· The dollar was poised on Friday for its strongest gain in five months as investors responded positively to a bounce in U.S. Treasury yields and as some of its rivals were hit by dovish signals from their own central banks.
With many currencies on the defensive, the dollar has weathered a decline in benchmark Treasury yields to a 15-month low. Against a basket of key rival currencies, the U.S. currency was a shade higher at 97.217.
The index was on track for a more than one percent rise in March, its best monthly performance since gaining 2.1 percent in October last year. It has risen 1.5 percent from a near two-month low of 95.74 brushed on March 20.
· The 10-year U.S. Treasury note yield edged up to 2.405 percent, extending its rise after coming off a 15-month low of 2.340 percent touched overnight.
· US DOLLAR RALLIES AS Q2 OPEN NEARS
It’s been a busy month in the US Dollar, but the ascending triangle formation that’s been building for the past few months remains. Prices tested the resistance side of that formation a few weeks ago, just after the ECB rate decision. But the day after that rate meeting brought an abysmal NFP report, and prices soon moved into a week-and-a-half pattern of weakness that saw USD move down to the support side of that formation around FOMC. Since last week’s FOMC, however, prices have been rallying and working-higher within this triangle. This keeps the door open for bullish breakout potential around the currency as the page turns into Q2.
· GBP/USD struggles around 1-week low as odds prevail against UK PM May’s deal
GBP/USD trades near 1.3050 during the early Asian session on Friday. The Cable struggles around one week low as Theresa May is likely witnessing third defeat in the UK parliament for her Brexit proposal ahead of today’s vote at 14:30 GMT.
The GBP/USD pair broke the base of an ascendant channel that led price action since the beginning of the year, with the broken trend line at around 1.3120 for this Friday, offering now a critical resistance, as, if the pair advances but gets rejected from the trend line, further declines to fresh lows are likely. For the short-term, and according to the 4 hours chart, the risk is skewed to the downside as the decline extended below the 200 EMA, now a few pips above the mentioned trend line, while the 20 SMA heads south above the larger one. Technical indicators in the mentioned chart maintain their strong downward slopes, despite being close to oversold levels.
Support levels: 1.3035 1.3000 1.2965
Resistance levels: 1.3080 1.3125 1.3160
· Investors should sell the Australian dollar and New Zealand dollar, and put their money in the Chinese yuan and the Singapore dollar instead, according to the Head of Asia Research at ANZ bank, Khoon Goh.
"The trade we've been recommending is to short the Australian dollar against the Singapore dollar, and to short the New Zealand dollar against the yuan," Goh told CNBC on Friday.
Shorting is a trading strategy that involves selling a borrowed stock or currency, with a view that it will drop in value, and can be bought back later at a lower price.
"I think that provides a good mix of play into the dovishness of the antipodean central banks and also the resilience of the Asian currencies," Goh said, referring to the central banks in Australia and New Zealand.
· The Trump administration is prepared to keep negotiating with China for weeks or even months to reach a trade deal that will ensure the world’s second-largest economy improves market access and intellectual-property policies for U.S. companies, a senior American official said.
Kudlow on Thursday said the U.S. may remove some of the tariffs on Chinese goods, but not all. “We’re not going to give up our leverage,” Kudlow said. “It doesn’t necessarily mean that all of the tariffs would be kept in place. Some of the tariffs would be kept there. Again, when Bob Lighthizer comes back, he will illuminate all of us on that. That’s part of the negotiations and we’ll see."
A possible meeting between Trump and Chinese President Xi Jinping to sign an agreement to end their trade war will likely happen no earlier than late-April, Bloomberg reported this month, citing people familiar with the matter.
· Trade talks between China and the United States began with a working dinner in Beijing on Thursday night as negotiators wasted no time trying to speed up the high-stakes discussions.
The US delegation led by trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin arrived in Beijing on Thursday for the latest round of talks aimed at resolving sticking points at the centre of the ongoing US-China trade war.
“Although some progress have been made during the telephone negotiations between Vice-Premier Liu He and his US counterparts, there are still lots of work to do,” commerce ministry spokesman Gao Feng said, adding that a full day of talks was scheduled for Friday.
Liu, China’s top trade negotiator, is then expected to visit Washington next week, but any final deal to end the trade war which has rattled the global economy since last year can only then be agreed at a proposed summit between President Xi Jinping and US counterpart Donald Trump.
· Prime Minister Theresa May will make a last-ditch attempt to push through her Brexit deal on Friday after a series of votes in the U.K. Parliament showed that political deadlock is as strong as ever.
With no clear consensus on Wednesday night’s votes, there is expected to be a second round of nonbinding votes on Monday.
As Pickering noted, “the calculus may change for a significant number of MPs so that a majority in favor of one of the options that almost made it tonight could emerge. 320 votes guarantees a majority in the House of Commons.”
· Britain has until May 22 to leave the bloc if politicians agree to May’s deal, or April 12 if they do not. If Britain wants to stay longer, it will have to participate in European parliamentary elections on May 26.
Faced with the prospect of a delayed departure, some Brexiteers agreed Wednesday to back May’s deal if a third vote were held. But it’s nowhere near certain that she would get the support the deal needs to get through Parliament, particularly after the DUP said again that it would not support it.
If the deal were passed, May agreed Wednesday that she would leave office. This would mean a leadership contest in the Conservative Party, and the increased likelihood of a general election.
· The European Union risks opening up a trade war with Malaysia over its “grossly unfair” policies aimed at reducing the use of palm oil, Prime Minister Mahathir Mohamad said on Thursday.
This month, the European Commission concluded that palm oil cultivation results in excessive deforestation and its use in transport fuel should be phased out by 2030.
Malaysia, the world’s second biggest palm oil producer after Indonesia, relies on the crop for billions of dollars in foreign exchange earnings and hundreds of thousands of jobs.
· Turkey holds nationwide local elections on Sunday.
Investor fears have roiled Turkey’s lira over the past 48 hours.
Markets remember Turkey’s currency crash last summer, which triggered a sell-off in emerging markets and sent investors running for the hills.
· Oil prices rose on Friday, pushed up by ongoing supply cuts led by producer club OPEC and U.S. sanctions against Iran and Venezuela, putting the crude markets on pace to post their biggest first quarter gain since 2009.
U.S. West Texas Intermediate (WTI) futures were at $59.56 per barrel at 0211 GMT, up 26 cents, or 0.4 percent, from their last settlement.
WTI futures are set to rise for a fourth straight week and are set for a first quarter gain of 31 percent.
Brent crude oil futures were up 30 cents, or 0.4 percent, at $68.12 per barrel. Brent futures are set to increase by 1.7 percent for the week and are set to climb by 27 percent for the first quarter.
· CRUDE OIL AS A MACRO BATTLE FOR Q2
I had looked at Oil on Tuesday and remarked on resistance at the $60 level, pointing attention to the potential for a tweet from President Trump to push prices-lower. That took place earlier today and prices moved down for a quick test of support. But this is unlikely to be a smooth bearish trend, as other parties have interest pointing in the opposite direction, and this may provide a near-term show of support that can keep ranges in-play until, eventually, a directional move begins to show. For now- that $60 level remains as resistance and this can be an interesting area to investigate targets for topside plays. Underneath price action – short-term support is around 58.33 and a bit deeper is a prior zone of resistance that can function as support from 57.47-57.85.
Reference: Reuters, CNBC, Daily FX, FX Street
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