Stocks fall, yields rise; Biden set to ban Russian oil imports
Summary: “It’s just another day for you and me in the forex markets.” The Australian and Canadian dollars crashed on another day-saw after US President Joe Biden said the United States would ban imports of Russian oil. AUD/USD reversed, erasing yesterday’s gains to end at 0.7277 from 0.7315, down 0.75%. Against the Canadian loonie (USD/CAD), the greenback soared 0.62% to 1.2878 (1.2817 yesterday). The beleaguered Euro (EUR/USD) bounced off a short cover at 1.0905 from 1.0853 yesterday. The British Pound (GBP/USD) was little changed standing at 1.3108 vs. 1.3105 yesterday. The greenback was also higher against the yen (USD/JPY) at 115.72 (115.32), the Thai baht (USD/THB) at 33.22 (33.00) and the Singapore dollar (USD/ SGD) at 1.3647 (1.3622). USD/CNH (US Dollar-Chinese Offshore Yuan) was last at 6.3250 at the New York close (6.3255 yesterday). The Dollar Index (USD/DXY), a popular indicator of the value of the US Dollar against a basket of 6 major currencies, eased near its 2-year high at 99.07 from 99.40 yesterday.
Oil prices soared with Brent Crude at $128.20 after hitting $133.15 overnight and $124.25 yesterday. Metal prices settled higher. Spot Gold closed at $2,049. from $1,998.
Stocks on Wall Street soared as stocks tumbled in a choppy session. The DOW came in at 32,842 from 32,730 yesterday while the S&P 500 was last at 4,195 (4,187 yesterday).
Data released yesterday saw China’s trade surplus climb to +$116 billion from +$94.5 billion previously, beating median expectations at +$99.5 billion. Switzerland’s unemployment rate improved to 2.2% from 2.3%. House prices in Halifax (m/m) in the UK in February rose 0.5% from 0.3% previously, but are below the Economist’s median forecast of 1.1%. The Sentix Eurozone Investor Confidence Index for March fell to -7.0 from a forecast of 10, down from the previous 16.6. The U.S. merchandise trade deficit widened to -$89.7 billion from an upwardly revised previous of -$82.0 billion (vs. -$80.7 billion) and above expectations of -87.7 billion dollars.
- AUD/USD – The Aussie Battler reversed its gains from yesterday, closing at 0.7277 from 0.7315. Overnight, the AUD/USD pair traded as high as 0.7348. Australian inflation threatened to hit 12-year highs as recent flooding on the East Coast sent prices soaring.
- EUR/USD – the common currency found respite after three days of losses. After trading at an overnight low of 1.0849, the EUR/USD pair rebounded to end at 1.0905, up 0.36% from yesterday’s 1.0853. Overnight, the Euro traded as high as 1.0958. The euro also rebounded against other currencies.
- USD/JPY- the greenback rose slightly against the Japanese currency to 115.72 from 115.32 yesterday. A drop in US Treasury bond prices drove yields higher. The benchmark US 10-year yield jumped 9 basis points to 1.86%. Japan’s 10-year JGB yield rose one basis point to 0.15%. The overnight high for USD/JPY was at 115.79.
- GBP/USD – The Pound settled little changed at 1.3105 (1.3108 yesterday) after a choppy overnight session. GBP/USD fell to an overnight low of 1.3082 before bouncing back to its New York close. Overnight, the UK also announced that it was banning all crude oil imports from Russia. The UK’s current dependence on Russian natural gas is only 4% of its supply.
On the lookout: Today’s economic calendar is light. RBA Governor Philip Lowe spoke at the Australian Financial Review’s trade summit earlier today. Among the highlights of the RBA chief’s speech was “plausibility that the cash rate will be increased later this year.” The Australian Dollar was little changed, currently sitting at 0.7267 versus 0.7277 earlier in the day.
Australia’s Westpac Bank Consumer Confidence Index kicks off today’s reports (f/c -1.1% vs. previous -1.3% – FX Street). Japan then follows with its Q4 GDP (q/q/c 1.4% vs. 1.3%). China follows with its February CPI (m/mf/c 0.3% from 0.4%; y/yf/c 0.8% from 0.9%), China’s February PPI (y /yf/c 8.7% of 9.1% – ACY Finlogix). Japan Releases February Machine Tool Orders (y/y no f/c, previous was 61.4%). France begins its European reports with its fourth quarter non-farm payrolls (f/c 0.5% of 0.5%), Italy publishes its January industrial production (m/mf/c 0% of -1% – ACY Finlogix). The US rounds out today’s data releases with its JOLT job openings for January (f/c 10.925m vs. previous 10.925m – ACY Finlogix).
Business perspective: Hectic trading will continue in all markets, with the war in Ukraine the dominant force. In the forex market, the dollar index (USD/DXY) eased 0.22% to 99.07 despite rising US Treasury yields. Speculators bought the greenback as risk sentiment deteriorated last week. The price action of EUR/USD (higher) and USD/DXY (lower) overnight tells me that speculative long US Dollar bets are tiring. Early Asian reports pointed to Ukrainian President Volodomyr Zelensky confirming he was no longer pushing for NATO membership. This indicates a possible ceasefire in the future. A return to risk would see the greenback lose ground. The only common denominator is that choppy trading in all markets is likely to continue.
- EUR/USD – the common currency has borne the brunt of the war in Ukraine, losing more than 1% at the start of this week alone, falling from 1.1060 to 1.0852 yesterday. Overnight was the first high close for the Euro this month, closing at 1.0905. During the day, expect immediate resistance at 1.0930 and 1.0960 (overnight high at 1.0958). Immediate support is at 1.0880 and 1.0850. Expect another choppy session with a likely range of 1.0860 to 1.0960. Prefer to buy dips, specifications are still short.
- AUD/USD – The Aussie Battler reversed its strong overnight gains as the recent deluge saw flooding hit the country’s east coast. Overnight, AUD/USD hit a low of 0.7245 since opening at 0.7315 yesterday. For today we can find immediate support at 0.7245 followed by 0.7215. On the upside, immediate resistance can be found at 0.7310 followed by 0.7340 (overnight high was 0.7348). Look for further sawtooth trading in the Aussie with a likely range today of 0.7240-0.7340. Prefer to buy dips today.
- USD/JPY- against the Japanese yen, the dollar rose slightly to 115.72 from 115.32 yesterday. Rising US bond yields propelled this currency pair to an overnight high at 115.79. Immediate resistance stands today at 115.80 followed by 116.10. On the downside, immediate support can be found at 115.35 (overnight low at 115.32). The next level of support is at 115.00. Expect another choppy day in this currency pair with a likely range today of 115.00-116.00. Just swap the range shag on this one, it’s got 100 points in it.
- USD/CAD- Like the Aussie, the Canadian loonie lost ground against the greenback despite rising oil prices. In early Asia, USD/CAD has opened at 1.2878 since yesterday’s open at 1.2818. The overnight high traded was at 1.2900 while the overnight low was recorded at 1.2796. On the day, the immediate resistance is at 1.2900 followed by 1.2930. Immediate support can be found at 1.2850, 1.2820 and 1.2790. This currency pair was notoriously volatile. The war in Ukraine and its impact on oil prices once again stirred up the loonie. Happy Days. Likely range today 1.2810-1.2910, happy days.
Happy Wednesday everyone.