Forex news for North America traders for May 29th
- Financials hammered. Tech holds not hurt as much. Italy contagion hurts indices.
- Trudeau: Will only sign a NAFTA that is good for Canada
- Fed discount minutes show unanimous support for no change in May
- SNB's Jordan: Recent developments show currency market remains fragile
- Italy PM-designate may give up mandate, allow for July 29 election
- ECB's Lautenschaleger: Hike around mid-2019 not entirely out of the question
- European stocks end session with sharp declines.
- Canadian dollar consolidates above 1.30 after Kinder Morgan announcement
- Dallas Fed May manufacturing index 26.8 vs 23.0 expected
- US May consumer confidence 128.0 vs 128.0 expected
- Odds of a June 13 Fed hike slide
- US March CaseShiller 20-city house price index +0.53% vs +0.70% m/m expected
- The JPY is the safe haven and strongest currency. The EUR is the weakest.
- US will place investment restrictions on some Chinese people and groups
- Italy president summons Cottarelli to present government, but it's really not going to matter
In other markets:
- Spot gold up $1.29 or 0.10% at $1299.37. The high extended to $1308.71. The low reached $1292.43
- WTI crude oil fell -$1.02 or -1.50% at $66.86. The high reached $67.55. The low reached $65.80.
US stocks fell but at different trajectories:
- The 30 industrial stocks of the Dow closed down -391 points or 1.58%
- The broad S&P index fell -31.47 points or -1.16% at 2689
- The Nasdaq fell -37.26 points or -0.50% at 7396.59.
US yields fell sharply:
- 2 year 2.33%, -14.6 bps
- 5 year 2.595%, -16.9 bps
- 10 year 2.782%, -15.0 bps
- 30 year 2.972%, -11.9 bps
Today, the markets were held hostage by the political uncertainty out of Italy. Over the weekend, Italian Pres. Mattarella blocked the anti-euro 5-Star and League from forming a government. The instatement of Carlo Cottarelli to form a government was ordered by Mattarella, but it's unlikely 5-Star and League would allow Cottarelli to win a vote of confidence. That increases the likelihood of a new summer or fall election (talking July). The fear is that strengthens the hand of the anti-EU forces and leads to the potential that Portugal and Spain, get the itch too. All could snowball to a EU crisis.
The implications today?
Italian yields rose by a whopping 48 basis points. Portugal yields rose by 12 bps and Spain yields rose about 10 basis points as investors liquidated.
Investors also exited out of stocks with financials getting hammered the most (in Europe and in the US too).
- Italy's FTSE MIB fell 2.65%
- Portugal's PSI20 fell by -2.61%
- Spain's Ibex fell by -2.49%
- German Dax fell -1.53%
- US S&P fell -1.16%
Where did the money go?
- German debt. The 10 year yield fell -8.4 bps
- France debt. Their 10 year yield fell -4.4 bps
- UK debt. Their 10 year yield fell by -12.5 bps
There was big flows into US debt too with the 10 year in the US tumbling a large -14.5 bps to 2.7792%. On May 18th, the 10 year reached a high of 3.126%.
In the forex markets today, the flows led to the "relatively safety of the JPY". That was the strongest currency today. The weakest currency was the EUR for obvious reasons (no escaping the Italian story there). The CHF and the USD also attracted safe-haven flows at different times today. The NZD and AUD suffered on a flow out of risk.
Technicals into the new trading day:
EURUSD: The low today stalled just above the 1.1500 (at 1.1509). A move below that level and traders will be looking toward the 50% of the move up from the Jan 2017 low at 1.1453. The 200 week MA is at 1.1429. The 100 week MA is at 1.1404. That 50 basis point area (from 1.1404 to 1.1453) is a big, big area. Be aware.
GBPUSD: The GBPUSD tested 1.3200 at the low today and is closing around 1.3251. The 50% of the move up from the Jan 2017 low comes in at 1.31858. Key level below. On the topside, the 1.32987 is the swing low from December 2017. Support at 1.31858. Resistance at 1.32987 (call it 1.3300). We trade in between currently.
USDJPY: The USDJPY tested the 100 day MA at 108.145 (the low reached 108.11) and bounced. The move off the low moved back above the early May low at 108.64. We closed at 108.73 - just above that old low. The old May low should be a barometer for bulls/bears.
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