• UST AND USD MOVES SUGGEST RISK OFF CURRENTLY • OIL CLOSES HIGHER AFTER DIPPING TO $10 • THE SINGLE CURRENCY WEAKENS AHEAD OF THE ECB
The Japanese Yen and Australian dollar battled it out for the strongest currency in the US session with the Aussie coming out on top. Equities were down from their highs from the start of the US session as news around the Wholesales Inventories and Trade Balance data showed a widening trade deficit and the largest decline in wholesale inventories since 2009. The data didn’t move the US dollar that much which is in a larger range, but recent price action suggest that 100 is the magnetic level and any move away from that is short lived. The upper bound of the larger range is 100.80 and support for the DXY comes in at 98.40.
US 10-year yields were down as the yen and US Treasuries garnered more favour with traders looking for a risk-off position ahead of the FOMC and ECB meetings. The fiscal support is coming into the markets but there is a lot of bearish sentiment as traders look at the data coming out of Americas corporations and business and see no way around a Depression rather than a short sharp Recession. Today’s announcement that Mitch McConnell has squashed President Trumps ideas of continued fiscal spending, with a stimulus bill based on infrastructure, will show that the financial injection into the markets may not keep the markets buoyed for much longer. The US deficit is $1.3trillion and that is maybe too large a number for the US Senators to stomach as we start to look to November’s elections.
Oil futures traded higher into settlement as we look for a reduction in production from the US to combine with the lowest US imports for a couple of decades. Storage is still a problem with massively reduced demand, but some States are starting to come back to life opening up their economies slowly. Assuming the EIA data shows some significant reduction in production following on from the API 10mln barrels build this week, down from 13.3mln last week. In the latest reports from Petro Logistics there is still massive supply coming out of Saudi Arabia and the UAE ahead of the May production cut brokered by OPEC+ even though there had been talk of Saudi cutting ahead of that date. USDCAD bucked the trend of trading inverse to the Oil futures into the close and looks to the 1.4000 resistance level. If there is a sharp turn in the US dollar or Oil, the 1.4000 level could be an inflection point for the Loonie.
The EURUSD pivoted at the mid-morning session high, failing once again to get to the 1.0900 level. This was mainly driven by the US dollar, but the single currency was weak against the yen, Aussie, and pound also. Cable also fell against the US dollar and the move was more significant due to the lowest level recorded by the CBI distributive trades survey data, which came out this morning.