Investors trimmed their open interest positions for the second consecutive session on Tuesday, this time by around 98K contracts, the largest single-day drop so far this year. Volume, on the opposite direction, went up by around 1.765M contracts, rising the most in 2020 for the time being.

WTI remains volatile amidst demand crush

Occasional bullish attempts in prices of the barrel of WTI are likely to remain short-lived, as noted by Tuesday’s positive performance of the commodity against the backdrop of the sharp decline in open interest.

The measures taken by the US Federal Reserve (Fed) since 15 March have already had a major impact on the balance sheets of commercial banks resident in the United States, Céline Choulet from BNP Paribas reports.

Key quotes

“Reserves held at the Central Bank have considerably increased following their role as intermediaries for the Fed’s securities purchases, emergency loans and liquidity swaps.” 

“As in 2008-2014, the Fed’s QE policy has also created a disconnect between growth in loans and growth in deposits on banks’ balance sheets.” 

“As in 2008, a large proportion of dollar liquidity lent by the Fed to foreign central banks, then distributed to non-resident banks, has eventually been re-lent to resident banks, as shown by the increase in their net debts to affiliated entities located abroad.”


Inflation turned negative in March (-0.2% y/y) on the back of a sharp fall in transport costs, a fallout of the recent massive drop in global oil prices, per ANZ Bank. USD/MYR is trading at 4.385.

Key quotes

“On a sequential basis, headline inflation decreased 1.2% m/m in March on the back of an 8.7% m/m decline in the ‘Transport’ component. ‘Food’ prices also declined by 0.1% m/m.” 

“On an annual basis, inflation eased to -0.2% y/y in March from 1.3% previously.” 

“Core inflation remained unchanged at 1.3% y/y in March.” 

“We expect Bank Negara Malaysia (BNM) to cut by 25bps, bringing the Overnight Policy Rate (OPR) to 2.25%.”


German Chancellor Angela Merkel and Spanish Prime Minister Pedro Sánchez have opened a path to agreeing on a European coronavirus crisis fund, according to El Pais. The Madrid-based publication says that both leaders are close to agreeing on a compromise that does not include coronabonds but would enlarge the bloc’s fiscal response ahead of the EU Summit due on Thursday.

Earlier this week, Spain proposed a €1.5 trillion fund based on perpetual debt as a way forward. The sum of the compromise package is unclear. 

While details are vague, any deal between these countries would have to receive the blessing of Italy – the hardest-hit country in the eurozone and the most vocal in calling for solidarity. It would also need the approval of the Netherlands, which has been opposed to any sharing of debt or unconditional help.

EUR/USD is trading around 1.0850, stable within its range. COVID-19 statistics and the jitters in oil markets are also eyed by investors. 

GBP/USD has fallen due to a sour market mood and high UK coronavirus cases. The reasons for the cable’s fall will likely continue pushing it lower, according to FXStreet’s analyst Yohay Elam.

Key quotes

“The collapse in oil prices continues to weigh on equities and boosts the safe-haven greenback.”

“The mood in the UK is weighing on the pound while it has been ignoring economic figures. CPI decelerated to 1.5% in March, showing stability despite the crisis. Jobless claims rose by only 12,200 last month, better than expected.” 

“Brexit talks continue and may produce headlines that may move the pound. However, negotiations have been quiet and may stay so until the end of the week. Chief EU Negotiator Michel Barnier is scheduled to hold a press conference on Friday.”

“UK and US COVID-19 statistics are of interest later on. Frictions between the White House and state governors over testing and other steps are prevalent.”


GBP/USD Wednesday’s four-hour chart is showing that the cable is nearing oversold conditions, as FXStreet’s analyst Yohay Elam notes.

Key quotes

“The Relative Strength Index on the four-hour chart is nearing the 30 level, getting closer to oversold conditions and thus implying a bounce.” 

“Support awaits at the fresh low of 1.2250. It is followed by the April low of 1.2160.” 

“Resistance is at 1.2335, the daily high, followed by 1.2410, which supported it in mid-April and it is also where the 100 SMA meets the price.”

CME Group’s flash data for GBP futures markets noted open interest went up by nearly 3.4K contracts on Tuesday, resuming the uptrend at the same time. Volume, too, increased by around 35.8K contracts, reversing the previous drop.

GBP/USD looks to breach 1.2200

Cable’s negative performance on Tuesday was amidst increasing open interest and volume. That said, a deeper pullback remains on the cards with the next contention seen at 1.2163, April’s low.


  • Uptick in US and European equity futures point to risk recovery.
  • US dollar slips across the board on improving market mood
  • Oil-price slump still remains a concern ahead of a quiet docket.

USD/JPY is testing lows near the midpoint of the 107 handle in early European dealing, with the latest leg down driven by the extension of the retreat in the US dollar from two-week highs reached against its main competitors on Tuesday. The US dollar index dropped to lows of 100.07 before recovering some ground, still down 0.15% on the day.

The recovery in the risk sentiment, reflective of the uptick in the US and European equity futures, dents the haven demand for the greenback. Meanwhile, markets digest the news that US Senate approved a Bipartisan agreement was reached on $320 bln additional funds for coronavirus.

On the JPY-side of the story, the anti-risk Japanese currency continues to find support from recent oil-price collapse led investors’ concerns while the fallout of the virus outbreak on the global economic growth continues to weigh on the sentiment and in turn renders JPY-positive.

However, a lack of certainty on when the state of emergency will be lifted in Japan and downbeat domestic macro news could likely keep the yen’s bullish momentum in check. Also, the gains in the JPY could be limited by the expectations of the Bank of Japan (BOJ) support measures to boost funding for the companies due to be announced next week.

Looking ahead, the spot will remain at the mercy of the risk trends and dollar dynamics, in absence of relevant US economic data releases later on Wednesday. At the press time, USD/JPY trades at 107.58, down 0.16% so far.

USD/JPY technical levels to consider


It does appear that when the June expiry rolls around, a similar selloff – and maybe negative prices, would happen again, according to Howie Lee from OCBC Bank.

Key quotes

“The inability to store means it matters little that a refiner had earlier bought crude oil at the low $20s if they cannot find a space to store the oil, their purchase is as good as moot.” 

“The lack of storage/expensive storage is unlikely to be resolved unless demand either improves, or the US cuts its output.”

“As long as demand remains weak and buyers cannot find storage space, prices will remain heavily suppressed.”


Open interest in EUR futures markets rose for the second session in a row on Tuesday, this time by nearly 2.3K contracts according to preliminary data from CME Group. In the same line, volume reversed three consecutive daily drops and increased by around 34.3K contracts.

EUR/USD still targets 1.0768

The small drop in EUR/USD on Tuesday was accompanied by rising open interest and volume, leaving the door open for further pullbacks in the short-term horizon. Against this, the next support of relevance emerges at the April low at 1.0768.