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Greenback Extends Gains As Equities Lose Ground

FOREX
  • The US Dollar index rose just shy of 0.5% on Monday, extending on last week’s stellar advance amid the geopolitical turmoil surrounding the Ukraine conflict.
  • A dramatic gap higher in crude futures prompted risk/equities to trade on the backfoot, in turn strengthening the greenback and weighing on all other G10 currencies.
  • CHF (-0.95%) and GBP (-0.76%) are the worst performers but they are closely followed by AUD, NZD and CAD, all falling close to half a percent.
  • Despite a relatively meagre daily adjustment in EURUSD (-0.34%), price action continued to be very volatile with a punchy 155 pip range.
  • Initially the single currency’s early sell-off in Asia extended during Europe to print new lows at 1.0806 against the dollar. However, there was a strong retracement higher as markets translated headlines from the Kremlin as an excuse to stage a relief rally. Newswires indicated Russia has told Ukraine it can halt operations ‘at any moment’ if Kyev meets Russian conditions and while not particularly ground-breaking, EURUSD rallied back to 1.0932 before consolidating back below the 1.09 mark. The next technical supports to watch out for include 1.0767, low May 7 and 1.0727, Low Apr 24 from last year.
  • Emerging market currencies bore the brunt of the downturn in risk, with notable losses seen in HUF (-1.97%), PLN(-2.05%) and MXN (-1.61%). With USDMXN having broken some significant short-term resistance around 20.90, the price action suggests scope for an extension higher with the focus on 21.3920, 61.8% of the Nov 26 - Feb 23 downleg.
  • Tuesday’s data calendar is void of any significant market moving event risk. Australian NAB business confidence will precede German industrial production. Final readings for Euro-area GDP and employment will then be followed by US and Canadian trade balance figures. RBA Governor Lowe is due to speak at the Australian Financial Review Business Summit much later in the session.
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