Market Drivers April 13, 2015

Euro tests 1.0550 as dollar Juggernaut continues
Chinese Trade Balance plummets to 3.1B vs. 40B eyed
Nikkei -.01% Europe -0.02%
Oil $52/bbl
Gold $1201/oz.

Europe and Asia:
CNY Trade 3.1B vs. 43.4B

North America:
No Data

The new week in the currency market started much like the week that just passed – with the greenback continuing to rally across the board as US 10 year yields inched ever so close to the psychologically key 2.00% level as currency traders flocked to the buck.

The EUR/USD drifted lower all night long dropping nearly 100 points off its Asian session open as momentum players pressed the unit through the 1.0525 level targeting the key 1.0500 barrier. The euro has now declined more than 500 points in a week unwinding all of its short covering gains over the past month.

The pair now stands perilously close to breaking the key 1.0500 support level to test multi-year lows at 1,0488. The change of sentiment in the market has been remarkably swift with currency traders now convinced that the Fed is determined to normalize rates by September and perhaps even as early as June. However, the market may be getting ahead of itself as the Fed remains data dependent and the eco data has not confirmed the confidence of the price action.

This Tuesday’s US Retail Sales will be a key litmus test of the US recovery thesis. The market is looking at a string rebound of 1.1% versus –0.6% the month prior, but if the consumer does not come through – the dollar rally could run into the brick wall of reality.

Elsewhere, news out of China shocked the Asian trade session as the country’s trade balance came in at 3.1B versus 40.0B eyed. The massive miss was partly blamed on lunar year adjustments and the trade data does tend to be volatile, yet it does not alleviate the fact that growth has slowed materially and that concern was reflected in the commodity dollars with Aussie and kiwi dropping more than 100 points off the session highs.

In North America the battle lines will be clearly drawn in the EUR/USD between the bargain hunters who are lining up against the range lows at 1.0500 and the momentum traders looking to push the pair to new multi year lows. With no US data on the docket, the price action is likely to be technical as barrier defense and barrier attack against the 1.0500 level will be the primary focus of the day.

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