Terrible German manufacturing PMI spooks markets
Summary
  • USDCAD:Dollar/CAD is trading with a bid tone this morning after Germany reported a terrible manufacturing PMI print for the month of March. This caused a risk-off selling wave across the broader markets and saw the EUR, S&Ps, crude oil, copper and AUD all move swiftly lower. The beneficiaries were the traditional safe havens (the USD, JPY, and bonds). Todays move adds credence to the trader angst we observed yesterday post Fed. Whats the Fed worried about all of a sudden? Growth slowing down across the globe in our opinion (case in point with todays German data). USDCAD has benefited from all this, and is now trading just shy of chart resistance at the 1.3400 level as market participants prepare for the release of some key Canadian data. The consensus estimate is +0.4% MoM, and +0.2% MoM ex. Autos for January Retail Sales. Markets are expecting +0.6% MoM and +1.4% YoY for February CPI. We think weaker than expected data will spur on the bulls and see this market regain its new uptrend in style.

  • EURUSD:Euro/dollar is hemorrhaging losses this morning as the 44.7 (vs 48.0 expected) read on German manufacturing sentiment for March is starting to confirm some of markets worst fears about slowing global growth. EURUSD plunged all the way down to the next major trend-line support level in the 1.1290-1.1305 area, and this comes after an already poor NY close yesterday which saw the market retrace all of Wednesdays post Fed gains. German bund yields are tanking, and have now gone below zero! We think the leveraged funds (who are net short EUR) are breathing a sigh of relief over the last 48hrs. Well get an updated read on their positioning from the CFTC later today.

  • GBPUSD:Sterling is somehow avoiding the broad risk-off flows of today, as it appears some no-deal Brexit risk has been removed from the market. The EUs Donald Tusk confirmed last night that Europe is willing to grant the UK an unconditional Brexit extension until April 12th, and a further extension to May 22nd if the UKs parliament can finally pass the Withdrawal Agreement next week. The EU is still not willing to renegotiate, but Theresa May now has two more weeks to convince her country to accept the only agreement on the table. Chart support today rests in the 1.3070s, while resistance is very chunky from the 1.3170s to the 1.3220 level.

  • AUDUSD: The Aussie is trading down this morning, as one might expect given the moves lower in EURUSD and copper. Yesterdays NY close did not produce an bearish, inverted hammer candle, but the pressure on chart support in the 0.7080s still remains at this hour. We think a move below this level may usher in a new wave of selling and keep the leveraged fund short position in charge here.

  • USDJPY:Dollar/yen is back in sell mode today after yesterdays bounce proved feeble. Chart resistance in the 110.70-80s reasserted itself and when the shoe dropped this morning with the weak German data, USDJPY traders started to scramble in search of buyers. The market continues to fall here, and we think how the market responds to the 110.10s will be pivotal. Well get an updated read on the leveraged fund net USDJPY long position later today, which is now starting to take some heat once again.

Tune in @EBCTradeDesk for more real-time market coverage.

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Erik Bregar - Director, FX Trading
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