US durable goods orders is a dated report but it confirms that businesses began to be more cautious mid-Q1 and it is going to be painfully clear how cautious/concerned they are as more data roll in, Jennifer Lee from BMO Economics briefs.

Key quotes

“US durable goods orders jumped 1.2% in February, while January’s 0.2% decline was erased to reflect a 0.1% gain.”

“The key core orders component, a good indication of future activity, fell 0.8% in February following a slight downward revision to January (from +1.1% to +1.0%). And this is a February report. Plenty has happened since then.”

  • Prices of the WTI trade on the defensive above $23.00.
  • Oversupply, demand concerns keep the commodity depressed.
  • The EIA reported a 1.623m barrel build during last week.

Prices of the WTI are fading the optimism seen at the beginning of the week and trade closer to the $23.00 mark per barrel.

WTI focused on price war, COVID-19, data

Following a positive start of the week, prices of the barrel of the American reference for the sweet light crude oil are grinding lower on Wednesday, as oversupply concerns plus the demand shock from the coronavirus keep weighing on traders’ sentiment.

In fact, the Russia-Saudi Arabia price war keeps prices depressed and bullish attempts capped so far, while the impact on the global economy of the fast-spreading COVID-19 keep prices under extra pressure from the demand side.

Ongoing supply/demand concerns among traders have practically ignored any benefit for crude oil prices from the recently clinched agreement between the US government, Democrats and Republicans over a $2 trillion stimulus package to fight the effects on the economy of the coronavirus pandemic.

In the calendar, the EIA’s report showed US crude oil supplies went up by 1.623M barrels during last week, adding to the previous 1.954M barrel build. In addition, supplies at Cushing increased by 0.858 barrels. Additional data from the report showed Distillates Stocks went down by 0.679 barrels and Gasoline Inventories fell by 1.537 barrel.

Late on Tuesday, the API reported a 1.250M barrel drop in US crude oil supplies during last week.

What to wait for around WTI

Crude oil prices remain under heavy pressure in a context of heightened volatility and thin liquidity. As usual in the past weeks, prices of the commodity are hurt by a combination of demand and supply side drivers coming from the ongoing (and future) impact of the coronavirus on the global economy and the unabated Saudi Arabia-Russia price war, aggravated by the palpable possibility that the Kingdom could ramp up production to a record of 12.3Mbpd as soon as in April. A potential relief to this low-prices-scenario could come in the form of a US intervention, which is expected to morph into some sort of agreement between the US, Russia and Saudi Arabia, all aimed to bring in stabilization to the oil market.

WTI significant levels

At the moment the barrel of WTI is retreating 4.13% at $23.32 and a breach of $20.08 (2020 low Mar.18) would expose $17.12 (monthly low November 2001) and finally $10.65 (monthly low December 1998). On the upside, the next resistance aligns at $28.46 (high Mar.20) seconded by $34.84 (21-day SMA) and then $36.28 (high Mar.11).

  • GBP/USD failed to capitalize on its early positive move to over one-week tops.
  • The sharp intraday fall tests a descending trend-line resistance-turned-support.

The GBP/USD pair witnessed a dramatic intraday turnaround and has now retreated nearly 250 pips from over one-week tops, set earlier this Wednesday. The pair has now dropped back to a one-week-old descending trend-line resistance break-point, which is closely followed by 100-hour SMA.

Meanwhile, technical indicators on hourly charts have again started drifting into the negative territory. This comes on the back of already bearish oscillators on the daily chart, which points to the emergence of some fresh selling pressure and supports prospects for the resumption of the prior bearish trend.

Some follow-through weakness below the 1.1700 round-figure mark will reinforce the negative outlook and accelerate the fall further towards testing the next support near mid-1.1600s. The downward trajectory could further get extended and turn the pair vulnerable to break below the 1.1600 round-figure mark.

On the flip side, the 1.1800 mark now seems to act as immediate support, above which the pair might head towards testing the 1.1860-65 supply zone. Any subsequent strength might negate any bearish bias and prompt some aggressive short-covering move, lifting the pair back beyond the 1.1900 mark.

GBP/USD 1-hourly chart

fxsoriginal

Technical levels to watch

 

  • US Dollar Index struggles to hold above 101.50.
  • WTI steadies above $23 ahead of EIA data. 
  • Durable Goods Orders in US increased unexpectedly in February.

The USD/CAD pair failed to hold above the 1.4400 mark and fell sharply in the early trading hours of the American session on Wednesday. As of writing, the pair was trading at 1.4322, erasing 0.95% on a daily basis.

Earlier in the day, the bearish pressure surrounding crude oil prices made it difficult for the CAD to gather strength against the greenback and allowed the pair to push higher. However, with the barrel of West Texas Intermediate (WTI) finding support near the $23 handle and recovering a small portion of its losses, the pair started to react to the USD weakness.

Later in the session, the Energy Information Administration’s (EIA) weekly US Crude Oil Stocks Change data will be watched closely by oil traders. 

USD selloff weighs on the pair

After erasing 0.7% on Tuesday, the US Dollar Index (DXY) edged lower on Wednesday as investors cheered the confirmation of the $2 trillion US stimulus deal.

Although the DXY pulled away from the 101 handle tested during the European trading hours, it struggled to extend its rebound beyond 101.50 and was last down 0.35% on the day at 101.42. The data published by the US Census Bureau on Wednesday showed that Durable Goods Orders increased by 1.2% in February to beat the market expectation for a decline of 0.8% but failed to trigger a market reaction.

Technical levels to watch for

 

  • EUR/GBP met support in the mid-0.9000s.
  • German Business Climate dropped to 86.1 in March.
  • UK CPI rose 0.4% MoM and 1.7% YoY in February.

The continuation of the buying interest in the sterling keeps the downside pressure well and sound around EUR/GBP, forcing it to drop as low as the 0.9050 region.

EUR/GBP drops to 3-day lows

EUR/GBP is down for the second session in a row on Wednesday, briefly testing the mid-0.9000s earlier in the session, or 3-day lows, just to rebound and regain the 0.9100 mark soon afterwards.

In the meantime, the rally in the British pound remains well and sound and keeps recovering ground lost, particularly vs. the greenback after last week’s “flash crash”. Indeed, further strength in the quid came after the recently announced extra stimulus by the Federal Reserve and the subsequent impact on the buck.

In the docket, German Business Climate measured by the IFO indicator dropped more than estimated for the current month along with the Business Expectations and Current Assessment components. In the UK, inflation figures tracked by the CPI showed consumer prices rose 0.4% inter-month in February, reversing the previous contraction, and gained 1.7% from a year earlier.

What to look for around GBP

The British Pound keeps correcting higher so far this week, bouncing off levels last seen in times of the Plaza Accord in 1985 vs. the greenback and multi-month lows vs. the euro. The extra stimulus from the Fed is lending oxygen to both currencies at the moment, although they’re not out of the woods yet. In addition, GBP is expected to remain under the microscope in light of the upcoming EU-UK trade negotiations to kick in later this year, while shaky UK fundamentals plus the impact of the coronavirus on the domestic and global economy open the door to the palpable possibility that the country could slip into recession in the near future.

EUR/GBP key levels

The cross is losing 0.30% at 0.9143 and a drop below 0.9054 (weekly low Mar.25) would expose 0.8994 (low Mar.20) and then 0.8896 (21-day SMA). On the flip side, the next resistance lines up at 0.9499 (2020 high Mar.19) seconded by 0.9649 (monthly high January 2009) and then 0.9804 (monthly high December 2008).

  • USD/JPY lacks any firm direction and remained confined in a multi-day-old trading range.
  • Optimism over the Fed’s unlimited QE and the US stimulus package extended some support.
  • Some follow-through USD weakness seemed to hold bulls from placing any aggressive bets.

The USD/JPY pair extended its sideways price action on Wednesday and is currently placed near the top end of a multi-day-old trading range, just below mid-111.00s.

A combination of diverging forces failed to provide any meaningful impetus, or assist the pair to build on its recent strong positive momentum to one-month tops and led to a subdued/range-bound price action through the early North-American session.

The recent optimism over the Fed’s unlimited QE and the passage of a massive $2 trillion economic stimulus package by the US Senate dampened demand for traditional safe-haven assets and extended some support to the major.

The uptick was further supported by a goodish pickup in the US Treasury bond yields. However, some follow-through US dollar unwinding trade, led by easing concerns over tightening liquidity, kept a lid on any runaway rally for the major.

Meanwhile, Wednesday’s surprisingly stronger US Durable Goods Orders data passed rather unnoticed and did little to impress bulls, warranting some caution before positioning for any further near-term appreciating move for the pair.

Hence, it will be prudent to wait for some strong follow-through buying beyond mid-111.00s, which if cleared decisively, might accelerate the positive move and could possibly lift the pair further beyond the 112.00 round-figure mark.

Technical levels to watch

 

  • XAU/USD surged as the Fed announced no limit to its bond-buying program.
  • The level to beat for buyers is the 1630 level. 
 

XAU/USD daily chart

 
After a sharp drop at the start of the month, gold is rebounding up violently as this Monday the Fed announced its largest stimulus scheme. 
 

XAU/USD four-hour chart

 
The metal is consolidating the strong advanced made in the last three days as the market holds above the main SMAs on the four-hour chart. As bulls regained control of the market XAU/USD is likely looking to extend gains on a break above the 1628 level en route towards the 1660 resistance and 1700 figure while support is expected to hold near 1605, 1590 and 1560 levels. 
 
 
Resistance: 1628, 1660, 1700
Support: 1605, 1590, 1560
 

Additional key levels

 

The EUR/USD pair is unable to advance beyond a key Fibonacci resistance level at 1.0840, as FXStreet’s Chief Analyst Valeria Bednarik notes.

Key quotes

“The 4-hour chart shows that the pair is holding above a flat 20 SMA, although below the larger ones, which maintain modest bearish slopes.”

“The Momentum indicator keeps retreating within positive levels, while the RSI lacks directional strength around 49, offering a neutral stance.”

“Support levels: 1.0770 1.0725 Resistance levels: 1.0840 1.0885”

  • GBP/USD extended its recent recovery move from multi-decade lows amid weaker USD.
  • A strong pickup in the US bond yields extended some support to the buck and capped gains.
  • A surprisingly stronger US Durable Goods Orders report failed to provide any fresh impetus.

The GBP/USD pair trimmed a part of its early strong gains and has now retreated over 100 pips from one-week tops, set earlier this Wednesday.

A combination of supporting factors helped the pair to gain some strong follow-through traction for the second consecutive session on Wednesday and recover further from multi-decade lows.

The sterling remained well supported by the UK’s stricter lockdown measures to combat the COVID-19 pandemic and got an additional boost from Wednesday’s mostly in line UK CPI inflation figures.

On the other hand, the US dollar remained depressed for the fourth straight day in the wake of the Fed’s unprecedented action to buy unlimited amounts of Treasuries and mortgage-backed securities.

This coupled with the latest optimism over the US Senate’s agreement on the economic stimulus package dented the greenback’s perceived safe-haven status against its British counterpart.

However, a goodish pickup in the US Treasury bond yields helped limit the USD downside and kept a lid on the pair’s strong intraday positive move to the vicinity of the key 1.20 psychological mark.

Meanwhile, the US macro data, showing that headline Durable Goods Orders recorded an unexpected growth of 1.2% in February, failed to impress traders or provide any meaningful impetus.

Technical levels to watch

 

  • US Durable Goods Orders rose unexpectedly in February.
  • US Dollar Index posts modest daily losses near 101.50.

Durable Goods Orders in February increased by 1.2%, or $2.9 billion, to $249.4 billion, the US Census Bureau announced in its advanced report on Wednesday. This reading came in much better than the market expectation for a decline of 0.8%. Additionally, January’s reading got revised up to -0.1% from -0.2%.

“Excluding transportation, new orders decreased 0.6%, the publication further read. “Excluding defense, new orders increased 0.1%. Transportation equipment, up two of the last three months, drove the increase, $3.8 billion or 4.6% to $87.0 billion.”

Market reaction

The US Dollar Index ignored these data and continues to stay relatively calm near the 101.50 handle ahead Wall Street’s opening bell.