Ukraine War Obscures Robust US Payrolls: EUR/CHF tanks, Yen gains

Aussie Soars to 2022 Highs; Metals Surge, Stocks, Bond Yields Slump

Summary: The war which began with Russia’s invasion of Ukraine continued into its eleventh day over the weekend. Ukraine’s defence has been far more effective than Russia’s leadership of anyone else anticipated. Latest reports of the civilian death toll from hostilities across Ukraine since the start on February 24 was reported at 351 civilians. A growing number of Western firms cut ties with Russia. Meantime markets shrugged aside an impressive US February Non-Farms Payrolls which saw a total of +678,000 jobs created, bettering median expectations of +438,000. The US Unemployment Rate improved to 3.8% from January’s 4.0%, beating forecasts at 3.9%. The Euro (EUR/USD) tanked, breaking the 1.10 support level to 1.0932 at the close of trade in New York from 1.1058 Friday morning. Which enabled the Dollar Index (USD/DXY), a measure of the Greenback’s value against a basket of 6 major currencies, where the EUR/USD carries the most weight, to rally 0.74% to 98.50 (97.80 Friday). The Euro was also weaker against the other major currencies.

The EUR/CHF cross headed towards parity, tumbling 1.5% lower to 1.0025 from 1.0160 Friday. Overnight low traded was at 1.0005, just above the 1.00 level, lows not seen since January 2015. Switzerland’s Economic Minister, Guy Parmelin noted that the EUR/CHF near 1.00 is a “concern.”

(Source: Finlogix.com)

Elsewhere, the Australian Dollar (AUD/USD) edged 0.30% higher to 0.7375 from 0.7320, fresh 2022 highs, supported once again by higher metal prices. Gold soared 1.8% to USD 1,969.50 (USD 1,936.50), Iron Ore and Copper saw strong buying, Aluminium prices hit a fresh record high. Against the haven sought Japanese Yen, the Greenback tumbled 0.76% to 114.85 (115.43) as the market’s risk appetite soured. Sterling (GBP/USD) fell under the weight of risk-off and an overall stronger Greenback to 1.3234 (1.3337). The US Dollar rallied against the Asian and EMFX. The USD/SGD pair climbed to 1.3612 from 1.3575 on Friday. USD/THB (US Dollar-Thai Baht) edged higher to 32.67 from 32.60. The Greenback finished 2% up against the Russian Rouble at 122.00 (110.00 Friday). Wall Street stocks slid. At the close of trade on Friday, the DOW settled at 33,580. from 33,752. while the S&P 500 lost 0.25% to 4,324. from 4,358. Global bond yields slumped. The US 10-year treasury bond rate was last at 1.73% from 1.85%, a massive 12 basis points lower. Germany’s 10-year Bund yield fell to -0.08% from 0.01% Friday.

Other economic data released on Friday saw Japan’s Unemployment Rate rise to 2.8% in February from a previous 2.7%, higher than estimates of 2.7%. Australia’s Retail Sales for February matched expectations, up 1.8%, which was January’s rise. Germany’s Trade Balance climbed to +EUR 9.4 billion from a previous upwardly revised +EUR 8.1 billion, bettering estimates of +EUR 7.5 billion. French Industrial Production jumped to 1.6% in February, higher than forecasts at 0.5%. The Eurozone Retail Sales missed forecasts, rising 0.2% against 1.5%. UK Construction PMI beat expectations, up to 59.1 against 57.4 and higher than a previous 56.3. Canada’s Building Permits slumped -8.8% in February, underwhelming median estimates at +1.3%. US Average Hourly Earnings (Wages) in February fell to 0.0% from a previous downward revised 0.6% (from 0.7%), missing forecasts at 0.5%. Canada’s February IVEY PMI rose to 60.6 from 50.7, and forecasts at 54.2.

• EUR/USD – The shared currency got crushed, breaking the 1.10 support level to settle at 1.0932 in late New York. On Friday the Euro opened in Asia at 1.1058. Overnight low traded for the EUR/USD pair was at 1.0889. Against the other major currencies, the Euro also fell. Against the Swiss Franc, the Euro fell to a new low at 1.0005 before settling at 1.0025.
• AUD/USD – The Aussie Battler extended its outperformance, rallying 0.30% against the broadly based stronger Greenback. Higher commodity prices, led by precious and base metals continued to buoy the AUD/USD pair. Overnight, the Aussie traded to 0.7380, fresh 2022 highs.
• USD/JPY – the market’s risk-off stance favoured the haven sought Japanese Yen. The Greenback tumbled 0.76% against the Yen, settling at 114.85 at the close of trade in New York. On Friday morning, the USD/JPY pair opened at 115.42. Lower US bond yields also weighed on the USD/JPY pair.
• GBP/USD – The British Pound fell under the weight of the overall stronger Greenback, sliding to 1.3234 from Friday’s opening at 1.3337. The combination of risk-off coupled with a strong US Payrolls report weighed on Sterling. A robust UK Construction PMI report could not support the British currency. Overnight, the GBP/USD pair traded to a low at 1.3202.

On the Lookout: The new week begins with the limelight firmly focussed on the Russia-Ukraine war. Economic data releases will be relegated to the background as geopolitical risks grow. Today’s economic calendar is light. Australia kicked off earlier today with its February AIG Services Index, which rose to 60.0, bettering a previous 56.2. Australia’s February ANZ Job Advertisements follow (no f/c, previous was -0.3%). China follows with its January Trade Balance (+USD 99.5 billion from +USD 94.46 billion – ACY Securities). Chinese Exports in January (y/y f/c 15% from a previous 20.9%), Imports (y/y f/c 16.5% from 19.5%) – ACY Securities. Switzerland starts off Europe’s data releases with its Unemployment Rate for February (f/c 2.5% from 2.6% - ACY Finlogix). Germany follows with its January Retail Sales (m/m f/c 1.8% from -5.5%; y/y f/c 9.8% from 0% - ACY Finlogix). German January Factory Orders follow (m/m f/c 1% from 2.8%). The UK releases its February Halifax House Prices Index (y/y over 3m f/c 10.6% from 9.7%; m/m f/c 1.1% from 0.3%). China releases its February Reserves data (f/c +USD 3.225 trillion from a previous +USD 3.222 trillion – ACY Finlogix). The US rounds up today’s reports with its January Consumer Credit Change (f/c USD 23.8 billion from previous USD 18.9 billion).

Trading Perspective: As FX volatility ramps up on the Ukraine War certain currency pairs are threatening sensitive levels. The EUR/CHF cross, which almost always falls during times of excessive risk-off is in danger of breaking through parity (1.00). Expect the Euro to remain under pressure while a continuous slide in risk sentiment will attract funds to the Swiss Franc. In early Asian trade, the EUR/CHF cross tumbled to a low at 0.9980 (probably some stops executed in early Sydney). Expect the Swiss National Bank will verbally intervene to prevent any further strengthening of the Swiss Franc against the Euro. While the shared currency has stabilised, it remains under pressure which will continue to support overall US Dollar strength. Asian and EM currencies have also weakened against the Greenback. While the Australian Dollar has outperformed, managing to trade to 2022 highs, any further gains in the current environment will be difficult.

• EUR/USD – The break of the 1.1000 support level on the Euro forced the shared currency lower to finish at 1.0932 from Friday’s open at 1.1058. Overnight low traded was at 1.0889. Immediate support on the day lies at 1.0900 followed by 1.0870. On the topside, immediate resistance can be found at 1.0960, 1.0990 and 1.1020. Look for the Euro to remain heavy in a likely choppy range today between 1.0885-1.1025. Just trade the range, enough in there to make some good cash.
• AUD/USD – The Australian Dollar benefitted from the strong rise in commodity prices, particularly iron ore, and other base metals (copper, aluminium). AUD/USD traded to an overnight high at 0.7380 before easing to settle at 0.7375. Immediate resistance lies at 0.7380 followed by 0.7410. On the downside, immediate support is found at 0.7340, 0.7310 and 0.7280. Despite higher commodity prices, its difficult to see the Aussie Battler maintain its strength against the Greenback considering the weakness of the Asian and EM Currencies. Looking to sell rallies to 0.7400-10 today.
• USD/JPY – The Dollar slid against the Yen to 114.85 from 115.43 as risk-off favoured the haven Japanese currency. US bond yields were also lower. The robust US Payrolls report saw the USD/JPY pair trade to its overnight high at 115.55 before sliding at the New York close. The overnight low traded for the USD/JPY pair was at 114.52. For today, immediate support lies at 114.50 followed by 114.20. Immediate resistance can be found at 115.10, 115.40 and 115.70. Look for further choppy trade in a likely range today between 114.50-115.50.
• GBP/USD – the combination of broad-based US Dollar strength and risk aversion will weigh on the British currency. Overnight, Sterling slid to a low at 1.3202 before settling at 1.3237 in late New York. For today, immediate support is found at 1.3200 and 1.3170. Immediate resistance can be found at 1.3260, 1.3290 and 1.3320. Expect the British Pound to trade a likely range today of 1.3200-1.3320. Just trade the range shag on this one today.