Forex news for NY trading on March 26, 2020
- Major indices end the day with solid gains and at the highs
- Fed's Powell speaks at FSOC meeting in Washington: Fed has taken serious action
- We are in the last hour...Buckle up
- EU leaders fail to agree on next steps to fight virus - report
- France coronavirus total deaths at 1696 vs 1331 yesterday
- Six US Senators tell Pompeo that Saudis and Russians at economic warfare against US
- UK coronavirus cases at 11,658 vs 9,529 yesterday
- Trump expects to label counties as low, medium and high risk
- Italy death toll rise by 662 to 8165
- UK Sukak announces self-employed income support scheme
- Italy announces 6,153 new coronavirus cases, the most in five days
- US auctions off 7 year note at a high yield of 0.680%
- Are we missing the forest for the trees on coronavirus?
- European shares recover and close higher on the day
- Trump expected to send US troops to border with Canada to support operations
- New York coronavirus cases 37,258 vs 30,811 yesterday
- KC Fed manufacturing index -17 vs -10 expected
- Pelosi: There will be a strong bi-partisan vote for virus legislation Friday
- China implementing $344B in mainly fiscal mesures in virus fight - ministry official
- UK coronavirus expert makes a U-turn, sees far less impact
- US Energy Debt withdraws tender to buy crude for SPR
- Italy's Lombardy regional governor says virus data Wed 'not very good' up by some 2,500
- US Q4 GDP third reading +2.1% vs +2.1% expected
- US February prelim wholesale inventories -0.5% vs -0.2% expected
- US initial jobless claims surge 3283K vs 1640K estimate
- US February advance goods trade balance -$59.9B vs -$63.4B expected
- The JPY is the strongest and the USD is the weakest as NA traders enter
In other markets:
- Spot gold is trading up $14.25 or 0.8% at $1631.20. There was lot of up and down volatility with the low price coming in at $1593.15. The high price extended to $1645.02
- WTI crude oil futures continue to be under pressure as global demand falters as a result of the coronavirus and supply remains a problem. The price is currently trading at $23.07. That is down $1.42 or 5.8%. The good news is the price is off the settlement price of $22.60
Today all the focus was on the long-awaited weekly initial jobless claims. The number did not disappoint with a gain of 3.283 million new jobless claims. That smashed the old record of 655K from March 2009. The spike has ruined the chart forever (or so it seems but who knows what next week might bring?).
So how did the market react?
- The Dow Jones is on the track for it's best week since 1931 and rose 6.3% today
- The S&P is on track for the best week since June 1938 and it rose by 6.24% today
- NASDAQ on track for the best week since April 2001 and it rose by 5.6% today
You can say the week claims number was all baked in the cake.
Of course, the US Senate passed an equally impressive and record $2T coronavirus stimulus package overnight that includes money for every man, woman and child (well most) along with aid for small, medium and large businesses. That is on top of the other fiscal measures and a plethora of Fed expansionary action including:
- Purchasing $125 billion in securities every day this week
- Buying corporate bonds, asset-backed securities, municipal bonds, and mortgage-backed securities
- Announcing that QE was unlimited
- Initiating a $300 billion treasury back lending program
- Setting up Main Street loan facility
- Lowering the target rate by 1.5% to 0.25%
Moreover Fed's Powell said on the Today Show this morning (a first for the Fed Chair to visit the morning variety program), that:
- This is not a typical downturn
- There is nothing fundamentally wrong with our economy
- The Fed will "aggressively and forthrightly" replace normal lending channels for businesses that have temporarily closed due to the pandemic.
- There can also be a good rebound on the other side,
- That the Fed is working to "ensure that it is as vigorous as possible," adding that "the virus is going to dictate the timetable."
- The Fed has the ability to step in and provide loans to any industry
That is a lot of firepower.
Of course there IS a lot of firepower because of the coronavirus, and it's devastating impact. The expected upward trajectory in Europe, the US, and potentially other parts of the world are also expected to get a lot worse before gets better. That has - and will continue to have - dire economic consequences for large sections of the the economy in the US and around the world. Today J.P. Morgan lower their estimate for 2nd quarter GDP to -25%. That's a big number.
Nevertheless, today was about the good news - or at least the hope that the bad will not be as bad as feared.
That led to the S&P and Dow indices rising over 6.2% each and the NASDAQ gaining 5.6%. Each of the major indices closed at the session highs
In the forex market, the flight to safety bid into the USD was replaced by selling. The US dollar was the weakest of the major currencies by far, with the greenback falling by -0.95% versus the CAD and up to -2.7% vs the GBP. The other major currencies fell in between those extremes (see charts below).
Some technical levels into the new trading day:
- EURUSD: The EURUSD trended to the upside today and in doing so reached its 100 day moving average at 1.10425. The high price did extend above that moving average level in late afternoon trading with the high price reaching 1.10579. However selling into the close has the price back below the moving average at 1.1032. In the new trading day, the moving average will be the barometer for the bulls and bears. A move above would target the 200 day moving average at 1.10799. Get above and it opens the door for further upside. If the price can stay below, there may be more downside probing with the 1.1000 area as a target support level.
- GBPUSD: The GBPUSD had a huge 454 pips trading range for the day. That took the price to the highest level since March 17, and above the 38.2% retracement of the move down from the March 9 high at 1.20926. The price is trading at 1.2200 at the end of the day. Close your support will be eyed at the March 18 high price of 1.21287 in the new trading day. On the topside keep an eye out at the 1.2304 level. That represents the 50% midpoint retracement of the March trading range. Tomorrow is the last day of the trading month
- USDJPY: The USDJPY traded in a 207 pip trading range. That happened to equal the average trading range for the last month. Like other currencies, the pair trended to the downside (lower dollar). In the process the price fell below its 200 hour moving average currently at 109.528 and the swing low from last Friday at 109.320. However, the low price at 109.198 fell short of reaching the key 100 day moving average at 109.018. In the new trading day, more downside probing will have traders eyeing that level for bias clues. A break below would target the 108.30-41 area which is home to the 30.2% retracement of the March trading range, and the 200 day moving average.
In the US debt market today, yields fell modestly with the 2-10 year spread remaining steady at around 54 basis points:
