· The dollar was shackled on Tuesday by a combination of weak U.S. economic data and gains for commodity-linked currencies such as the Canadian and Australian dollars which drew support from an extended surge in crude oil prices.
The dollar index against a basket of six major currencies inched down 0.05 percent to 97.001 after losing 0.35 percent the previous day, marking its biggest daily decline since March 20.
· “The dollar’s strength peaked out towards the end of last week, when the U.S. jobs data showed that wage increases had slowed. The currency hasn’t been able to find traction since,” said Shin Kadota, senior strategist at Barclays in Tokyo.
“And the latest bounce in U.S. yields did not provide much lift for the dollar as they still remain at low levels in absolute terms.”
The 10-year Treasury yield bounced to 2.52 percent, edging further away from a 15-month low of 2.34 percent plumbed at the end of March.
The yield was still significantly below its recent highs around 2.8 percent hit in early March.
· “Themes such as U.S.-China trade talks and Brexit are turning rather stale and no longer providing the currency market with as much incentive. The rally in crude gave the market something to focus on under such conditions, ” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
The euro was effectively flat at $1.1265 after advancing 0.4 percent on Monday, when it ended a two-day losing streak.
The pound edged up 0.1 percent to $1.3078, having traded in a narrow range so far this week, reflecting nervousness in the market about key Brexit talks between British Prime Minister Theresa May and the opposition Labour Party.
· U.S. 'not satisfied yet' in China trade talks: White House official
U.S. officials are “not satisfied yet” about all the issues standing in the way of a deal to end the U.S.-China trade war but made progress in talks with China last week, a top White House official said on Monday.
The two sides wrapped up the latest round of talks in Washington late last week and will be resuming discussions this week remotely.
· What changes has China already made to meet US trade war demands?
1. Beijing has responded with large purchases of American agricultural products and tariff cuts on US-made car imports.
2. It also laid out new domestic laws and regulations to address intellectual property protection and market access.
3. China announced on April 1 it would classify all fentanyl variants as controlled substances from May 1, after Xi agreed to Trump’s request for tougher action to stem the flow of the deadly synthetic opioid from China to the US.
4. Following the trade war truce, China rolled back the tariffs it had added on US-made cars.
· The U.S. Trade Representative on Monday proposed a list of European Union products ranging from large commercial aircraft and parts to dairy products and wine on which to slap tariffs as retaliation for European aircraft subsidies.
With the move, the USTR said it was kicking off the process for retaliation against over $11 billion worth of damage from EU subsidies to Airbus that the World Trade Organization has found cause “adverse effects” to the United States.
The European Union and the United States have been battling for more than a decade over mutual claims of illegal aid to plane giants Boeing and Airbus, with parallel cases at the WTO. Both sides have been caught paying billions of dollars of subsidies to gain advantage in the global jet business.
· For Europe, the timing could not be worse. Eurozone growth has been abysmal with last week’s release of German factory orders that put a dent in the Euro’s performance and soured overall market sentiment.
Furthermore, this week, the IMF and World Bank will be holding their annual spring meeting where policymakers will weigh in on the outlook for global growth and potential risks facing the financial system. Fears over a global slowdown will likely dominate the topic of discussion as the three largest economies –the US, China and EU – decelerate as the geopolitical landscape shifts into unpredictable territory.
· European Union ministers said on Tuesday the bloc was ready to grant Britain a second Brexit delay but that British Prime Minister Theresa May must come up with a clear plan of how to ratify the stalled divorce deal in the overtime.
EU ministers are meeting in Luxembourg a day before 27 national leaders of the bloc will decide during afternoon talks in Brussels on whether to allow Britain another extension to try to break the deadlock in London over Brexit.
· China’s stimulus-boosted private sector is on track to lead the economy to a “self-sustained recovery” that could see growth hit 6.6 percent this year, according to HSBC.
And while that would only match last year’s GDP result — the worst performance for the world’s second-largest economy in 28 years — it is well above current consensus of about 6.2 percent for 2019.
· Oil prices were near 5-month highs on Tuesday as markets continued to tighten amid OPEC-led supply cuts, U.S. sanctions against Iran and Venezuela, and escalating violence in Libya.
International benchmark Brent futures hit their strongest level since last November at $71.34 per barrel, before easing to $70.99 per barrel by 0700 GMT.
U.S. West Texas Intermediate (WTI) crude oil futures also hit a November 2018 high, at $64.77 per barrel, before easing to $64.42 per barrel.
Oil markets have tightened this year as the United States imposed sanctions on oil exporters Iran and Venezuela while the producer club of the Organization of the Petroleum Exporting Countries (OPEC) has been withholding supply to prop up prices.
· As oil prices climbed to multi-month highs on Tuesday, one strategist warned of the “potential for greater disruption” ahead for crude markets.
“It’s almost like 2011, when (former Libyan dictator Muammar Gaddafi) was toppled. If ... Libya comes into play, that’s only going to add more tightness to the market, ” John Driscoll, chief strategist at JTD Energy Services, told CNBC’s “Squawk Box” on Tuesday.
· CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices rose to a five-month high to challenge support-turned-resistance in the 63.59-64.88 zone. This is swiftly followed by the 66.09-67.03 inflection area. A turn lower from here eyes rising trend line support set from late December. The outer layer of that barrier is now at 59.79, with a daily close above below that initially targets the 57.24-88 region.
· WTI Technical Analysis: RSI reporting overbought conditions near $64.75/80 resistance
WTI is on the rounds near $64.50 ahead of European markets open on Tuesday. The black gold has been on an upward trajectory so far during 2019 but overbought RSI and $64.75/80 resistance-region challenges buyers at the moment.
Despite trading near the highest levels in more than five-months, WTI still needs to provide a daily closing beyond $64.75/80 horizontal-area, comprising August 2018 lows, in order to escalate the up-moves toward $65.80 and $67.20. Though, the overbought conditions of 14-day relative strength index (RSI) signal pullback of the energy benchmark.
Should prices rally beyond $67.20, October 29, 2018 high near $67.85 and $70.00 are likely following numbers to flash on the Bulls’ radar.
In a case, the quote fails to surpass $64.80 on a daily closing basis, 61.8% Fibonacci retracement of its October to December 2018 downturn, at $63.70, followed by $62.80 may act as adjacent supports.However, 200-day simple moving average (SMA) level of $61.30 and an upward sloping trend-line stretched since December 2018, at $59.50, could question the sellers past-$62.80.
Reference: Reuters, CNBC, FX Street
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