- The US Dollar retreats mildly on Tuesday for a second day in a row.
- Traders see Durable Goods coming in as a strong beat on estimates.
- The US Dollar Index steadies above 104.00 and sees the selling pressure halt for now.
The US Dollar (USD) weakens for a second consecutive day on Tuesday, though intraday losses are being pared back by stronger Durable Goods. Markets will welcome clear data after US Federal Reserve members have contradicted each other, with calls for three and only one interest-rate cut. This dispersion could make the Fed less credible at a moment when markets seem to be challenging the broader stance of the US central bank, a scenario that could lead to erratic moves for the USD.
Durable Goods orders are triggering a bit of a turnaround in sentiment for this Tuesday. Still, Consumer Confidence and the Richmond Fed Manufacturing Survey deserve as well a fair bit of attention. Traders will want to see confirmation if the Fed is right or wrong about interest-rate cuts and the health of the US economy and trade that adjustment.
Daily digest market movers: Upbeat Durable
- Russia has accused the US, UK and Ukraine of being behind the Moscow concert hall attacks.
- The People’s Bank of China (PBoC) fixed the Chinese Renminbi substantially stronger for a second day in a row against the US Dollar, triggering a lower USD/CNH.
- Durable Goods orders data for February were released:
- The headline Durable Goods Orders went from -6.9%£ to 1.4%, beating the 1.3% forecast.
- Durable Goods orders without Transportation jumped from -0.3% to 0.5%.
- At 12:55 GMT, the US Redbook will come out, with the previous number at 3.4%.
- The Housing Price Index for January will be released at 13:00 GMT. In December, house prices increased 0.1% on month.
- US Consumer Confidence for March will be released at 14:00 GMT.
- Together with the US Consumer Confidence, the Richmond Fed Manufacturing Index for March will be released. The previous number was at -5, signaling contraction.
- Equities are in the green in Europe and the US ahead of the US Opening bell. All three US indices are up by a near 0.50%.
- According to the CME Group’s FedWatch Tool, expectations for the Fed’s May 1 meeting are at 92% for keeping the fed funds rate unchanged, while chances of a rate cut are at 8%.
- The benchmark 10-year US Treasury Note trades around 4.26%, around the high for this week.
US Dollar Index Technical Analysis: Steady above104.00
The US Dollar Index (DXY), which gauges the value of the Greenback against a basket of foreign currencies, trades a touch softer nearing 104.00. The projected easing in the Greenback is taking place as investors look for an equilibrium between the dovish Fed and the rather challenging markets on that possible outcome. The truth will probably be somewhere in the middle, which means the DXY could retreat a few points to challenge 104.00 and snap below this barrier by the end of the week.
The DXY is still eyeballing a pivotal level near 104.60, where last week’s rally peaked. Further up, 104.96 remains the first level in sight. Once above there, the peak at 104.97 from February comes into play ahead of the 105.00 region, with 105.12 as the first resistance.
Support from the 200-day Simple Moving Average (SMA) at 103.73, the 100-day SMA at 103.49, and the 55-day SMA at 103.64 are getting a fresh chance to show their importance. The 103.00 big figure looks to remain unchallenged for now after the decline after the Fed meeting last week got turned around way before reaching it.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Read the full article here