30-Mar-2021

1) EUR/USD Hits Fresh Four-Month Low Amid Rising US Yields
2) AUD/USD Slides Back Closer To Session Lows, Around 0.7635 Region
3) USD/CAD Refreshes Session Tops, Bulls Await A Sustained Move Beyond 1.2600 Mark

1) EUR/USD Hits Fresh Four-Month Low Amid Rising US Yields

EUR/USD has extended its falls, dipping below 1.1750 to hit the lowest since November. US yields are rising ahead of President Biden’s speech on infrastructure spending while virus-ravaged Europe struggles with its vaccination campaign. US Consumer Confidence is eyed.

Euro/dollar is trending lower as the four-hour chart clearly demonstrates. Momentum remains to the downside while the Relative Strength Index (RSI) is still above 30 – thus outside oversold conditions.

Some support is at the fresh 2021 trough of 1.1740. The next cushion awaits at 1.1695, which held the currency pair up in October 2020. It is followed by 1.1630, a support line from early November, and then by the round 1.16 level.

Resistance awaits at the previous 2021 bottom of 1.1760, and then by 1.1805, which recently capped it. Further above, 1.1836 and 1.1875 are eyed.

The vaccines, stupid – paraphrasing James Carville’s “the economy, stupid” from 1992, that is the straightforward explanation of why EUR/USD is relentlessly falling. The old continent continues struggling to immunize its citizens while the US is surging forward.

By April 19, roughly 90% of Americans will be able to receive a COVID-19 vaccine, en route to President Joe Biden’s 100% eligibility goal of May 1. The pace of immunization remains robust in the US while it lags behind in the old continent.

German politicians are pointing fingers at each other for handing mitigating measures and French President Emmanuel Macron is also under fire for not acting on time. While infections are also rising in the US – with the CDC director calling it an “impending doom” – the inoculation chart below points to a widening gap that favors the dollar.

The greenback has also received a boost from rising US bond yields. Returns on ten-year Treasuries have surpassed 1.75% and five-year yields are also moving higher. Details of Biden’s infrastructure plans have begun circulating and they are pointing to investment in green energy and potentially no taxes on gasoline – at least in the first phase.

If hikes of corporate taxes are deferred to the second stage of the plan, yields could further rise, also amid fears of inflation. The president is set to talk about the economy on Wednesday, but additional details about a two-pronged plan will likely come out beforehand.

Spain’s Consumer Price Index surprised to the upside, with the European standard HICP hitting 1.2%. Similar increases are also seen in German states. However, it is essential to note that these increases are a result of base effects – a tumble in inflation in March 2020.

On the other side of the pond, the Conference Board’s Consumer Confidence gauge for the current month is projected to show an increase, as Americans see better prospects – and have received stimulus checks.

2)AUD/USD Slides Back Closer To Session Lows, Around 0.7635 Region

The AUD/USD pair surrendered a major part of its intraday gains to one-week tops and was last seen trading near the lower end of its daily trading range, around the 0.7635 region.

Following the previous day’s two-way/directionless trading moves, the pair managed to gain some positive traction on Tuesday and built on its recent bounce from the vicinity of YTD tops. A generally positive risk tone was seen as a key factor that extended some support to the perceived riskier Aussie. However, sustained US dollar buying kept a lid on any further upside, rather prompted some fresh selling at higher levels.

The USD shot to four-and-half-month tops and remained well supported by the upbeat outlook for the US economy. Investors remained optimistic about the prospects for a relatively faster US economic recovery from the pandemic, bolstered by the impressive pace of coronavirus vaccinations, the passage of a massive stimulus package, and expectations for an additional $3.0 trillion infrastructure spending plan from the Biden Administration.

Apart from this, a fresh leg up in the US Treasury bond yields provided an additional boost to the greenback. In fact, the yield on the benchmark 10-year US government bond jumped back closer to the 1.75% threshold, or over one-year tops touched earlier this month. This was seen as another factor that collaborated towards capping gains for the AUD/USD pair, possibly setting the stage for the resumption of the prior depreciating move.

Market participants now look forward to the US economic docket, highlighting the release of the Conference Board’s Consumer Confidence Index. This, along with the US bond yields, will influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the AUD/USD pair.

3) USD/CAD Refreshes Session Tops, Bulls Await A Sustained Move Beyond 1.2600 Mark

The USD/CAD pair refreshed daily tops during the early European session, with bulls making a fresh attempt to build on the momentum beyond the 1.2600 mark.

Following the previous day’s pullback from the 1.2625-30 region, the pair managed to regain some positive traction on Tuesday and was supported by a combination of factors. The US dollar shot to fresh four-month tops amid the upbeat US economic outlook. Apart from this, a softer tone around crude oil prices undermined the commodity-linked loonie and provided a modest lift to the USD/CAD pair.

Investors remained optimistic about the prospects for a relatively faster US economic recovery amid the impressive pace of coronavirus vaccinations and the passage of a massive stimulus package. Further feeding the expectations were the US President Joe Biden’s pledge of administering 200 million vaccine shots in 100 days and hopes for an additional $3.0 trillion infrastructure plan from the US.

Meanwhile, worries that a new wave of COVID-19 infections, pandemic-related lockdown, and the slow vaccine rollouts in Europe could hinder the anticipated recovery in demand for fuel products. This, in turn, weighed on crude oil prices and was seen as another factor that provided an additional boost to the USD/CAD pair, supporting prospects for a further near-term appreciating move.

That said, it will still be prudent to wait for some follow-through buying beyond the 1.2625-30 region before positioning for any further appreciating move. The market focus now shifts to an OPEC+ meeting this week and Friday’s release of the US monthly jobs report (NFP). This will play a key role in driving the USD/CAD pair and help investors to determine the near-term trajectory.

In the meantime, Tuesday’s release of the Conference Board’s Consumer Confidence Index will be looked upon for some impetus. The data, along with the US bond yields, will influence the USD. Traders might further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.