•The dollar held to tight ranges in holiday-thinned Asian trade on Tuesday, though its Australian counterpart eased as disappointing readings on Chinese manufacturing tempered hopes for a rapid rebound in global growth.
The Aussie dollar suffered the most as it is often used as a liquid proxy for China plays given Australia is a major exporter of resources to the Asian giant. The currency eased to $0.7045 after the PMI release, from $0.7064, but soon steadied.
The safe-haven yen got a lift, with the Aussie losing 0.4% to 78.59, while the dollar dipped 0.1% to 111.50 yen.
Against a basket of currencies, the dollar was off a fraction at 97.813 but not far from last week’s 23-month peak of 98.330. It was still 0.5 percent higher for the month.
The euro was little moved at $1.1187 as investors await figures for economic growth in the common currency bloc due later in the session.
Forecasts are for a modest rise of 0.3% in the first quarter, although that would still be faster than the previous quarter and may be taken as a sign of stabilization.
•EUR/USD TECHNICAL ANALYSIS
The Euro was the best-performing major on Monday in an overall quiet day for foreign exchange markets ahead of this week’s Fed rate decision. The single currency appreciated alongside Eurozone front-end government bond yields, brushing off softer-than-expected European economic confidence data. Meanwhile, the spread between Italian and German 2-year government bond yields narrowed.
This reflects ebbing geopolitical concerns stemming from Italy, which may have improved after S&P Global Ratings withheld from downgrading the nation’s sovereign credit rating. Yet, the Euro Stoxx 50 only ended the day slightly higher. While the index gained initially after market open, declines in energy shares sapped its full potential in a similar way with what we saw in the S&P 500 on Friday.
Zooming in on a 4-hour EUR/USD chart, we find that the currency pair is sitting right under a near-term falling trend line from the middle of April. On top of this, we are also within a former range of support between 1.1176 and 1.1199. If these two critical technical areas hold, we may see the Euro extend declines against the US Dollar, facing support at 1.1119 again (June 2017 lows).
•The Federal Reserve is expected to hold interest rates steady at its policy meeting this week as policymakers balance recent stronger-than-expected U.S. economic growth against sluggish inflation.
Officials have given no signal in recent weeks of any change to the U.S. central bank’s benchmark overnight lending rate, currently set in a range of 2.25 percent to 2.50 percent. Markets have bet heavily the Fed’s “patient” approach means just that - with rates on hold until a run of good or bad news about the economy provides a compelling reason to move.
Data compiled by CME Group put the odds the Fed leaves rates unchanged this week at 97 percent.
“We do not expect a big change in tone,” compared to the Fed’s mid-March policy statement, with policymakers likely to be “more upbeat on growth, though with a more cautious reading of recent inflation developments,” JP Morgan economist Michael Feroli wrote in a preview of this week’s meeting.
•U.S. Treasury Secretary Steven Mnuchin said on Tuesday that he hopes to make substantial progress in upcoming rounds of trade talks with Chinese negotiators.
“We’re looking forward to productive discussions over the next few days,” Mnuchin told reporters at a hotel in the Chinese capital Beijing where talks are scheduled for this week.
Chinese Vice Premier Liu He will go to Washington for another round of talks scheduled for next week.
•U.S. President Donald Trump, three of his children and seven of his companies filed a federal lawsuit Monday against Deutsche Bank and Capital One Financial Corp to block the banks from complying with federal subpoenas investigating his financial dealings.
“The subpoenas were issued to harass President Donald J. Trump, to rummage through every aspect of his personal finances, his businesses, and the private information of the President and his family,” the lawsuit said.
•The Trump administration is ready to provide more federal aid to farmers if required, a White House adviser said on Monday, after rolling out up to $12 billion since last year to offset agricultural losses from the trade dispute with China.
“We have allocated $12 billion, some such, to farm assistance. And we stand ready to do more if necessary,” White House economic adviser Larry Kudlow told reporters.
While farmers have largely remained supportive of Trump, many have called for an imminent end to the trade dispute, which propelled farm debt to the highest levels in decades and worsened the credit conditions for the rural economy.
•Prime Minister Theresa May’s government has made substantive moves in Brexit talks with the opposition Labour Party, The Times newspaper reported, citing unidentified Labour sources.
Labour sources were quoted as saying that the government appeared to have shifted its position on Labour’s key demands around a closer customs union with the European Union after Brexit.
May’s de-facto deputy, David Lidington, said the meeting was “productive” and “positive”. The talks are now expected to run into next week, The Times said.
•Oil prices on Tuesday reversed earlier losses after Saudi Arabia said a deal between producers to withhold output that has been in place since January could be extended beyond June to cover all of 2019.
The statements by Saudi energy minister Khalid Al-Falih came despite pressure by U.S. President Donald Trump to raise output to make up for a supply shortfall expected from tightening U.S. sanctions against Iran.
Brent crude futures were at $72.25 per barrel at 0701 GMT, up 21 cents, or 0.3 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $63.67 per barrel, up 17 cents, or 0.3 percent, from their previous settlement.
Prices had come under downward pressure earlier on Tuesday after data on China’s factory activity weighed on financial markets, including crude oil futures, as it suggested Asia’s biggest economy is still struggling to regain traction.
Despite a shaky global economy, oil prices have surged by almost 40 percent since January, lifted by supply cuts led by the Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) as well as by U.S. sanctions on producers Iran and Venezuela.
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are idling at trend line support set form December. A daily close below this level – now at 63.30 – initially exposes 60.39. A dense resistance cluster runs through 67.03. A rebound above that, likewise confirmed on a closing basis, sets the stage for a challenge of the $70/bbl figure.
Reference: Reuters, CNBC , DailyFX, FX Street
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