data are the key economic reports due out on Tuesday. The March Eurozone PMI data is forecast to come out unchanged at 54.5 while the UK PMI forecast is for a dip to just 54.5 from its previous reading of 55.2.

Lousy weather at the end of March may have had a negative impact on the UK data. If so, uptrend support at 1.4020 should hold.

Four-hour GBPUSD 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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