By Adam Button
The US dollar was singled out for selling on Tuesday but the overall picture fared mixed. The euro continued to preserve its role as the posterchild of technical trading, emerging as the top performer while the loonie and Aussie lagged. Coronavirus worries continue to weigh. The NASDAQ trade was stopped out, the gold long reached fell $5 short of the final target. It's time for a non-indices Wednesday trade.
We wrote earlier this week about the case for unique dollar selling outside of the risk trade and we saw some of that Tuesday. USD/JPY was hit particularly hard even as risk trades advanced. There was talk of Softbank (OTC:SFTBY) flows related to the divesture of T-Mobile shares but USD was soft on nearly all fronts. The lone exception was CAD, which was hit by new aluminum tariff talk and a dip in crude.
Economic data was mostly positive as European PMIs roundly beat expectations. The US Markit data was less upbeat with manufacturing at 49.6 compared to 50.0 expected and services at 46.7 compared to 48.0 expected. However new home sales were significantly stronger than anticipated.
The early mood in the market was good. There were dips in sentiment as virus cases rolled in but it wasn't until late in the day when California and Texas hit records that sentiment began to dip. Importantly, the S&P 500 also failed at 3155, which was the June 19 high. Dow Jones 30 Futures failed its 200 DMA.
The Texas data is particularly troubling because along with a record 5489 cases – up from 3280 the day before, the hospitalization rate rose 10.3% day-on-day. Houston-area officials are warning that ICU beds are nearing capacity.
In general, US markets managed to look past virus data but – like in Feb/March – there is a limit. This time, though it's a uniquely US situation and whether that leaves an outsized mark on the US dollar is a theme worth watching closely.
