During the session on Thursday (March 15), the US dollar bulls exploded and stood above the 90 mark in one fell swoop. Non-US currencies such as the euro and the Canadian dollar generally fell, while spot gold fell below the 1,320 US dollar/ounce mark. The new US economic adviser Kudlow's remarks on "buy the dollar and sell gold" have greatly encouraged the dollar bulls. However, the flow of funds in ETF used to hedge against exchange rate risk shows that the foreign exchange market is undergoing a major turn, the US dollar has been thrown into the cold palace, and the yen and the euro have become new favorites, which may imply that the prospects of the US dollar bulls are not good.
US dollar bulls broke out again, and non-US and gold retreated steadily
US dollar index continued to rise, breaking through the 90 mark to 90.05, the highest level in two trading days.
four-hour chart shows that the US dollar rebounded yesterday by the combination resistance between the middle rail of the Bollinger Band and the upper rail of the downward channel. It has stabilized during the day and rebounded again, but the overall situation is still in the wave of decline starting from last week's high. If
rebounds in the short term, focus on the resistance in the 89.85-89.90 area. If the rebound cannot break through this area, it will maintain the short-term bearish outlook for the US dollar index. An effective breakthrough in this resistance area may open up further rebound space. However, analysts pointed out that US President Trump is preparing to impose new tariffs on China, which triggers the impact of the outbreak of a trade war, and any strong rebound of the US dollar may be suppressed.
As the US dollar recovers, major non-US currencies are losing streak: the euro/US dollar continues to fall, with a low of 1.2316.
The euro fell across the board overnight, mainly because European Central Bank President Draghi once again regained the dovish argument. Draghi expressed concerns about the sluggish inflation, pouring cold water on central banks' expectations of removing asset purchase plans for the foreseeable future.
Axel Rudolph, senior analyst at Commerzbank, believes that exchange rate is currently pointing to 1.2275. On the downside, falling below 1.2355 (5-day and 10-day moving averages) will fall to 1.2299 (declined 50-day moving averages) and 1.2273 (March 9 low).
USD/JPY fell to a low of 105.78 over the past week. Analysts pointed out that the disappointing U.S. retail sales announced overnight were disappointing and growing concerns about a potential global trade war, providing an additional boost to the safe-haven yen and exacerbating the decline in exchange rates. According to the news, the US dollar/Japanese yen is not only hit by concerns caused by Trump's trade war, but also the political risks of the Japanese government are under pressure.
JP Morgan Executive Director of Japan Securities said that if Shinzo Abe resigns and believes that his successor will give up Abe economics centered on monetary easing, he may start buying yen.
USD/Canada finally broke through the recent consolidation range, breaking the key psychological threshold of 1.30 strongly, reaching the highest price since the end of June last year at 1.3064.
Although the market is still concerned about US President Trump's trade protectionism, the rising demand for the US dollar has provided effective support for the currency pair. At the same time, the uncertainty of negotiations on the North American Free Trade Agreement (NAFTA) is still high, which puts the Canadian dollar under great downward pressure. The US dollar/Canadian dollar opened up a new upside space after breaking through the key psychological barrier.
In addition, the oil price trend has not provided enough support for the recent Canadian dollar trend, and it is believed that it will be difficult to prevent the pair from stabilizing above 1.3030.
Technically, the upward resistance of the US dollar/Canada dollar is near the middle section of the first level of 1.3000. After rising above this, it will further test the 1.3100 mark. On the downward trend, 1.30 has become a support that needs to be protected in the short term. If it falls below this point, it will fall again to the 1.2950-45 support area.
spot gold fell, falling to a low of $1315.80 per ounce, setting a new low on two trading days due to the continued rise of the US dollar. Technically, gold prices may fall in the short term and point to the bottom of the range 1315, and falling below this support may have greater downward space.
What news is there on the news about the rise of the US dollar tonight? The financial website compiled as follows:
1. US economic data: The number of initial unemployment claims in the United States decreased by 4,000 to 226,000 last week, and has been below the 300,000 mark for 158 consecutive weeks, the longest time since 1970.
Foreign media commented that the number of initial unemployment claims in the United States that week decreased, indicating that the labor market continued to be strong even as economic growth slowed down in the first quarter.
The Federal Reserve expects the labor market to be close to full; economists are optimistic about the view that "the tightening of the labor market will boost wage growth in the second half of this year", which will help support consumer spending that has begun to slow at the beginning of the year.
2. Remarks from the White House: A spokesperson for the US White House said that the White House supports permanent personal income tax reduction, and the White House and Republicans may also seek to lower capital gains taxes!
3. US President Trump: Trump posted on Twitter saying: "Under the leadership of low tax rates, unparalleled innovation, fair trade and an expanding labor force, our country will enjoy many years of great economic and financial success!"
Trump said in the same tweet, " Larry Kudlow will become my chief economic adviser as the director of the National Economic Commission", confirming the statement issued by the White House before.
According to Bloomberg's earlier report, the incoming White House economic adviser Larry Kudlow hinted that US President Trump will support a strong dollar, advance the second phase of tax reform, make tax cuts permanent measures, and take a tougher trade stance against China.
Minutes after Kudlow's appointment was announced, the economist and CNBC TV commentator started with the US dollar, elaborating on the channel his views on a range of economic sectors.
He even made a trading suggestion: "I will buy US dollars and sell gold." As a person who is about to take up a senior government position, this practice is rare.
Signs show that the US dollar is still unpopular. Is the bullish disaster approaching?
ETF funds flows used to hedge exchange rate risks show that the market is still not optimistic about the US dollar, and more funds have begun to embrace the yen and the euro.
Bloomberg data shows that investors have withdrawn US$2.1 billion from WisdomTree Japan Hedged Equity so far this year, accounting for one-third of the total size of the ETF. The ETF Foundation hedges the volatility risk of the yen by purchasing Japanese shares. As funds outflows significantly, ETF value fell 5% this month, setting a new low since 2013. Similar situations in
also occur on ETFs that hedge the euro risks. WisdomTree Europe Hedged Equity, with a total of $6.6 billion, has seen capital outflows for 17 consecutive weeks, with ETF value falling to a new low since 2015.
's outflow of funds on currency hedging ETFs reflects the market's pessimism about the US dollar. With the further recovery and improvement of the European and Japanese economic data and the continuous emergence of the United States, some investors believe that there is no reason to hedge the risks that the sharp fluctuations in exchange rate may bring to the European and Japanese stock markets.
George Saravelos, co-head of Forex Research at Deutsche Bank in London, said signs of capital flow to Japan and the euro zone have begun to appear. When global stock markets plummeted, the performance of Japanese and European stocks was more stable than that of US stocks, and this situation may be reflected throughout 2018. Amid expectations of appreciation of the euro and yen, market demand for exchange rate hedging weakens.
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iShares' exchange rate hedging MSCI Japan ETF this year saw a decline of about 3.9%, and its corresponding non-replacement hedging ETF recorded a gain of 1.5%. iShares' exchange rate hedging MSCI Eurozone ETF so far this year, while non-replacement ETF rose .5%.
