US Dollar Holds Ground as Risk Sentiment Slides, Eurozone Data Weakens

Talking Points:

– Concerns per a intensity US-China trade fight and a obstacle in NAFTA negotiations have strike tellurian equity markets during a start of a week.

– Further decrease in Eurozone information has weighed on EUR/USD this morning.

Sentiment for a US Dollar stays disastrous as a new entertain gets underneath way.

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The US Dollar (via a DXY Index) has proven stout during a start of a new month and entertain as European markets have come online for a initial time given final Thursday. Reinvigorated tensions between China and a US interjection to a array of comments by US President Trump have strike tellurian equity markets again, with tech bonds in a US offered off quite hard.

The news handle is expected to be a primary source of eventuality risk during a North American trade eventuality currently as a mercantile calendar is rather dry for Canada, Mexico, and a United States. While some-more agitator comments per NAFTA have crossed a wires, they’ve had small impact on pairs like USD/CAD and USD/MXN so far. Attention and concerns is some-more focused on US-China trade tensions than NAFTA, it would reason.

Elsewhere, decrease in a rough Mar Eurozone PMI total – maybe weighed by a clever Euro itself – have authorised EUR/USD to stay forked to a downside, if usually minorly. The Eurozone Citi Economic Surprise Index, a sign of mercantile information momentum, now sits during a adverse -56.8, down from a 2018 high of +59.7 on Jan 11.

Price Chart 1: DXY Index Daily Timeframe (September 2017 to Apr 2018)

US Dollar Holds Ground as Risk Sentiment Slides, Eurozone Data Weakens

The tellurian equity marketplace sell-off yesterday, led by batch markets in a United States, joined with weakening Eurozone data, might be assisting keep a US Dollar afloat as Apr and Q2’18 trade gets underneath way. The DXY Index has been holding above a daily 21-EMA for a past few sessions, though stays within a forward channel determined with a bearish daily pivotal annulment on Mar 1.

Even in a eventuality of a mangle out of a down channel from Mar 1, it would not be a reason to call a bottom in a DXY Index yet. While cost is no longer trade within a downtrend from a Dec 2017 and Jan 2018 pitch highs, cost still stays next 91.01, a 2017 low set on Sep 8 (which subsequently noted a morning doji star candle cluster disaster in mid-January as good as a Mar 1 pivotal reversal).

Similarly, given that trade is not usually a duty of cost though also of time, the DXY Index would need to contend with a forward trendline from a Nov and Dec 2017 highs once it reached 91.01 before any legitimate low could be called. Given a stream marketplace environment, it would seem that a entrance Mar US Nonfarm Payrolls news (and knock-on effects to Fed supports rate pricing) would not be a matter to expostulate such cost action; instead, a serve tightening of financial conditions and erosion in risk view would be necessary.

Read more: A War to Trade More, Not Less – What’s Behind US-China Tariffs

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— Written by Christopher Vecchio, CFA, Senior Currency Strategist

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