US Dollar under pressure – Market Analysis – April 1

US Dollar under pressure – Market Analysis – April 1

With most other majors under scrutiny, USD shines

The first day of the second quarter of the year began with Dollar buying flows again.

The US Dollar rose against all currencies with the sole exception of the Japanese Yen, which remained on demand in a market characterized by risk aversion due to the escalation of contagion figures and with the concern that the United States is currently at the epicenter of the pandemic.


The Yen crosses GBP/JPY, EUR/JPY, CAD/JPY ... etc. suffered losses for this reason.

The US Dollar

The purchase of Dollars, however, was not due to flows in search of safe haven but due to new tensions in short-term funding. Short swaps rebounded, and the high cost of funding short Dollar positions has precipitated their cut.

Despite the efforts of the Federal Reserve to normalize the money market, giving liquidity in Dollars at low cost, the high demand, coming mainly from emerging countries, caused this measure not to take effect.

This situation, in the opinion of most market analysts, will continue in the medium term, even when the health crisis subdues, but the adverse economic effects are beginning to be visible in the financial figures.

However, at the moment, the figure of ISM manufacturing was published yesterday with a number for March at 49.1, much better than expected, and showing a very slight deceleration, which supported the Dollar.

EUR/USD fell with the strength of the Dollar more than one figure to 1.0900. The head and shoulders technical pattern that has formed has a theoretical target at 1.0730. The foremost market analysts agree on the intrinsic weakness of the Euro for economic and political reasons, so it is reasonable to think that if tight financing conditions remain for the Dollar, EUR/USD will consolidate its downward path. The following targets would be 1.0893 50% Fibonacci and 1.0833 61.8% Fibonacci.


Other assets

The American stock indices failed to get over the resistance levels in the corrective movement of last week, and, in the still prevailing risk aversion scenario, they lost above 3%.

Commodities are also on the downside, and BrentOil hit a low of $24.59 after the Crude Oil inventories figure was known with a spectacular increase to 13.8 M barrels when slightly less than 4 M was expected.

There is concern about the lack of storage capacity; if full capacity is reached, the demand for Crude Oil will disappear. Also, take into consideration that the global demand already decreased by more than 50%.

Every day there's news of negotiation attempts between producer countries to stop this collapse, but without success until now. A tweet from Trump against Iran about an attempt to attack American facilities in Iraq managed to rebound the price of Crude Oil by a few cents. The general market sentiment is that Crude will continue to drop to at least $20.


Sources: tradingview.com



By: Miguel A. Rodriguez Ruiz

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