· The dollar rose to a two-week high against the yen on Tuesday as ebbing concerns about weakness in the global economy lifted U.S. bond yields from 15-month lows.
The greenback was steady at 111.395 yen after touching 111.46, its highest since March 20.
The dollar index against a basket of six major currencies added 0.1 percent to 97.336, within close reach of a three-week high of 97.392 scaled the previous day.
The 10-year Treasury yield stood at 2.495 percent, pulling back from a 15-month low of 2.34 percent brushed last week when risk aversion driven by concerns towards a global economic slowdown gripped the financial markets
· “The dollar is benefiting from broader ‘risk on,’ with bonds sold and stocks being bought in light of the strong U.S. ISM data,” said Shin Kadota, senior strategist at Barclays in Tokyo.
“Seasonal flows also appear to be helping the dollar, with the currency drawing demand from participants kicking off the new quarter,” Kadota added.
· The euro was down 0.1 percent at $1.1201. The single currency brushed $1.1198, its lowest since March 8, and was headed for its sixth straight day of losses.
Sterling last traded at $1.3075, down 0.25 percent, after the British parliament on Monday failed to agree on any alternative to Prime Minister Theresa May’s divorce deal from the European Union.
· EUR/USD struggles around the lows amid USD strength
EUR/USD struggles around the 3-week low of 1.1197 as US data continues outshining euro-zone figures. The market mood is also damp due to the Brexit impasse. Euro-zone PPI and US Durable Goods Orders are next.
From a technical perspective, the pair has now slipped back towards challenging a support marked by 61.8% Fibonacci retracement level of the 1.0341-1.2556 up-move, which if broken has the potential to accelerate the slide towards May/June 2017 swing lows, around the 1.1120-10 region en-route the 1.1080 region. The later represents a descending trend-line support extending from August 2018 through low posted in Nov. 2018 and might act as a key pivotal point for the pair's near-term trajectory.
On the flip side, any attempted recovery move might continue to confront some fresh supply near the 1.1250 region, above which a bout of short-covering could assist the pair to aim towards reclaiming the 1.1300 round figure mark. However, any subsequent up-move seems more likely to remain capped near the 1.1325-30 supply zone.
· EUR/USD Technical Analysis: 1.1175/70 can question bears targeting 1.1080
EUR/USD trades near the 1.1200 mark, lowest in a month, on early Tuesday.
Having failed to confirm “falling wedge” bullish formation during mid-March, the quote is presently aiming to revisit March month lows, around 1.1175.
However, oversold levels of 14-day relative strength index (RSI) and a descending trend-line joining November and March month low, at 1.1170, could confine the EUR/USD pair’s further downside around 1.1175/70 area.
In a case bears refrain from respecting 1.1170, June 2017 low around 1.1120 followed by 1.1110 comprising May 2017 bottom could offer intermediate halts during their journey towards another downward sloping trend-line stretched since August 2018, at 1.1080 now.
Alternatively, pair’s pullback can avail 1.1250 as an immediate resistance ahead of challenging 1.1300 and 50-day simple moving average (SMA) level of 1.1330.
In a case where prices rally beyond 1.1330, upper-line of a medium-term “falling wedge”, at 1.1395/1.1400, becomes crucial to watch as a break of which can trigger the pair’s rally towards 1.1450, 200-day SMA level of 1.1470 and then further towards surpassing highs of 2018.
· The global stock rally lost some steam on Tuesday in Asia, and Treasury yields edged lower, after notable moves Monday in the wake of better-than-expected American and Chinese manufacturing data.
Japanese shares reversed modest gains, while benchmarks were up slightly in Shanghai and Seoul, while Hong Kong stocks fluctuated. European futures were little changed. U.S. contracts nudged lower after the S&P 500 Index closed little more than 2 percent from its record high. Bitcoin jumped suddenly to the highest level since November, leading a surge in virtual currencies. The pound slipped on the latest Brexit news while oil added to gains. Ten-year Treasury yields fell after the biggest surge in three months Monday.
· The Chinese government said it will extend a suspension of retaliatory tariffs on U.S. autos and include the opioid fentanyl in a list of controlled substances, two steps that could generate a positive atmosphere for trade negotiations due to resume this week.
The moves signal China is trying to keep momentum in trade talks going as they enter what could be the final stretch before Trump and Xi are presented with a text to finalize or sign. Beijing is determined to prevent an escalation of the frictions that have hurt its economy and roiled markets, even as enforcement measures remain a sticking point in negotiations.
A Chinese trade delegation led by Vice Premier Liu He will visit Washington for the newest round of talks starting on Wednesday.
· U.S. President Donald Trump said on Monday he was willing to wait until after the 2020 presidential election to get Congress to vote on a new healthcare plan, giving Republicans time to develop a proposal to replace Obamacare.
Trump’s move suggests he is willing to debate the future of the U.S. healthcare system during the 2020 presidential election campaign than try to reach agreement on a plan sooner.
· Economic data in the U.S. don't justify an interest rate cut by the Federal Reserve — despite recent calls for the American central bank to do so, said Mark Zandi, the chief economist at Moody's Analytics.
Top White House economic advisor Larry Kudlow said last week that the U.S. central bank should "immediately" cut interest rates by 50 basis points. His comment followed a similar stance by Heritage Foundation fellow Stephen Moore, whom U.S. President Donald Trump has said he intends to nominate for a position on the Fed.
Their comments came after the Fed's latest decision to hold rates steady as it cut the central bank's forecasts for U.S. economic expansion and inflation. The central bank also warned of slowing growth in Europe and China.
"I'm not sure why the Fed needs to go into panic mode here," he said. He pointed to the latest data that showed the U.S. economy was still healthy: Unemployment rate was close to a 50-year low, wage growth was strong, inflation inched closer to the Fed's target of 2 percent and the stock market looked like it could hit record levels again.
Lowering interest rates under such conditions would be "counter-productive" because the move could "juice things up" and encourage debt to build up in the economy, he explained.
· The global economy is “highly likely” to go into a recession if the U.S. and China don’t reach a trade deal within three months, said Moody’s Analytics Chief Economist Mark Zandi.
Business sentiment has been hurt by the trade war and companies are now “on edge,” Zandi said.
The economist also said the probability of a no-deal Brexit is “uncomfortably high” and that’s a risk that could send Europe into a recession.
· Britain has become more likely in the recent days to crash out of the European Union without a divorce agreement, the bloc’s chief Brexit negotiator Michel Barnier said on Tuesday.
He said Britain could still accept the stalled deal negotiated by May, reiterating it was “the only way” for Britain to leave the bloc in an orderly way. Other options were the most damaging no-deal Brexit, or a long delay of the UK’s leaving date, Barnier said, adding the factious UK parliament would hold the responsibility for these.
· Oil prices climbed to nearly five-month highs on Tuesday, supported by firm Chinese economic data that eased demand concerns, the possibility of more sanctions against Iran and further Venezuelan supply disruptions.
Brent crude rose 15 cents, or 0.2 percent, to $69.16 a barrel by 0636 GMT, having earlier touched $69.50, the highest since mid-November.
U.S. West Texas Intermediate (WTI) futures rose 14 cents, or 0.2 percent, to $61.73 a barrel, after earlier rising above $62 for the first time since early November.
Positive data from the world’s biggest economies, the United States and China bolstered prices, with China’s manufacturing sector unexpectedly returning to growth for the first time in four months during March, figures showed on Monday.
Reference: Reuters, CNBC, Daily FX, FX Street
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