US Senate Passes Stimulus Bill, BoE and US Jobless Claims in Focus

The dollar continued to slide against most of the other G10s, while most EU and US indices closed positive on expectations that the US Senate was getting closer to pass a USD 2 trillion stimulus package. Indeed, the bill was approved later in the day, but Asian indices finished today’s trading mixed. As for today, apart from headlines surrounding the coronavirus, investors may pay some attention to the BoE decision and the US initial jobless claims for last week.

Markets Trade Risk on Ahead of BoE and US Jobless Claims

The dollar continued trading lower against most of the other G10 currencies on Wednesday and during the Asian morning Thursday. It gained only against AUD, NZD, and slightly versus SEK, while it underperformed the most against NOK, EUR, and CAD in that order. The greenback was down against CHF and JPY as well.

The relative strength of the safe havens yen and franc, combined with the weakness of the risk-linked Aussie and Kiwi, suggests a risk-off trading environment. However, the slide of the US dollar and the strengthening of the oil-related Loonie and Krone point otherwise. Thus, with the FX performance painting a blurry picture with regards to the broader market sentiment, we will turn our gaze to the equity world.

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In a dollar-denominated world, investors scaling back their risk exposure may prefer to hold cash in order to be able to cover loses and margin calls elsewhere. History has shown that in extremely turbulent conditions, the greenback may outperform even the traditional safe havens, like the yen and the franc. In our view, the dollar may slide somewhat in case the forecast is exceeded, but we don’t expect the retreat to last for long. After all, a very bad figure may result in a risk-off trading in the aftermath, and paradoxically, may once again prove supportive for the dollar. In any case, we prefer to exploit any potential dollar gains against the Aussie or the Kiwi, currencies which come under selling interest when investors’ morale deteriorates.

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AUD/USD — Technical Outlook

After yesterday’s failed attempt to stay above the psychological 0.6000 hurdle, AUD/USD reversed back south and fell below its short-term upside support line drawn from the low of March 19 th. If the pair continues to trade below that line, there is a chance to see a larger decline, especially if the rate slides below the 0.5865 hurdle, which is an intraday swing low of March 24 thand lies near today’s current low. Until we see a drop below that hurdle, we will stay cautiously bearish.

As mentioned above, if AUD/USD stays below the aforementioned upside line and falls below the 0.5865 area, this would confirm a forthcoming lower low and more bulls might start abandoning the field. This is when we will aim for the 0.5700 territory, or even the 0.5640 hurdle, marked by the low of March 23 rdand an intraday swing low of March 19 th. The pair may temporarily get a hold-up around that area, from which it could even rebound slightly. However, if the bears are still feeling more confident, they might take back control and send AUD/USD down again. If the 0.5640 zone surrenders to the bears, this could lead to a test of the 0.5510 level, which is the current low of March.

Alternatively, if the rate climbs back above the aforementioned upside line and manages to overcome the 0.6073 barrier, marked by the current high of this week, this will confirm a forthcoming higher high and could open the door for a further extension north. We will then aim for the 0.6184 obstacle, a break of which may clear the path to the 0.6300 level, marked by the high of March 16 th.

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EUR/GBP — Technical Outlook

Looking at the technical picture of EUR/GBP on our 4-hour chart, we can see that the pair is currently coiling up, as it is stuck in a triangle pattern. For now, we will stay neutral and wait for a clear break of one of the sides of that formation.

If EUR/GBP makes a move higher, breaks the upper side of the aforementioned triangle and climbs above the current high of this week, at 0.9275, this would confirm a forthcoming higher high and might attract more buyers into the field. The pair could then drift to the 0.9387 hurdle, a break of which may set the stage for a test of the current highest point of March, near the 0.9500 level.

On the other hand, if the rate falls sharply, breaks the lower bound of the triangle and drops below the 0.9055 area, which is the current low of this week, that may spook the buyers from the field temporarily and allow the bears to take control for a while longer. That’s when we will aim for the 0.8995 zone, a break of which may send the pair to the 0.8939 area, marked by an intraday swing high of March 13 th. Initially, EUR/GBP might stall around there, or even bounce back up a bit. However, if the rate finds to difficult to get back above the psychological 0.9000 area, this could lead to another slide. If the pair easily overcomes the 0.8939 hurdle, this will confirm another forthcoming lower low and may clear the way to the 0.8842 level, marked by the low of March 13 th.

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As for the Rest of Today’s Event

During the early European morning, we already got the UK retail sales for February. Headline sales slid 0.3% mom after rising 1.1% in January, missing the forecast of a slowdown to +0.2%. The core rate entered negative waters as well, sliding to -0.5% mom from +1.8%. The forecast was for the core rate to slide to -0.2%.

As for tonight, during the Asian morning Friday, Japan releases the Tokyo CPIs for March. No forecast is currently available for the headline rate, but the core one is anticipated to have ticked down to +0.4% yoy from +0.5%.

Disclaimer:

The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.

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Originally published at https://www.jfdbank.com on March 26, 2020.

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