FOREX: Broad Dollar Weakness Pervades, USDCHF Prints Below 0.8400
- Although off its worst levels, the session has been characterised by a resumption of US dollar weakness, which sees the ICE dollar index down 0.5% ahead of the NY open. USD outflows have combined with a further souring of risk sentiment, as market participants continue to gauge the impact of such restrictive US trade policy.
- This dynamic briefly saw the DXY back below 102.00 and contributed to EURUSD reaching as high as 1.1089. With volatility remaining extremely high, and markets continuing to ponder the best expression for the rapid swings in risk sentiment, EURUSD did move aggressively back to 1.1000, before stabilising somewhat. Additionally, ECB rate cut pricing has picked up, providing an additional Euro headwind to contend with.
- Safe havens remain the key beneficiaries, with both JPY and CHF rising around 0.6% on the session. USDJPY fell to within two pips of the most recent cycle lows at 144.56, keeping bearish momentum firmly in place. A break of this level would signal scope for an extension towards 144.13, a Fibonacci retracement point, and 143.43, the Oct 2 ’24 low.
- For USDCHF, the pair briefly broke below 0.8400 for the first time since September. Trend indicators continue to point south, and the market’s focus will be on 0.8333, of which a break would place USDCHF at its lowest level since the removal of the peg in 2015.
- AUDUSD screens as the best performing major pair, rising 0.85%. It is important to put this into context, given the aggressive move down to 0.5915 in early APAC trade. Spot remains ~1.25% off the Tuesday highs.
- Earlier today, all eyes were on USDCNH as it broke above 7.40, reaching as high as 7.4273 before gravitating back to 7.3820 at typing . The moves come as USD/CNY saw the highest fix since 2023 this week. Chinese Premier Li Qiang said his country has ample policy tools to “fully offset” any negative external shocks.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EQUITIES: EuroStoxx 50 Futures Through First Support
The recently outlined risk-negative factors push EuroStoxx 50 futures through Friday’s low.
- The 20-day EMA (5,445.11) has also been breached, exposing next support at the March 4 low (5,373.00).
- Zooming out, the technical trend in the contract is unchanged, remaining bullish, trading closer to its recent trend highs. This remains the case as long as the contract holds above the March 4 low.
CROSS ASSET: Risk-Off Trade Driven By 3 Factors
Broader risk-off trade seems to be driven by 3 major factors:
- Continued U.S. growth worry.
- Signs of tension within the German fiscal negotiations as the Greens grow a little louder when it comes to voicing some lingering areas of dissent. Most still expect the well-documented fiscal reform to be passed, however, the headlines remind market participants of the tight time constraints and continued potential for posturing/headwinds ahead of any deal.
- Social media reports suggesting that the Finance Minister of Israel has said that fighting in Gaza is set to resume in absence of progress in negotiations with Hamas, with the new chief of staff having “a more effective combat plan than his predecessor”.
COMMODITIES: Last Week's Cycle Lows Reinforce Bearish WTI Future Trend
A bearish trend condition in WTI futures remains intact and last week’s fresh short-term cycle lows reinforce current conditions. Recent weakness has resulted in a clear breach of support at $70.20, the Feb 6 low. This confirmed a resumption of the downtrend that started Jan 15 and has paved the way for an extension towards $63.61 next, the Oct 10 ‘24 low. Key short-term pivot resistance is seen at $70.54, the 50-day EMA. Gold is unchanged. The trend condition remains bullish and the recent pullback appears to have been a correction. A stronger rally would refocus attention on $2962.2, a Fibonacci projection. This would also open the $3000.0 handle. On the downside, a resumption of weakness would instead suggest scope for a deeper correction and expose support around the 50-day EMA, at $2823.8. The 50-day average marks a key support.
- WTI Crude up $0.02 or +0.03% at $67.09
- Natural Gas up $0.21 or +4.73% at $4.61
- Gold spot down $9.6 or -0.33% at $2899.23
- Copper down $4.45 or -0.94% at $466.5
- Silver down $0.18 or -0.56% at $32.3488
- Platinum down $1.47 or -0.15% at $967.77
