Today’s report: Why the US Dollar came crashing down
What a difference one week makes. A week ago, currencies were down across the board, and in a big way against the Buck. But as we look at five-day performance against the US Dollar on this Friday, it’s a completely different picture. Currencies are all now up, and impressively against the Buck. So what accounts for the massive turnaround?
- Fed QE
- US worsens
- US claims
- EURCHFSNB policy runs into tough times
- US aid
- OIL price
- global sentiment
- US stimulus
- hard asset
- global turmoil
- traditional markets
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewA higher low is now sought out above the multi-year low from 2017, ahead of the next major upside extension. Look for the major pair to be well supported into dips ahead of the next big run towards the 2019 high at 1.1570. Ultimately, only a weekly close below 1.0700 would compromise this outlook.
- R2 1.1237 – 16 March high – Strong
- R1 1.1087 - 27 March high – Medium
- S1 1.1000 - Psychological – Medium
- S2 1.0870 – 26 March low – Strong
EURUSD – fundamental overviewThe Euro continues to recover, mostly on the back of the latest Fed gesture, in which the central bank committed to unlimited QE. Other factors behind Euro demand are the coronavirus outbreak intensification in the US, and a massive surge to a record print in US initial jobless claims. Key standouts on Friday’s calendar include US core PCE and Michigan sentiment.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe market has rebounded sharply, after collapsing to a +30 year low below 1.1500. This supports the longer-term constructive outlook, with a major bottom sought out ahead of the start to a big run to the topside. Look for the major pair to hold up above 1.2000 on a monthly close basis for confirmation.
- R2 1.2422 – 16 March high – Strong
- R1 1.2306 – 27 March high – Medium
- S1 1.2000 – Psychological– Medium
- S2 1.1777 – 26 March low – Strong
GBPUSD – fundamental overviewThe Pound continues to recover, mostly on the back of the latest Fed gesture, in which the central bank committed to unlimited QE. Other factors behind Sterling demand are the coronavirus outbreak intensification in the US, and a massive surge to a record print in US initial jobless claims. Key standouts on Friday’s calendar include US core PCE and Michigan sentiment.
USDJPY – technical overviewWe're seeing a pickup in volatility in the major pair, with the market swinging wildly through the upper and lower bound of a massive triangle. Still, there is no clear direction insight, with rallies well capped above 110.00 and dips well supported below 104.00.
- R2 111.30 – 26 March high – Medium
- R1 109.72 – 27 March high – Medium
- S1 107.85 – 19 March high – Medium
- S2 106.76 – 18 March low – Strong
USDJPY – fundamental overviewTokyo's governor has urged the public to remain indoors this week and warned of stricter measures as the coronavirus outbreak worsens. But overall, we're seeing a resurgence in Yen demand this week, with the currency benefitting from the Fed's unlimited commitment to QE, the US becoming the epicenter of the coronavirus pandemic, and a disturbing record surge in US initial jobless claims. Key standouts on Friday’s calendar include US core PCE and Michigan sentiment.
EURCHF – technical overviewThe market remains very well capped into offers and the medium-term picture continues to favour the downside. A break back above 1.0710 would be required to take the immediate pressure off the downside. Technicals are however looking extended and the market should be well supported ahead of 1.0500.
- R2 1.0834 – 13 January high – Medium
- R1 1.0710 – 3 March high – Strong
- S1 1.0524 – 20 March/2020 low – Medium
- S2 1.0500 – Psychological – Strong
EURCHF – fundamental overviewThe SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook, and from a US administration that has put Switzerland on its currency manipulator watchlist. Any signs of risk liquidation in 2020, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.
AUDUSD – technical overviewAussie has recently extended declines to its lowest levels against the Buck since 2003. At the same time, technical studies are looking stretched and any additional setbacks below 0.5500 should be a difficult task, at least over the coming months. Back above the December 2019 high at 0.7032 would however be required to take the immediate pressure off the downside.
- R2 0.6326 – 13 March high – Strong
- R1 0.6150 – 17 March high – Medium
- S1 0.5870 – 26 March low – Strong
- S2 0.5664 – 20 March low – Medium
AUDUSD – fundamental overviewThe Australian Dollar continues to recover, mostly on the back of the latest Fed gesture, in which the central bank committed to unlimited QE. Other factors behind Aussie demand are the coronavirus outbreak intensification in the US, and a massive surge to a record print in US initial jobless claims. We've also seen Aussie getting more support on a recovery in investor sentiment, with the massive US stimulus package helping this cause. Key standouts on Friday’s calendar include US core PCE and Michigan sentiment.
USDCAD – technical overviewAn intense market rally has stalled out just ahead of the 2016 high. At this stage, there is risk for a more meaningful period of correction, with potential for setbacks to extend back down towards previous resistance turned support, in the form of the 2018 high.
- R2 1.4483 – 25 March high – Medium
- R1 1.4276 – 26 March high – Strong
- S1 1.3960 – 17 March low – Medium
- S2 1.3728 – 16 March low – Strong
USDCAD – fundamental overviewThe Canadian Dollar continues to recover, mostly on the back of the latest Fed gesture, in which the central bank committed to unlimited QE. Other factors behind Loonie demand are the coronavirus outbreak intensification in the US, and a massive surge to a record print in US initial jobless claims. Key standouts on Friday’s calendar include US core PCE and Michigan sentiment.
NZDUSD – technical overviewThere's a case to be made for a meaningful bottom, with the market looking quite extended after dipping below major psychological support at 0.5500. As such, look for setbacks to be well supported in the days ahead, in anticipation of sharp rebound. Only a weekly close below 0.5500 would give reason for rethink. Back above 0.6500 however, would be required to take the immediate pressure off the downside.
- R2 0.6160 – 13 March high – Strong
- R1 0.6016 – 27 March high – Medium
- S1 0.5777 – 26 March low – Strong
- S2 0.5589 – 23 March low – Medium
NZDUSD – fundamental overviewThe New Zealand Dollar continues to recover, mostly on the back of the latest Fed gesture, in which the central bank committed to unlimited QE. Other factors behind Kiwi demand are the coronavirus outbreak intensification in the US, and a massive surge to a record print in US initial jobless claims. All of this has more than offset the earlier release of a discouraging Kiwi consumer confidence print. Key standouts on Friday’s calendar include US core PCE and Michigan sentiment.
US SPX 500 – technical overviewSetbacks have been intense as the market puts in a longer-term top. The market has collapsed through the 2018 low, with the next major support coming in at the 2016 low around 1800. Extended readings warn of a corrective bounce, but rallies should now be well capped ahead of 2800.
- R2 2774 – 12 March high – Strong
- R1 2707 – 13 March high – Medium
- S1 2397 – 25 March low – Medium
- S2 2182 – 23 March/2020 low – Strong
US SPX 500 – fundamental overviewAlthough we've seen attempts at recovery in response to unlimited QE from the Fed and a $2 trillion US stimulus package, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for additional runs to the topside, on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, tension on the global trade front, geopolitical risk, and ongoing worry associated with coronavirus fallout, should weigh more heavily on investor sentiment in 2020.
GOLD (SPOT) – technical overviewThe 2019 breakout above the 2016 high at 1375 was a significant development, and suggests the market is in the early stages of a bullish move that follows a multi-month consolidation. The next major level of resistance comes in around 1800 (measured move extension target), while in the interim, look for any setbacks to be well supported above 1500.
- R2 1703 – 9 March/2020 high – Strong
- R1 1645 – 26 March high – Medium
- S1 1558– 24 March low – Medium
- S2 1451 – 16 March/2020 low – Strong
GOLD (SPOT) – fundamental overviewThe yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, political uncertainty, coronavirus fallout, systemic risk and trade war threats. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.
BTCUSD – technical overviewSetbacks should be very well supported ahead of the 2018 low, with a higher low sought out in favour of a bullish continuation back above the 2019 high and towards the record high from late 2017 further up. Ultimately, only a weekly close below 5,000 would compromise the constructive outlook. Back above 10,500 further encourages the bullish prospect.
- R2 10,477– 9 February/2020 high – Strong
- R1 7,000 – Round number – Medium
- S1 5,660 – 20 March low – Medium
- S2 3,995 – 13 March/2020 low – Strong
BTCUSD – fundamental overviewBitcoin is finally feeling the impact of global macro pressures, with the new currency falling victim to broad based risk liquidation. However, despite the recent slide, there continues to be good demand from players looking out to the medium and longer term, who see Bitcoin as a safe haven, store of value asset.
BTCUSD - Technical charts in detail
ETHUSD – technical overviewThe market is in the process of attempting to establish a meaningful base after stalling out in the latter half of 2019. Look for setbacks to be well supported above the 2018 low, in favour of another big bounce, eventually back towards and through the 2019 high up at 363.
- R2 200 – Psychological – Strong
- R1 153 – 20 March high – Medium
- S1 100 – Psychological – Strong
- S2 90 – 13 March/ 2020 low – Strong
ETHUSD – fundamental overviewWhile there is plenty of Ether demand built up, with so much optimism around prospects for the blockchain, given all of the development going on in the decentralised finance space, macroeconomics will likely play a negative role in 2020, with Ether expected to underperform in a risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes.
- That Depression-Era Feeling Is Euphoria for Stocks, J. Authers, Bloomberg (March 27, 2020)
- Coronavirus: Learning Urgent Lessons from Italy, F. Cocco, Financial Times (March 26, 2020)