Forex news for North American trading on May 19, 2021
- US dollar stays strong after Fed minutes
- WTI crude oil futures settle at $63.36
- Dollar breaks to new highs after the FOMC minutes
- FOMC minutes: 'A number of participants' said taper discussion might be appropriate at upcoming meetings
- The comeback in risk assets continues
- U.S. Treasury auctioned off $27 billion of 20 year bond at a high yield of 2.286%
- Success in Iran nuclear talks not guaranteed
- Fed's Bostic: I don't spend a lot of time worrying about asset prices
- Equities bounce into the European close
- Fed's Quarles: Dislocations will cause temporary increase in prices
- Oil falls further after Iran says texts are mostly drafted for return to nuclear deal
- Elon Musk tweets on Tesla's crypto
- US weekly oil inventories +1320K vs +2000K expected
- Fed's Bullard: I think inflation will remain above 2% in 2022 but that will be consistent with framework
- The tail is wagging the dog as the crypto rout sparks a broad flight to quality
- Old fashioned gold turns positive as crypto rout spills over into a broader risk-off trade
- Bitcoin/Ethereum continues to get hammered as traders liquidate. Prices move down over -50% from highs.
- Canada Teranet/National Bank home price for April 2.4% versus 1.5% last mo
- Canada CPI for April 0.5% m/m versus 0.2% estimate
- The USD is the strongest and the NZD is the weakest as NA traders enter for the day
The crypto markets went wild with Bitcoin moving down from a high of $43,591 to a low of $30,000. That is a 31% move from the intraday high to the low.
The ball got rolling overnight when China enacted crypto trading restrictions, and the selling continued in the morning trading in the US. The final plunge in bitcoin, did stall right at the $30,000 level which suggests bids were waiting against the level.
The price is trading back up at $39,100 (in volatile trading). That still down 9.77% on the day. The corrective move off below has moved back toward its 200 day moving average at $39,816.42. That will be a technical barometer going forward for both buyers and sellers. BTW the move down from the all-time high at $64,895 to the low today, took the price down 53.67% or $34,829 from the high.
In Ethereum, it too tumbled sharply lower. The intraday low reached $1850 after trading as high as $3468 earlier in the day. Just last week the high for this digital currency reached $4380.64. That high to low move took the price down $2475 or -57.23%.
What about Elon Musk's favorite, Dogecoin. It reached a low at $0.215 after trading as high as $0.74 on May 8. The decline from the high? Down minus -70.9%.
The tumble to downside in crypto, took stocks down with it as (I guess?) selling begets selling. Analyst might say that traders had to cover losses in Bitcoin. Another reason includes concerns about higher interest rates from a Fed tapering (although rates were lower earlier before moving higher into the close post the FOMC minutes - more on that later).
Overall today, the Dow industrial average traded as low as -586.86 points or -1.72%. The NASDAQ index was down -231.4 points or -1.74% at the lows.
However, in both the crypto market and the stock market, lows found willing buyers (the $30000 low was a hard one to ignore) and both markets rebounded. The NASDAQ index rallied into the close, and settled just below unchanged on the day at -3.9 points or -0.03% at 13288.74. The Dow industrial average closed down -164.62 points. The S&P index was down -11.04 points. Below are the high low, and percentage change values for the major US indices today. PS European stocks also close sharply lower with declines of -1.2% up to -1.77%.
Despite the rises off the lows, the major US stock averages still closed down for the third consecutive day and the 6th in 8 trading days. The woods may have gotten a little brighter, but the dip buyers are not necessarily out of the darkness of the woods just yet.
Looking at the US debt market, as mentioned, yields are higher with the 5 year up 4.2 basis points on the day and up six basic point from the low, and the 10 year up 3.8 basis points and six basis points off its low for the day (1.6128%, versus 1.676% currently). While stocks are getting hit earlier in the day, the yields were steady or moving lower on flight to safety flows. However, after the FOMC meeting minutes which started to hint that 'a number of participants' are actually 'thinking' about tapering, yields started to move back higher.
The actual wording from the Fed minutes:
"A number of participants suggested that if the economy continued to make rapid progress toward committees goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases."
Now there are some caveats including the word "rapid progress". Moreover, tapering is not tightening. Finally, tapering is a phased in process that will still take time to discuss and then let the market know before actually starting. That might take until the start of the new year for the Fed to start the process. It also is not a guarantee that once they start they don't stop. All of which could lead to more of the increased volatility as fears ebb and flow.
How did the Fed minutes, the stock and crypto volatilities play out in the forex?
The dollars started off as the strongest of the majors, giving up that distinction midday to the JPY. However, post the FOMC minutes, the greenback reestablished itself as king. The sharpest gains were verse the NZD and AUD +1.09% and +0.82% respectively. The smallest gains were vs the JPY, up 0.28%.
Some technical levels to watch into the new trading day:
- EURUSD. The EURUSD fell down to test its 100 hour moving average (currently at 1.21621 and moving higher). The low price which 1.2159, a few pips below the moving average level, but rebounded back toward a swing area between 1.2176 and 1.2181. Holding below that level would tilt the buyers more to the downside with a likely break of the 100 hour moving average leading to a test of the 200 hour moving average 1.2145. Moving above 1.2181, would be disappointing for sellers. We could see a move back toward the 1.2196 to 1.2200 area.
- GBPUSD: THE GBPUSD through the 100 hour moving average of 1.41267 and briefly below the 200 hour moving average of 1.4168 currently. However, momentum could not be sustained below the 200 hour moving average, and the price rebound back higher into the close. The currently trades at 1.41216, just below the 100 hour moving average of 1.41267. In the new trading day getting back above the 100 hour moving average is needed to tilt the bias more to the upside. Conversely a move back below the 200 hour moving average, will likely lead to further selling.
- USDJPY. The USDJPY sold off initially as stocks were getting beat up and flows led into the relative safety of the USDJPY (and JPY pairs). However as yields move higher and stocks start to rebound, so do the USDJPY. The pair moved back above its 200 hour moving average at 109.078 and its 100 hour MA at 109.178. In the new day if the price can stay above those moving averages, the buyers would be more control to extend higher toward one 109.46 as the first target. A move below the 200 hour moving average would tilt the bias back to the downside
In other markets today:
- Gold was a another market that saw volatile swings up and down. The initial move was to the downside in the the exception to $1852.25. Then as the dollar started to move lower in the first half on the day, the price of gold shot up to $1890.13. Post the FOMC minutes, however, as yields moved higher in the dollar got stronger again, the price rotated back down and is trading near unchanged levels at $1869.90. That's up $0.46 or 0.02%.
- WTI crude oil futures fell $-2.16 or -3.3% to $63.33. It's low reached all the way down to $61.95 as traders reacted to hopes of a Iranian nuclear deal which would likely lead to decreased sanctions and more oil supply in the global market. That is not guaranteed however and buyers pushed price back up toward the midpoint area of the day's trading range.
Good fortune with the training
