Friday April 24th, 2020

The US$ index continues to strengthen after a week of disappointing global economic data releases, high volatility in the oil markets and the inconclusive results on a treatment for Covid-19. EU leaders fail to reach consensus on a stimulus package and speculation is that they are still weeks away from an agreement. US House passes $480 bln package and the bill is expected to be signed by the US President soon. US$ safe haven buying continues with the index +1.5% vs a basket of major currencies in April. EUR & GBP heading lower, Petro currencies firmer & ZAR weaker as virus concerns grow. Intraday US Durable goods and US Nondefense capital good orders data releases will provide direction.

Oil prices continue to rebound up +3% overnight with output cuts starting, oil companies instigating cost cutting measures and increasing creative storage solutions being rolled out. Expectations are that oil demand will remain low in Q2 and prices could stabilize around current levels. C$ strengthened on stronger oil prices, but with lockdown restrictions to remain in place expect Canadian economic pressures will remain. Intraday US data releases and oil prices will continue to dictate direction. 1.4085 now provides intraday resistance with 1.3990 support, a break could see 1.3875 next. Bias is to buy US$ dips under the current economic conditions.

Euro remains under pressure amid weak data and the failure of EU leaders to agree on a recovery package. EU leaders are studying the idea of a Euro1.5-2 trillion packages, but leaders are stuck between disbursement being in the form grants vs loans. ECB President told the EU leaders that the economic downfall could reach 15% of GDP. Recent EU data has been weak with Service PMI hitting record lows, German IFO business climate this morning all fell below expectations. Euro looks vulnerable to further weakness as safe-haven US$ buying remains, watch US data for direction today. key support sits at 1.0640, with resistance at 1.0880.

GBP tested fresh lows on weak economic data results, government criticism over covid-19 response and a strengthening US$. UK March retail sales dropped worse than expectations, following yesterday’s PMI which tumbled to 12.3, its lowest on record. The UK PM is expected to return to his office on Monday and will address the government lack of a perceived plan for exiting the lockdown. Focus will also return to Brexit as the EU chief negotiator is expected to comment on the Brexit negotiations today. Intraday US Data results, Brexit comments and lockdown updates will dictate direction. Initial support at 1.2275, if breaks 1.2160 will provide key support with resistance at 1.2450.