FX Update: The killer dollar is on the loose

The G-10 rundown

USD – it is troublesome for USD bears to see the currency creeping back higher as risk appetite comes off again today – if long end treasuries are finished in providing a safe haven, the USD will only turn by massive brute, coordinated force. Watching levels like 1.1050 in EURUSD and 108.00 in USDJPY for a sign that the USD becoming the killer dollar once again..

EUR – this is a full bore existential crisis for the EU and the greatest challenge the EU has ever faced from a solidarity perspective as the EU must get together to open the fiscal taps wide. EUR 30 billion for Italy fiscal efforts? Not even a starting point. Germany-Italy 10-year spread at 260 basis points.

JPY – the USDJPY rally found resistance at the ultimate 108.00 area and Bank of Japan printing pressures are running at a furious rate with new asset purchase announcements, but long end sovereign bonds under pressure globally makes us hesitant to continue to call USDJPY back toward 100.00 – and the USD could prove ascendant here if long yields continue to rise – regardless whether risk appetite improves.

GBP – we discussed scaling into sterling trades yesterday – but having a change of heart on the risk that we have to go much lower first – protect for the risk of short term extreme spikes lower in sterling – eventually like fading EURGBP, but it may simply be too early – need to turn the corner in sentiment across markets to start.

CHF – USDCHF uptick may prove that USD are preferred to CHF as the global financial system wrestles to get ahead of the USD funding issue... watching 0.9600+ area in USDCHF like 108.00 area in USDJPY.

AUD – AUDUSD is eyeing the 0.6000 level and set to exceed the lows from the financial crisis around that level as long as the pressure keeps up. The headlines may say that China is normalizing, but Australia looking for its own coronavirus shutdown and its mining giants are under huge pressure.

CAD – 1.4500 is the next target zone for USDCAD having cleared all relevant resistance levels, with more rate chops and likely QE to come from the Bank of Canada to dig the banking system out of its exposure to housing.

NZD – the kiwi proving less cyclically sensitive than AUD to the backdrop, so without currency intervention from RBNZ or NZ, we may see record lower prices for AUDNZD before cycle turns – watching parity next.

SEK – Sweden has mobilized an enormous package to support workers, banks and the economy, worth up to a as much as a third of GDP (though some of it is not net stimulus, such as allowing banks to abandon their countercyclical buffers, which is nearly half of the headline amount..) New QE has arrive as well, to the tune of SEK 300 billion, and the RIksbank will purchase. EURSEK is trading up to new highs on the

NOK – as long as global markets and oil markets are under intense pressure, the situation will likely be the same for NOK – looking next for how the currency behaves once market volatility begins to ease – until then, there is no readily identifiable floor for the currency.

Calendar (times GMT)

• 1230 – US Feb. Retail Sales
• 1230 – Canada Jan. Manufacturing Sales
• 1315 – US Feb. Industrial Production
• 1400 – Canada Mar. Nanos Confidence