USD hits fresh 3-week lows, political developments driving the market
|The greenback came under some renewed selling pressure on Thursday, with the key US Dollar Index slipping below mid-99.00s to hit fresh 3-week lows. With geopolitical tensions taking the backseat, political developments turns out to be a key driver of the movement in the FX market. Against the backdrop of recent jawboning by the US President Donald Trump, weaker incoming US economic data further collaborated to the bearish sentiment surrounding the buck.
The latest disappointment came from a jump in weekly jobless claims and a sharp drop in the Philly Fed's manufacturing index. For the week ended April 14, the number of individuals filing for unemployment benefits rose by 10K to 244K. Meanwhile, the a gauge measuring manufacturing activity in Philadelphia area dropped further to 22 for April, down from previous month's 32.8 reading. Both the data points fell short of consensus estimates and did little to provide any immediate respite for the greenback.
Market participants would now closely scrutinize comments from the US Treasury Secretary Steven Mnuchin, where any specific remarks about the US currency could aggravate the moves later during the NY session.
The shared currency popped up on Thursday, lifting the EUR/USD major to a three-week high near 1.0775 region after the latest poll indicated centrist candidate Emmanuel Macron holding a lead in what is seen as one of the tightest race in decades. Hence, it is not surprising to see markets reaction to the final opinion polls just ahead of the vote on Sunday.
The up-move, however, seems to have ran out of steam near 61.8% Fibonacci retracement level of 1.0905-1.0570 downslide and the pair has now retreated back to mid-1.0700s. However, 50% Fibonacci retracement level near 1.0735 level might now protect immediate downside. Only a sustained weakness back below the said support could drag the pair back towards the 1.0700 handle, also coinciding with 38.2% Fibonacci retracement level. A follow through selling pressure would negate bullish bias and turn the pair vulnerable to head back towards 23.6% Fibonacci retracement level support near mid-1.0600s, en-route 100-day SMA and the medium-term ascending trend-line support near 1.0630-20 band.
Meanwhile on the upside, 1.0775 area remains immediate barrier, which if conquered is likely to push the pair further towards the 1.0800 handle before eventually boosting the pair back towards the very important 200-day SMA hurdle near 1.0845-50 region.
The pair seems to have failed ahead of mid-1.2800s and has now retreated back below the 1.2800 handle, inching back towards 1.2775-70 immediate support marking 23.6% Fibonacci retracement level of the 1.2365-1.2905 latest up-move. The latest revision of the EU governments' Brexit negotiating guidelines, demanding simple administration for citizens and asking UK to resolve ECB financial issues, seems to have prompted some profit taking. Moreover, investors also seemed to trim their bullish on possibilities of some dovish comments from the BOE Governor Mark Carney, especially after the latest political development in the UK where the PM May called for an early election on June 8.
From a technical perspective, a follow through retracement below 1.2775-70 immediate support is likely to extend the pair’s corrective slide towards 38.2% Fibonacci retracement level support near 1.2700 round figure mark.
Meanwhile on the upside, bulls would be eyeing for a sustained move beyond 1.2850-60 horizontal resistance, above which the pair is likely to make a fresh attempt towards reclaiming the 1.2900 handle, marking 61.8% Fibonacci retracement level of 1.3445-1.1980 downfall. A follow through buying interest has the potential to continue boosting the pair, but any further up-move is likely to remain capped at a strong horizontal resistance near 1.2960-65 zone, at least in the near-term.
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