The dollar was headed for its worst week of the year on Friday as unexpectedly strong economic data in Europe, downbeat U.S. jobs figures and a determinedly accommodative Federal Reserve have prompted investors to unwind some bets on the greenback.
The euro and yen are also poised for their largest weekly percentage gains in five months while the dollar index, which has fallen 1% this week, is parked near a two-week low at 92.066.
“In short, the energy has gone out of the dollar’s first-quarter rebound, just as it has gone out of the bond sell-off,” said Kit Juckes, head of FX strategy at Societe Generale.
Early in the Asia session, the euro sat above its 200-day moving average at $1.1916, just short of Thursday’s two-week top at $1.1928, while the yen pushed through its 20-day moving average to hold at 109.325 per dollar. The euro is up 1.4% against the dollar this week and the yen is up 1.3%.
The euro has also risen more than 2% against the pound this week, bouncing from a one-year low of 84.70 pence on Monday to hit 86.81 pence in Asia on Friday amid growing concerns about Britain’s reliance on AstraZeneca’s vaccine. Sterling was an outlier against the dollar this week and has fallen half a percent to sit at $1.3744.
Fed leaders also again vowed to keep monetary policy super easy, even after some erstwhile positive signals from economic data. Chair Jerome Powell said policy wouldn’t shift until there was at least a monthslong string of such data, while board member James Bullard said the Fed should not even discuss changes until it is clear the pandemic is over.
The Aussie last sat at $0.7657, up 0.8% for the week, while the kiwi climbed to $0.7060, up 0.6% on the week.
“Markets (are) re-thinking the U.S. dollar exceptionalism view,” ANZ Bank analysts said in a note on Friday.
“Stronger U.S. growth should benefit all global cyclical assets, including the New Zealand dollar and Asian currencies, and this appears to be the theme now at play.”
EUR/USD has been benefiting from Fed Powell’s dovish comments but virus and fiscal concerns in Europe and profit-taking on Wall Street may trigger a setback, Yohay Elam, an Analyst at FXStreet, reports.
“While the Federal Reserve is focused on outcomes, not outlooks, and continues printing greenbacks, Powell’s messages were not new. On Friday, investors already have a somewhat different view – the recovery in US Treasury yields have edged higher, underpinning the greenback and pushing EUR/USD under 1.19.”
“EUR/USD bears may have more to chew on in Europe. Isabel Schnabel of the European Central Bank warned that delaying EU fiscal aid would be a ‘catastrophe.’ She shed light on issues with distributing the already agreed New Generation funds.”
“The old continent’s more significant issues come from covid. Cases remain elevated in Germany, France, and Italy, with Spain joining in with fresh post-Easter increases. Moreover, several EU countries have banned the usage of AstraZeneca’s vaccines for most adults, potentially delaying immunization rollout.”
“Some support awaits at 1.1890, the daily low, followed by 1.1860, which cushioned the pair on Thursday. Resistance is at the April peak of 1.1925, followed by 1.1950 and 1.1990, the latter being a double top.”
The USD/JPY pair has eroded the 20-day moving average at 109.51eroded to leave the market under pressure, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, reports.
USD/JPY sells off
“USD/JPY is under pressure following the demise of the 20-day ma at 109.51 and the mid-March high at 109.36, and it has already reached the 23.6% retracement at 109.00.”
“We would allow for a slide to initially the March 10 and 23 lows at 108.41/34 and there is scope for the 38.2% retracement at 107.77.”
“Above 110.97 lies the 111.13/38 October 2018 low and mid-February 2019 high.”
Legal disclaimer: The material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instruments. UR Trade Fix Ltd accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. The analysis does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it. Past performance does not constitute a reliable indicator of future results and future forecasts do not constitute a reliable indicator of future performance.
It has not been prepared in accordance with legal requirements designed to promote the independence of research, and as such it is considered to be marketing communication. Although we are not specifically constrained from dealing ahead of the publication of our research, we do not seek to take advantage of it before we provide it to our clients. We aim to establish, maintain and operate effective organizational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. We operate a policy of independence, which requires our employees to act in our clients’ best interests when providing our services