The USD was the weakest of the major currencies today. The CHF was the strongest.
The greenback’s declines were supported by US yields which fell (and are well below their recent cycle highs). Admittedly, yields are off the lows of the day but remain negative.
A look at the yields shows:
- 2 years 2.619%, -4.7 basis points. The recent cycle high extended as high as 2.857% on May 11
- 5 years 2.847%, -4.4 basis points. Its recent cycle high extended to 3.107% on May 9
- 10 years 2.8496%, -3.4 basis points. This is the cycle’s recent peak of 3.203% on May 9
- 30 years 3.0614%, -1.2 basis points. Its recent cycle high peaked at 3.309% on May 9
Dollar weakness may also be a function of tighter monetary policy abroad. Canada’s Producer Price Index came out much higher than expected today and should keep the Bank of Canada firmly in a tightening mode. Meanwhile, in Europe, the battered euro got some relief from ECB policymakers who were a bit more eager to start the tightening cycle (with chatter even though a 50 basis point move ).
Traders could also expect slower growth in the US going forward due to a faster Fed rate hike. The playbook is designed to lower inflation expectations on the demand side of the equation versus the supply side that the Fed cannot control (i.e., the supply chain of the China’s lockdown and port issues, rising oil prices from war in Ukraine, a housing market that has supply issues like Well).
Economic data today was weaker:
- Initial jobless claims were estimated at 218,000 from 200,000
- Philadelphia, this index was lower by 2.6 against 16.0 expected. The Empire State index released earlier this week was also much weaker than expected
- Existing home sales were also slightly lower (down for the 3rd month), although supply remains a concern and prices remain high.
A snapshot of other markets shows:
- Spot gold followed the lower dollar and is trading up $25.94 or 1.43% at $1,841.50
- Silver is up $0.52 or 2.3% at $21.91
- WTI crude oil futures for July delivery are at $109.46. That’s up $2.40 or 2.24% on the day
- Bitcoin is trading just around the $30,000 level. It is up on the day but off its high of $30,505.14. The low price reached $28,656.46 today. Technically, the price is just above its 100 hourly moving average at $29,878, the 200 hourly moving average below that at $29,660. Staying above both gives buyers modest control, but the digital currency remains in a trading range between $28,600 and $31,400
In US equity markets today, the Dow Jones Industrial Average opened lower and was the biggest drop today, but recovered from low levels. The NASDAQ index has traded above and below flat levels and above and below its 50% midpoint of the range since the pandemic low. This median level since March 2020 stands at 11449.29. The price closes just below this level, which slightly tilts the bias to the downside.
Final figures show:
- The Dow Industrial Average closed down -236.94 points or -0.75% at 31,253.12. The high reached 31569.13, up 79.06 points or +0.25%. The low was at 31016.41, down -473.66 points or -1.5%
- The S&P index closed down -22.89 points or -0.58% at 3900.78. The high price reached 3945.92, up 22.24 points or +0.57%. The low was at 3877.17, down -46.51 points or -1.19%
- The NASDAQ index closed down -29.65 points or -0.26% at 11288.51. The high price reached 11562.82 up 144.67 points or +1.27%. The low was at 11313.31, down -104.84 points or -0.92%
- Russell 2000 bucked the trend and closed up 1.37 points or +0.08% at 1776.22. The highest price reached 1797.23. The low price extended to 1759.66.
In the forex market, certain technical levels are in play as the new trading day approaches for the major currency pairs:
- EURUSD: EURUSD based near its 100 hourly MA at today’s low at 1.0464. The London morning session low hit 1.0466 – just ahead of this low. The price moved higher during the afternoon session in the US with the high price extending up to 1.0606. That’s a solid 142 pips to the upside. EURUSD moved above a 1.0592 and 1.0598 swing zone to the upside, but is currently trading below that swing zone at 1.0590. In the short term, buyers would like to see the 1.05728 level hold support on the downside (or stay above). This is the 38.2% decline from the April 21 high to last Friday’s low. If the price can stay above this level, the buyers remain in control with a move above 1.0600 opening the door to the May 5th high at 1.0642.
- GBPUSD: GBPUSD – like EURUSD – was based near the 100 hour MA earlier in the day and this opened the door for further bullish momentum. The 100 hour MA was at 1.2338 when the low price tested this MA at 1.2341. Positioning above this level opened the door for a run up to 1.2524 high. That extended above Tuesday and Wednesday’s highs at 1.2500, and the 38.2% move down from the April 21 high at 1.2511, but the momentum hasn’t faltered. could not be sustained and the price is trading at 1.2472 until the close. There is near support at 1.2448 in the new trading day. Stay above this level and the buyers can make another run to and through the 38.2% at 1.25116.
- USDJPY: USDJPY found sellers on lower yields. When yields were at the bottom, the USDJPY was also near the bottom. The low reached 127.01 just above the natural support at 127.00. However, with rising yields, USDJPY also rose. TI is trading at 127.81. It’s still down on the day, but above the 38.2% rise from the March 31 low at 127.508. This retracement level will be a barometer on the new trading day. The move below is more bearish (by the way, this level was also the May 12th low). Stay above and move above 128.00, may see more buying into the weekend.