[VIDEO] Currency Point: Data Seat belts, please


If you believe most federal governments, the world is ready to start coming out lockdown as the COVID-19 health crisis passes ‘peak’. 

From Washington to Wellington, Canberra to Berlin, Vienna to Tel Aviv, governments are gearing up to restart opening their economies. 

This has, and will, drive FX, you only have to look at the reactions to the Australian Federal Government’s COVIDsafe road map to understand that economics that may be ‘ahead’ in the reopening cycle could see fund flows. 

But, and it is it quite a ‘but’ at that. The data that will be released in the coming weeks will smash all the record books several times over and we need to prepare for that in event risk positioning. 

This chart of the ADP US Private payrolls is literally ‘off the chart’

[VIDEO] Currency Point: Data Seat belts, please, FP Markets

The US non-farm payrolls charts show that we are in for some wild intraday trading and that seatbelts are well and truly needed. The biggest question from the NFP is how many employable US citizens have left the workforce for good? And has participation been destroyed long term. Only time will tell. Then there are the unprecedented (a word that is being used at unprecedented levels) PMI and employment surveys the world over. India’s PMI of 5.4 is just mind-blowing and shows that COVID-19 is more than just a health crisis.

With all this movement and data, I thought it would be prudent to review the reactions and trends of the major pairs.   

USD/JPY ranging between ¥105.00 and ¥108.00 over the past few days, but it’s clear from the chart the JPY’s safe haven is slowly ‘winning’ and is seeing the pair drift lower after wild first pricing of the COVID-19 crisis. With the USD facing domestic economic risk believe this easing momentum will continue. 

EUR/USD has slipped back to $1.0840 levels as Europe battles the virus on several different fronts and German legal action over the course the ECB is putting the EUR under pressure. It is clear though that since the initial spike in the pair is in a range of $1.077 to $1.098. However, the US data may cause that range to be broken. 

GBP/USD at $1.239 is right in the middle of the trading range that has established itself after the initial reaction to COVID-19. Cable is pretty solidly brought at $1.23 and quickly sold off at $1.26. Interestingly the UK is now the most affected European nation with over 30,000 deaths and restrictions look like staying in place longer leaving the UK under more economic strain than peers. This could lead to GBP weakness. But the USD has its only headwinds which may cause some spike that tests the $1.26 upper level. Risky pair at the moment.

AUD/USD, in contrast, is actually the one pair that has to retract over 75% of its initial falls. Why is an interesting one, it could be the quasi-China trade that the AUD is famous for, the fact Australia has (so far) escaped the worst of the COVID crisis ad has mentioned early is on the road to reopening or that Asia as a whole has fared better than its other continent peers. All explain the pair’s performance. There is support at $0.63 no doubt but there does not appear to be a driver that could see it pushing through $0.66 level meaning US data will be the key to this pair and any slight beats or less than horrible US data would probably see this pair sliding back to the level range of the band. 

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Source - database | Page ID - 21593

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