Forex news for North American trading on March 10, 2021
- WTI crude oil futures settle at $64.44
- Like $1.9 trillion? Then you'll love another $2.5 trillion more as Biden team preps infrastructure bill
- US House has the votes to clear $1.9 trillion stimulus package
- US Feb monthly budget deficit $310.9 vs $305.0B expected
- US sells 10-year notes 1.5230% vs 1.5143% pre-sale
- ECB draft forecasts reportedly assume only a fleeting jump in inflation
- US and China officials will meet for a 2-day summit next week in Alaska
- Major European shares close higher on the day
- US weekly EIA crude oil inventories +13,798K vs +2500K expected
- The full statement from the Bank of Canada
- Bank of Canada leaves overnight rate unchanged, as expected
- Bank of Canada has a tough landscape to navigate
- US February CPI +1.7% y/y vs +1.7% expected
- The USD is the strongest and the CHF is the weakest as NA traders enter for the day
- The beginning of the end of yield curve control as BOJ seeks freer fluctuations - report
The US CPI data came out on or just below expectations. The YoY for the headline came in at 1.7%. The ex food and energy came in at 1.3% (below the 1.4% est). That is the good news for inflation for now.
How do I know?
The next three months will replace headline numbers of -0.3%, -0.7% and -0.1% from March, April and May 2020. The sum of those declines is 1.1%. If inflation moves up by 0.1% to 0.2% instead in March, April and May 2021, the YoY will surge by about 1.4% to 1.7% from the current 1.7% (to 3.1% to 3.4%).
It will step higher, but it will move higher.
What will help after those three months is in June, July and August 2020, the inflation numbers rose by the 0.5%, 0.5% and 0.4% respectively. Those numbers will likely NOT see gains of that magnitude. As a result, the inflation numbers will likely come back down toward the 2% to 2.4% area over the summer months. This is assuming that other inflationary pressures don't start to spike higher.
For today, the markets breathed a sigh of relief that inflation is starting from a lower base and not higher going forward.
The other key event today was the auction of 10 year notes. Typically, auctions come and go, but with fears of higher yields weighing on the tech heavy Nasdaq stocks, the markets were anxious. The auction did have a tail of about 1 bps, but yields did move lower into the auction. The Bid to cover was about the average. The market shrugged it off. Tomorrow, the treasury will complete the auctions this week with the sale of 30 year bonds. The 30 year yield was the only part of the curve that is higher today (see the table below).
In the forex, the USD is ending the day near the lows vs the EUR, GBP, JPY, CAD, AUD and NZD. It is only higher vs the CHF today. The green back did initially fluctuate down and then up in NY trading, before moving back to the downside into the close.
Technically:
- EURUSD: The EURUSD moved back above the falling 100 hour MA in the NY afternoon session and has extended to new session highs in the last hour of trading at 1.1930. The NY session low was down at 1.1881 in the first hour of trading. The pair is approaching the high from early Monday at 1.19317. The range for the week is still below 100 pips with more than half the week gone, so it is likely the range will continue in the new trading day. The next key target is the 38.2% of the move down from the March high at 1.19411. Above that and traders will start to eye the 50% retracement of the same move lower at 1.19739 and the falling 200 hour MA at 1.19802. A move back below the 100 hour MA at 1.19011 would spoil the corrective bullish party.
- GBPUSD: The GBPUSD is also closing near the highs for the day at 1.3937 (that is also a new high for the week). The price is extending away from the 200 hour MA at 1.39026. A move below would take the short /intermediate bullish bias away. The next target comes in at 1.39546 which is the 38.2% of the move down from the Feb 24 high. Get above that and traders will start to eye toward 1.4000 (the 50% is at 1.4009).
- USDJPY: The USDJPY is trading near the earlier session low at 108.34. That is back below the 100 hour MA at 108.54. The current price is at 108.38. Stay below the 100 hour MA and traders will start to eye the 38.2% at 108.245 followed by a swing low from last Friday after the US jobs report at 108.08. The 50% of the move up from the March 2 low comes in at 107.941 and the 200 hour MA (and rising) is at 107.70. All those are doable as long as the price can stay on the lower side of the 100 hour MA at 108.54.
- USDCAD: The BOC kept rates unchanged as expected. There was a modest decline in the CAD after the decision that saw the price test and briefly break above the 100/200 hour MAs (which were both at 1.2656). The pair subsequently fell after the failed break and is moving toward the 50% midpoint of the move up from the Feb 25 low at 1.26057. The USDCAD has traded most of the last 9 trading days between 1.2586 to 1.2697. Staying below the MAs in the new day, would have traders targeting the lower extreme for a possible break. Get below an the door opens for more downside momentum.
- NZDUSD: The NZDUSD broken above and away from the 100 hour MA (currently at 0.7154) and also extended to the highest level since March 4th to 0.7198. The pair approaches the 200 hour MA at 0.72088. The price has not traded above the 200 hour MA since Feb 26. A move above would increase the bullish bias for the pair.
In other markets in the US.
- Spot gold is trading up $10.09 or 0.58% at $1726.24 on the back of the lower dollar
- Spot silver is up $0.25 or +0.97% at $26.18
- Bitcoin is up $2131 or 3.92% at $56440
- Crude oil is up 0.72% or 1.12% at $64.73 despite a sharp build in crude oil inventories of 13.798M (but gasoline inventories fell -11.869M).
In the US stock market, the flow of funds favored the Dow 30 once again and sold the NASDAQ (down modestly at the close). The Dow closed at a new record high up 464 points or 1.46% at 32297.02. The European shares continued to move higher with the German Dax closing a record for the 3rd day in a row.
