USD Takes a Beating as Markets Scaling Back US Rate Hike Expectations

Risk aversion has been dominating the scene following the announcement from the BoJ that no immediate stimulus would be introduced. Upbeat European sentiment indicators yesterday overshadowed negative Spanish CPI, but was not enough to offset the negative surprise in the US GDP for the first quarter 2016 sending US yields and the US dollar lower. Implied probabilities for a rate hike in June is now down to 12% from 21% earlier. Also equities were lower on back of the slowing growth with benchmark US indexes 0.9-1.2% lower. Commodities and gold are generally higher as a result of the weakening US Dollar.

Overnight, Asian indices followed suit with MSCI Asia Pacific down 0.4% on the whole. ASX200 in Australia was the shining star in a touch market, rising 0.5% on back of lower than expected producer prices. Japanese markets were closed for Showa Day, but JPY-pairs continued to appreciate. USDJPY tumbled on the news from the BoJ and has continued lower in today’s session, down around 1%.

USDJPY Weekly – next key support at 105.20-area.

20160429 USDJPY.Weekly

This morning, the USD has continued lower and EURUSD has tested 1.14+ on back of better than expected preliminary Q1 GDP figures from Spain, coming out at 0.8%/3.4% vs. 0.7%/3.2%. At 11CET, we have key figures from the Euro zone as the Q1 GDP will be released, expected at 0.4% QoQ. Also the preliminary April CPI will be released, where markets are expected a 0.1% decrease from previous in both headline and core figure. EURUSD has so far found offers at the 2 daily pivot resistance, but we would prefer buying on dips towards 1.1370-area or wait for the market to come to use, buying the break of April highs at 1.1465 for a test of 1.1490+ intraday.

EURUSD daily

20160429 EURUSD.Daily

In the US session, the PCE Core and Personal Income, Spending and Real Consumption figures will take the stage at 1430CET, where upbeat figures are expected. The PCE Core, however is expected to stay at 0.1%. From Canada, monthly GDP figures will be released at the same time, and the markets are expected a drop of 0.1% from an increase of 0.6% prior. USDCAD has been on the offer for more than a year now and with the increase in oil, we could see further appreciation – next support at 1.2475-area. From the US, we also have the Michigan sentiment indicators as well as the Chicago PMI from 1545CET.


20160429 USDCAD.Daily

Have a nice weekend and safe trading!

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