The USD remains under pressure this morning as traders return to work after the Easter holiday. Global Coronavirus cases and deaths are beginning to trend lower and traders hope the worst is over in the US. The DOW broke a three-day winning streak yesterday falling over 300 points, but DOW Futures are higher this morning, indicating an opening of over 300 points later today. Earnings season begins today and JP Morgan Chase, Wells Fargo, and Johnson & Johnson will be reporting their numbers this morning. Investors are waiting to see how large a hit the pandemic will have on earnings. According to analysts, earnings growth may decline by over 10%, and there is an unusually wide range of estimates based on the virus. The USD traded lower against the EUR, GBP. JPY and CAD as traders moved away from the greenback. US Treasury yields were also higher overnight as traders react to the OPEC production agreement and show optimism that the pandemic may have reached its peak. The yield on 10-year notes was 0.7568%, and the yield on 30-year bonds was at 1.4011%.
EUR/USD moved higher overnight testing resistance levels and is currently trading near the top of its overnight range. Better than expected economic reports from China are aiding the move away from USD and helping the EUR. Virus cases seem to be slowing in Europe and the next move will be when countries begin re-opening the economy. France extended their lockdown to May 11, while Germany reported a significant slowdown in cases and their lockdown remains until May 3. Overall, the Eurozone’s four largest economies are seeing encouraging signs and planning a slow return to normal. Expect the EUR to hold onto gains made overnight during trading today.
GBP/USD is trading near one-month highs this morning, after also testing resistance levels in early Asian trading. The move higher is a combination of the USD pressure seen on all currencies as well as a “feel good” attitude towards PM Johnson’s release from the hospital. Technically, the pound is getting into an “overbought” situation and this could eventually weigh on the pound. The “Boris Bounce”, as it has been called, is beginning to ease and the pound could move lower. As PM Johnson recuperates, Foreign Secretary Raab is still running the government’s day to day operations. The UK economy is expected to remain under lockdown until May 7.
USD/JPY is much lower this morning, breaking through technical support levels and trading near overnight lows as traders once again move towards safe-haven trades. Traders in the futures markets are buying JPY as data from the CME Group show that open interest in JPY futures rose for the second consecutive session. Many traders expect the USD/JPY to test support levels and move lower during the trading day. JPY is also being aided by better than expected economic numbers from China. Continued uncertainty regarding the pandemic will keep traders involved in safe-haven trades.
USD/CAD is lower as well this morning as oil prices moved higher overnight. Adding to cuts by OPEC+, US energy forecasters are predicting shale output in the US would fall by the most on record in April. Brent crude rose $0.53 to $32.27 a barrel, while U.S. West Texas crude rose $0.32 to $22.73. After a strong move lower on Monday, breaking through some technical support levels, the USD/CAD has moved back near overnight highs. Technical analysts expect the negative USD sentiment to continue as the USD/CAD is testing 50 and 100-day moving average support levels. As a commodity-based currency, the influence of oil prices will keep the Canadian dollar better bid.
China reported a smaller than expected fall in exports overnight. Dollar-denominated exports fell 6.6% year on year, less than half of the -14% drop that was expected. Traders are watching the data being reported from China, the country that first had the Coronavirus, as a rough leading indicator as to how the rest of the world will move forward. China will also release Q1 growth figures on Friday and analysts now expect they may be better than expected as well.