The general consensus is that today’s moves in the forex market were largely due to the strong US dollar and the sell-off in Treasuries, as the FOMC moves last night were unwound. Though the moves in between the lacklustre day were around the opens of the trading sessions, the US Weekly Jobless report, and on the release of Fed Chair Powell’s pre-recorded remarks for the Bank for International Settlements (BIS).
The day started off weak for the EURUSD as the single currency was sold from the European open into the London session where it then traded for most of the morning in its initial balance range, before breaking lower for the start of the US session. At the London close, the EURUSD did test the lows of the morning range as news from the European Medicines Agency declared the Oxford AstraZeneca vaccine safe to use. But it was not too long before the EURUSD sold off back into the US sessions opening balance range.
The good news for Europe is that they can start to get back on track with their vaccinations and hopefully the pause in administering the AstraZeneca vaccine will not cause too much concern in the coming weeks.
In other good COVID-related news, the US Biden administration is considering relaxing travel restrictions in the next couple of months according to news sources and New York Governor Cuomo is allowing concerts to restart on April 1st, 2021.
Bad news for the USA came with the US initial jobless claims data. The figures rose to 770k, which is 70k more than the market expected and higher than the revised figures for the previous week. The increase in benefit claims was placed at the door of the freezing conditions in Texas and marks the highest number in 4 weeks.
A lot of the US Treasury selling could be the money market telling the Fed, that they cannot see how inflation can be contained if there is an abundance of stimulus and the USA is opening up for business in the coming months. There is a consensus that Fed Chair Powell may have to backtrack on the decision not to raise rates in the near future.
Today’s Bank of England rate decision largely followed on from what the RBA and Fed had said, and the BoE kept to their line of “if the outlook for inflation weakens”, they will do whatever is necessary. They are also using words like “significant progress” in their quest for 2% inflation and will not be tightening policy until they have evidence of this progress. The GBPUSD was unable to climb out of its 3-week range and traded down on the stronger US dollar theme into the supporting structure within the range.
For me, the US dollar has more reasons to be weaker than stronger and the price action feels very much like a Bear market rally, so I am looking for areas on charts for support until we break clearly under these weekly ranges across the majors. As a visual, using the Ichimoku cloud as support and resistance on the H1 charts gives you an idea of the levels I am looking for confluence with intraday market structure.
The ActivTrader sentiment indicators show that retail traders are mixed in their outlook at these levels for the EURUSD and the GBPUSD but still firmly believe that the USDCAD has been oversold and are 87% bullish on the pair but 69% bearish of the USDJPY, adding to the mixed messages for the US dollar traders.
Tomorrow morning is the final central bank announcement for the week, and it is the Bank of Japan’s turn to let us know their rate decision and how much ‘significant progress’ they need to have evidence of. Market expectations are that they again keep the rate at -0.1% and will probably say that they are monitoring the development of the vaccines and will attempt to create inflation. The USDJPY has been pinned to the upper bounds of its March trading range so a test of the lower bound would be a possible trade.