Euro Tumbles, Risk-Off as Russian Troops Continue Build Up in Ukraine

Michael Moran, Senior Market Strategist & Trading Mentor at ACY

01.04.2022 01:30 pm

#stocks

Yen Extends Rally, Rouble Gains; Yields, Stocks Slump; US Payrolls Next

Summary: After two days of impressive gains on short covering, the Euro (EUR/USD) tumbled lower, closing in New York at 1.1070, down 0.81% from 1.1160 yesterday. Russia demanded that oil and gas payments be made in Roubles even as Moscow continued to build its troops in Ukraine’s east following setbacks near the capital, Kiev. The Euro was also lower against the other major currencies as well. The EUR/JPY cross which FX traders use to express risk appetite, slumped 1.07% to 134.72 (136.02 yesterday). The USD/JPY pair eased 0.25% to 121.72 from 121.90 yesterday. Meantime, the DXY (Dollar Index) which measures the value of the Greenback against a basket of 6 major currencies, rallied 0.55% to 98.32 (97.80 yesterday). The British Pound (GBP/USD) was little changed at 1.3143 (1.3137) for the second day running. Oil prices slid after President Joe Biden said the US would release 1 million barrels per day of oil reserves for 6 months starting in May. Against the Russian Rouble, the US Dollar fell to 81.00 from 84.00 yesterday. Brent Crude was last at USD 107.30 from USD 111.00, down 5.4%. WTI Oil sank 6.07% to USD 101.25 from USD 106.50 yesterday. Wall Street stocks slumped with the DOW settling 1.3% lower to 34,783 (35,225 yesterday). The S&P 500 finished 1.57% lower to 4,547. Global treasury bond yields fell. The US 10-year bond rate was last at 2.34% (2.39% yesterday). Germany’s 10-year Bund yield fell 9 basis points to 0.54% while the UK 10-year Gilt rate eased 3 basis points to 1.61%.
Data released yesterday saw Japan’s Housing Starts climb to 6.3%, beating estimates at 1.1%. China’s March Manufacturing PMI slid to 49.5 from 50.2, and lower than forecasts at 49.9. UK Q4 GDP rose on q/q to 1.3%, against median estimates at 1%. Germany’s February Retail Sales eased to 0.3% against forecasts at 0.5% but higher than the previous 0.0%. Eurozone February Retail Sales was also up (y/y) to 7%, beating forecasts at 6.1%. The Eurozone March Unemployment Rate eased to 6.8% from 6.9% but higher than estimates at 6.7%. The US February Core PCE Price Index (y/y) eased to 5.4% against median estimates at 5.5% but higher than the previous 5.2%. US Initial Unemployment Claims rose to 202,000 from a previous 188,000 and higher than median forecasts at 197,000. US February Personal Income was up 0.5%, matching estimates while February Personal Spending eased 0.2% from 2.7% previously, and lower than median expectations at 0.5%.

EUR/USD – the shared currency extended its slide, weighed by the ongoing Russia Ukraine war which still sees no end in sight. Despite peace talks, there has been no real progress as at yet. Overnight, the EUR/USD pair tumbled to a low at 1.1061 before settling at 1.1065. Yesterday, the EUR/USD pair opened at 1.1160. In another volatile session, overnight high traded was at 1.1185.
USD/JPY – after soaring to a weekly and near 7 month-high at 125.00, the Greenback tumbled lower as markets switched to risk-off. The USD/JPY pair closed at 121.72 from 121.90 yesterday and 122.90 on Wednesday. Overnight low traded was at 121.28.
AUD/USD – The Aussie Dollar eased to 0.7490 from 0.7512 yesterday as risk appetite waned while commodity prices were mostly lower. Overnight the AUD/USD pair traded to a high at 0.7525 before easing to its New York close. The low traded for the Aussie was at 0.7470.
GBP/USD – Sterling finished little changed against the Greenback, closing at 1.3143 against 1.3137 yesterday. The British currency traded in an overnight range between 1.3105 and 1.3175. UK Q4 GDP beat expectations, climbing to 1.3% against 1%, and a previous 1%.

On the Lookout: Welcome to Payrolls Friday. With the focus still firmly on the war between Russia and Ukraine, the spotlight turns to the US Non-Farms Payrolls report in March. The US Unemployment rate is expected to continue its slide to a post-Covid low at 3.7% (from 3.8%). After February robust Employment gain of 678,000, median expectations are for a total of around 450,000-490,000 jobs created. Wages are forecast to climb to 0.4% from 0.0%. Watch this component, we could be in for a surprise here. Other data scheduled for release today kicked off with Australia’s AIG Manufacturing Index which rose to 55.7 from a previous 53.2. Japan follows with its Tankan Manufacturing Index (f/c 12 from a previous 18 – ACY Finlogix); Japanese Tankan Non-Manufacturing Index (f/c 8 from a previous 8 – ACY Finlogix). Japanese Jibun Bank Final March Manufacturing Index (f/c 53.2 from a previous 53.2). China follows next with its Caixin Manufacturing PMI (f/c 49.7 from a previous 50.4). Switzerland starts off European data with its March Inflation Rate (m/m no f/c, previous was 0.7%; y/y no f/c, previous was 2.2% - ACY Finlogix). Germany releases its March Final Manufacturing PMI (f/c 57.6 from 58.4 – ACY FInlogix), Eurozone Final March Manufacturing PMI (f/c 57 from 58.2), Eurozone March Flash CPI (no f/c, previous was 111.74), Eurozone March Flash Headline Inflation Rate (f/c 6.2% from 5.9% - ACY Finlogix). Eurozone March Core Inflation Rate (f/c 3.1% from 2.7% - ACY Finlogix). The US releases its March Payrolls report (see above). Canada releases its March Markit Manufacturing PMI (no f/c, previous was 56.6). The US rounds up today’s busy releases with its US March Markit Manufacturing PMI (f/c 58.5 from 57.3 – ACY Finlogix) and finally, US ISM March Manufacturing PMI (f/c 58.5 from 58.6 – ACY FInlogix).

Trading Perspective: Its all about the US Payrolls report once again as we end the week. After January and February saw strong US NFP gains, March’s report is widely expected to see an easing to between 450,000 and 490,000 Jobs created. Wages though are expected to soar 0.4% from 0.0%. Watch this number as anything weaker than 0.4% could see pressure on the US Dollar emerge. Watch the US treasury bond yields, they always tell a story. Meantime the Euro will continue to be pressurised as the war between Ukraine and Russia rages on. Reports that Russia is preparing new attacks on the southeast of the country will maintain the market’s risk-off stance. After a choppy week, keep those tin helmets on. We’re in for another choppy ride today.

EUR/USD – the shared currency opens heavy at the outset of Asian trade even at current levels. As I write this, the EUR/USD pair is changing hands at 1.1070. For today, we can find immediate support at 1.1060 (overnight low 1.1061) followed by 1.1030 and then 1.1000. On the topside, immediate resistance lies at 1.1100 and 1.1130. Expect the Euro to stay pressurised in a likely range today of 1.1040-1.1180. A bad US Payrolls report might be the saviour for the shared currency today.

(Source: Finlogix.com)

GBP/USD – while the Pound has held its levels, a strong US Jobs report will push Sterling lower. The British currency closed at 1.3143 from 1.3137 yesterday. Overnight low traded was at 1.3105. Immediate support today lies at 1.3110 and 1.3080. On the topside, immediate resistance is found at 1.3170 (overnight high 1.3175). The next resistance level lies at 1.3200 and 1.3230. Look for a likely trading range today of 1.3075-1.3175.
USD/JPY – slip-sliding away, the Greenback lost support against the Yen as haven support emerged for the Japanese currency. US bond yields were also lower. Immediate support for the USD/JPY pair lies at 121.40 followed by 121.10 and 120.80. On the topside, immediate resistance is found at 122.00, 122.30 and 122.60. Watch this currency pair, it could be a choppy one. A strong US Payrolls would see USD/JPY back to 125.00 while a weak number, and risk-off could see us re-test the 120.00 support level. Get ready for some fireworks.
AUD/USD – the Aussie Battler has steadied the past week against the Greenback and other currencies. Robust commodities and the proximity of Australia to the European conflict has shielded the AUD/USD pair, providing support. However, a drop in risk- appetite is never good for the Aussie Battler. Further risk-off will pressure the AUD/USD lower. Immediate support lies at 0.7470 (overnight low) and 0.7440. Immediate resistance can be found at 0.7510 and 0.7530. Look for the Aussie to trade a choppy range between 0.7430-0.7530. Prefer to sell on any Aussie strength today.

It's Payrolls Friday once again, lets get ready to rumble folks. Have a good one, and a top weekend all.

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