• Dollar sell-off is again fueling gains in EUR/USD, pushing the pair higher to key average hurdle. 
  • Downside risks persist as the virus outbreak is showing no signs of slowing down in the Eurozone. 

Dollar sellers continue to dominate the proceeding in the FX markets on the last trading day of the week, pushing EUR/USD higher to the 200-day average hurdle lined up at 1.1082. 

Dollar under pressure

The greenback is prolonging its recent downside bias with the dollar index, which tracks its value against majors, currently trading at lows below 99.00, representing a 0.60% drop on the day, having shed 1.47% and 0.82% on Thursday and Wednesday, respectively. 

The sustained selling could be attributed to concerns regarding the US labor market, triggered by the official data released Thursday, which showed the initial jobless claims topped 3.2 million last week, beating the forecast for 1.5 million by a big margin. Additional downside pressure may be coming from the uptick in the global equity markets. 

However, there is little news on the domestic front to support the ongoing EUR/USD rally. “Spain’s coronavirus death toll officially passed China’s, becoming the second-highest in the world. The health system is collapsing underneath the weight of the disease and the economy will follow,” according to BK Asset Management’s Kathy Lien. 

There is general consensus that the economic damage across the Eurozone is likely to be more severe than other parts of the world. As a result, a sudden bearish reversal in EUR/USD cannot be ruled out. 

On the data front, the focus will be on the US Personal Spending figure for February, scheduled for release at 12:30 GMT. 

Technical levels

 

US Dollar Index (DXY) registers six-day losing streak, below 21-day EMA for the first time in two weeks.

Buyers will watch for an upside break of 101.00 to re-enter.

US Dollar Index remains on the back foot while declining to the lowest since March 17, 2020, down 0.50% to 98.90, ahead of the European session open on Friday.

In doing so, the greenback gauge slips below 21-day EMA for the first time in two weeks while nearing the short-term key support confluence comprising 50-day EMA and 50% Fibonacci retracement of March 09-20 upside, near 98.80.

While a sustained break of the short-term EMA disappoints the buyers, confluence of the key Fibonacci and EMA questions the bears.

As a result, the sellers will wait for a clear break of 98.80 for fresh short positions.

On the contrary, the buyers can target 23.6% Fibonacci retracement level of 101.00 if manage to successfully bounce back beyond a 21-day EMA level of 99.50.

DXY daily chart

Trend: Pullback expected

 

Gold calls are claiming higher implied volatility premium than calls for the third straight day, indicating investors are adding bets to position for strength in the yellow metal. 

One-month risk reversals (XAU1MRR), the cost of swapping equally out-of-the-money puts and calls, flipped in favor of calls on Tuesday, as the metal rose more than 4 percent, extending Monday’s 3.7% price gain. 

Risk reversals currently trade at 2.925 versus -4.5 on March 19. The surge represents a bearish-to-bullish trend change in the options market. At press time, gold is trading near $1,625 per ounce, representing a 0.23% drop on the day. 

XAU1MRR

 

Reuters is out with its latest survey on coronavirus impact on the Indian economy and the Reserve Bank of India’s (RBI) next policy moves.

Key findings

“India’s economy will expand just 4.0% annually on a year ago in the quarter that ends on March 31, the weakest since comparable records began in early 2012.

That is also slower than the 4.7% recorded in the last three months of 2019.

The economy was forecast to grow 2.0% next quarter and 3.3% in the July-September quarter.

Under a worst-case scenario, the economy was forecast to grow by a median 0.5% in April-June, with one economist predicting a 20% contraction. Still, only about one-quarter of those who answered this additional “worst-case” question said the economy would shrink.

Although a few economists said fiscal stimulus should be used to stoke a revival from this unprecedented hit to an already slowing economy, many in the poll said the Reserve Bank of India should deliver rate cuts of up to one percentage point.”

USD/INR offered ahead of RBI presser

The Indian rupee extends its two-day winning momentum into Friday, mainly driven by broad US dollar weakness and India’s fiscal stimulus. the Indian government announced a $22.6 billion economic stimulus package to fight the virus impact, as the nation remains in a state of emergency until April 15th.

The USD/INR pair dropped to a fresh six-day low at 74.62 before recovering a few pips to now trade near 74.71, still down 0.23% on the day. The focus now remains on the press conference held by the RBI Governor Shaktikanta Das, with traders expecting liquidity-enhancing measures to be unveiled later today.

  • USD/CHF cheers broad US dollar weakness for the fifth day in a row.
  • Greenback bears are in full form as coronavirus spreads in the US.
  • House vote on the COVID-19 bill, virus developments will be in focus.

USD/CHF accelerates the five-day-old south-run to 0.9590, down 0.45%, amid the pre-European session on Friday. The pair have recently been cheering the broad US dollar weakness amid coronavirus (COVID-19) concerns.

The US recently surpassed China while flashing 81,321 cases of the virus infection, as per the New York Times.  The pandemic has already pushed the world’s largest economy towards witnessing a spike in the weekly Jobless Claims while also likely to weigh on the unemployment data as well.

To combat the pandemic, the Senate passed a $2.2 trillion aid package while the Fed Chair showed readiness to use further measures to infuse markets if needed.

The US policymakers are likely to vote on the bill in the House of Representatives today. However, the Wall Street Journal raised doubts over the voting while citing a Republican lawmaker from Kentucky.

The market’s risk catalysts flash mixed signals with the US 10-year treasury yields stepping back to 0.80% and futures linked to S&P 500 and DJI30 down near 1.5%. On the contrary, the Asian stocks are posting gains

Moving on, the pair traders will keep eyes on the coronavirus headlines for fresh impulse while the voting on the bill could also offer additional direction.

For the immediate insight, the US President Donald Trump’s talks with his Chinese counterpart Xi Jinping will be watched closely as both of them are at loggerheads over the virus and its spread. Furthermore, the US keeps showing its dislike for China’s Huawei while restricting the global supply of chips to the company.

Technical analysis

A daily closing under 21-day SMA level of 0.9585 becomes necessary for the bears to decline further below 10-day SMA, at 0.9715 now.

 

In an interview with Fox News, US President Trump said that they could open up farm belt, parts of the mid-West, ‘other places’.

Further comments

Texas has large swaths not hit by this.

People want to get back to work, it’s the way “people are engineered”.

The sooner we go back the better lift we are going to get.

Stimulus package will save Boeing, other airlines.

Gilead, others making incredible things to fight virus.

‘No way’ the Republican convention in August will be cancelled because of the coronavirus.  

US dollar reaction

The US dollar meanders near a fresh eight-day low reached at 99.22 vs. its major rivals, as ample liquidity in the markets, in the wake of the Fed’s unlimited QE, eases funding demand for the greenback.

Meanwhile, the surge in the number of new coronavirus cases across the US also adds to the weight on the buck. At the time of writing, the US dollar index trades at 99.29, modestly flat on the day.

The Korea Centers for Disease Control and Prevention said on Friday, South Korea confirmed 91 new coronavirus cases, with the total count now at 9,332.

The South reported eight new deaths, bringing up the death toll to 139.

Further, the health institute showed that 384 more fully recovered coronavirus patients are released, with total cured people standing at 4,528.

Meanwhile, a couple of weeks ago South Korea was only showing around a 0.6% case-fatality rather, which has now risen to around 1.4%.

USD/KRW off 8-day lows

USD/KRW tested the weekly lows reached at 1,212.62 reached on Thursday and bounced over the last hour, now trading at 1,216.50 levels, up 0.29% on the day.

New Zealand’s government coronavirus wage subsidy plan may now cost as much as NZ $ 12 billion and the government is making modifications to the plan, Finance Minister Grant Robertson said on Friday. 

Key quotes

The pandemic has moved fast.

the Government will make further moves to cushion the impact from businesses.

The current sick leave scheme is being folded into the wage subsidy scheme to prevent “double-dipping”.

The scheme is being run in a “high trust model”.

Employers are still expected to pay their employers 80% – but all workers now must receive the full value of the subsidy. 

Citing sources familiar with the discussion, Reuters reports that there is ‘at least’ one Republican member, who may act to delay the House vote on the US coronavirus relief bill into the weekend. 

House of Representative Leader has urged all members of the House not to do anything to delay the vote. 

Earlier today, it was reported that the House set two hours of debate on coronavirus aid bill Friday beginning at 1300 GMT.

On Thursday, the Senate cleared the $2 trillion rescue package to fight the virus’s impact on the economy by 96-0 voting.

  • US Pres. Trump: Could open up farm belt, parts of the mid-West, ‘other places’