Forex today: risk on, yen sent packing, investors turn optimistic

A risk-on session in the FX space today with the yen dropping back below key supports across the board while the DXY traded in the upper end of the 90.071 - 90.594 range for the day.

The US Treasury 10-year yield was up 2bps to 2.83% while yields globally were up 1-5bps - All this on the back of trade fears taking a back seat as investors figure that US / Chinese trade negotiations will occur before tariffs are applied, all vs a much more positive NAFTA backdrop, (the greenback was making gains against all but CAD in the G10 with NAFTA optimism still being priced into the latter). The DJIA up around 220 points, or by 0.9%, the S&P 500 index SPX higher by 18 points, or by 0.7% and the Nasdaq Composite Index COMP, putting up a further 32 points, adding 0.5%. Focus now shifts to labour data in the US and Chairman Powell’s speech on the economic outlook.

Meanwhile, and as for other currencies, EUR/USD started out the NY session -0.02%, (DXY 0.06%), with the greenback in better shape as risk takes off ahead of nonfarm payrolls. Trade war concerns took a back seat and the euro widened a narrow Asia range of between at 1.2277/90, by extending the downside to 1.2220 in NY trade. There was a recovery back towards 1.2245 but the dollar remained firm and the pair moved in for a US session close at 1.2237, below the cloud top and 10 & 21-D SMAs. For data, EZ manufacturing and services activity dropped sharply from cyclical multi-year highs. However, activity remains solid in historical terms and consistent with 0.6% GDP rise in Q1 2018. 

GBP/USD tried to recover in the NY session following a heavy sell-off from just below the 1.41 handle and dropping to 1.4030. The strong dollar was the main driver but there was a further loss on the back of the worse than expected UK service PMI, (51.7 vs 54.0 f/c). 1.3965 held in early NY and the pair drifted to just at the 1.4000 level meeting the descending 10-hr SMA. However, investors figure that this will not deter the BoE from hiking rates as soon as this summer, possibly in May. There are offers just below 1.4100 as seen in Asia yesterday.

EUR/GBP rose steadily from the depths of the 0.87 handle, testing the hourly resistance of the descending 100 hr-SMA making a high of 0.8749 before sitting back into the 0.8730's.

USD/JPY is making higher grounds on the 107 handle, breaking through key resistance as trade war angst subsides. After beating through a three-week high of 1071.5, the pair headed towards the cloud base just above 107.50 scoring a high of 107.48 overnight. The 30-D BB at 107.37 meets the rising 10 hr-SMA as a support area as the pair consolidates into early Asia. 

As for the antipodeans, the dollar was firm and the Kiwi fell back below 0.7300 while the Aussie chopped to the downside, falling back from the 0.7685 open and traded within a 0.7670/95 range for the NY session with AUD/JPY slowing the downside up with a new short-term high set and a focus to the downside. 

Keynotes from the US session

Funda/political wrap: risk-on as trade fears get shelved

Key events ahead

There are a lack of drivers for the Asian session today, but focus turns to the March employment report. Analysts at Westpac explained that after February’s stunning 313k surge in non-farm payrolls, a more muted but decent 185k is consensus. "The separate survey of households is expected to produce the dip in the unemployment rate from 4.1% to 4.0% that did not occur in Feb."