The first day of April has disappointed investors hoping for a EUR/USD bounce in the new quarter, as renewed coronavirus worries enhanced the allure of the dollar.
Risk sentiment soured significantly after U.S. President Trump warned Americans of a "painful" two weeks ahead nL1N2BP02Q.
Trump's comments fanned fears that the global economic impact of COVID-19 may be even more significant than expected, sending equity and commodity prices lower and global bond prices higher as investors made their preference for safe havens clear.
Despite currency basis swaps EURCBS3M=ICAP implying dollar funding pressures have eased, investors still see the dollar as a better bet.
The dollar remains bid against the major and emerging market currencies.
EUR/USD bears have taken charge, driving the pair below the March 31 low and threatening key support in around 1.0870/1.0900.
The daily cloud base, 10-DMA and March 26 low sit in that zone.
If risk sentiment remains sour and the dollar stays bid that support could break, exposing support near 1.0760/80 and 1.0720/30.

Bank of America Global Research discusses corporate and official G10 FX flows during the COVID-19 crisis and their market implications.

"The Chart of the Day summarizes our results. Corporates have bought primarily AUD and EUR, taking advantage of weak levels. Officials also bought AUD, as well as GBP and USD, but sold NZD, EUR and CAD. Flows in other currencies were relatively light. Officials have been more active than corporates and could be dominating FX," 

"Although one will also have to continue monitoring investor flows, these trends point to potential upside for AUDCAD and AUDNZD, and more upside for USD and GBP vs EUR," BofA adds. 

CIBC Research discusses its reaction to today's ADP employment report for the month of March. 

"The decline in US employment has started, although the modest 27K fall in private employment measured by the ADP survey (consensus -150K) is only a fraction of what's to come in the months ahead. Remember that the survey week for both the ADP and payrolls surveys was the week before the big rise in initial jobless claims. And we've noted in the past year or more that the divergence between the initial estimates of the ADP and private payrolls has been higher than normal. Given the increased volatility in both series that we will be seeing over the coming months, the average difference will likely be wider still. Moreover, note also that a slight methodological difference could result in greater than normal divergences between the two series at the onset of a recession. While the ADP data include any active employee within the company, the BLS tracks employees only if they were paid during the survey period," CIBC notes. 

"As such, the BLS data could be weaker initially than the ADP if companies first dramatically cut employee hours before officially taking them off the payroll. As such, we are still happy with our call of -75K for Friday's payrolls, with private payrolls weaker still," CIBC adds. 

• US$ generally higher versus major & EM ccys, USD/CNH trades above 7.1000

• Upbeat China March manufacturing PMI nZUN0008I5 cannot lift risk sentiment

• EquitiesESv1, copperHGv1, iron-oreDCIOc2, AU yieldsAU3YT=RR all down

• AUD/USD falls after failing to hold above 21-DMA, support near 0.6050 tested

• AUD/USD bulls need 10-DMA & March 27 daily low supports to hold

• A break below those supports targets 0.5955/60 and 0.5905/15 zones

GBP/USD looks to have established a top in the upper/mid 1.24s, with 61.8% Fibo retracement of the 1.32-1.1404 drop at 1.2514 to add resistance.
Ranges are starting to close now and option dealers are reducing the premiums they charge for volatility protection.
The benchmark one-month implied volatility sold 14.25 Wednesday, having doubled to 26.0 from 13.0 as GBP/USD fell to 35-year lows in mid-March (highest since Brexit day and 2008).
However, it's still 9.0 vols above February lows, showing dealers remain on alert while the current crisis remains liquid.
Those trading shorter-dated options have been well rewarded of late nL1N2BO0BX, but those premiums are now edging lower, too.
One-month risk reversals show 4.5 vol spike in premium for GBP puts over calls (spot downside) in mid March as GBP/USD fell.
Retracements have levelled off at 2.7 vols for now, which shows a lesser but still high perceived risk of GBP/USD losses.

• Cable down to 1.2331 as safe-haven USD benefits from risk aversion

• Nikkei closed down 4.5% nL4N2BP1C0. FTSE slumps nL4N2BP1UZ

• 1.2331 is lowest level for GBP/USD since Tuesday's high of 1.2471

• It also approximates to 61.8% Fibo of 1.2241 (Tuesday's low) to 1.2471

• Rise to 1.2471 was aided by Fed broadening access to dollars nL1N2BO0MO

• Cable traded widest monthly range since June 2016 in March nL1N2BP0BD

• Implied volatility gauges actual volatility risk - AUD/USD highest in G10 FX

• Implied volatility has fallen hard from recent/long term highs in all pairs

• AUD/USD no exception - benchmark 1-month now 17.5 from 33.0 on March 19

• However, that's still 10.0 vols above February's lows

• Risk reversals show downside spot risk lessens, but still a concern

• Vol premium for AUD puts over calls now 5.5 vs 8.25, but was 0.7 last month

• Related nL1N2BP0AY

  
  

  
  

• Daily chart signals conflicting but price maintains bullish potential

• Sharp gains last week into marked stalling this week: possible bull flag

• Small hammer Mon, larger hammer Tues and potential bearish engulfing today

• Tues 1.2241 low seen pivotal if a bullish continuation pattern is to hold

• Given speed and magnitude of last week's rally a pause was the risk

• We maintain a bid by 1.2140 for 200DMA at 1.2665

• AUD/USD replled again by 20 DMA resistance at 0.6155

• Second failure to break above 20 DMA will discourage bulls

• Long-trimming might follow, ditching AUD/USD below 0.6000

• Next key chart support at Bollinger downtrend channel 0.5879

• RBA worried about very material contraction in economy nL4N2BP0DA

• Off 0.2% with the USD a touch firmer and E-Mini S&P off 1.2%

• Volatile building approvals smashed 4.5% poll at 19.9% - no impact

• RBA fears very material contraction, recovery timing uncertain nL4N2BP0DA

• Economic impact of huge global stimulus and coronavirus remains unknown

• E-mini S&P off 1.25%, but ASX 200 +3.4% - FX markets calmer today in Asia

• Charts; momentum studies, 5, 10 & 21 DMAs conflict - neutral setup

• 0.6177 21 DMA, then 0.6236, 61.8% of the March fall resistance

• Yesterday's 0.6070 low then Friday's 0.6023 base initial support

• Flat at 0.6133 into data & RBA minutes - with a choppy 0.6109-0.6160 range

• RBA no appetite for negative rates, recovery timing uncertain nS9N286017

• Building approvals came in at a very strong 19.9% - poll 4.5% - no impact

• Economic impact of huge global stimulus and coronavirus unknown

• Charts; momentum studies, 5, 10 & 21 DMAs conflict - neutral setup

• 0.6179 21 DMA, then 0.6236, 61.8% of the March fall resistance

• Yesterday's 0.6070 low then Friday's 0.6023 base initial support

  
  

  
  

• Off 0.1%, with the USD a touch firmer - coronavirus expands nL8N2AB5TN

• E-mini S&P futures -1%, weighing on risk and supporting USD pre Tokyo

• UK banks scrap dividends on coronavirus impact fears - nL8N2BO8G1

• Cable consolidates close to mid point of March range - 1.2500 resilient

• 1.2517, 61.8% March fall is major resistance, break target 1.2665 200DMA

• Yesterday's 1.2241 low then 1.2075, 38.2% of the March bounce supports

Credit Suisse discusses EUR/USD technical outlook and adopts a tactical bearish bias targeting a move towards 1.0786-62

"EURUSD remains back in the middle of its range and exactly where we started the month after false breakouts in both directions. Going forwards though, the broader trend still points lower in our view, with MACD negative across all time horizons.

Furthermore, the market is now showing tentative signs of topping out in the shorter term after breaking back below the 200-day average at 1.1078 on Monday. Key support is now seen at 1.0953, below which would complete an intraday ‘head and shoulders’ top to confirm that the downtrend is resuming. The next key levels are seen at 1.0896/89, before the long term uptrend from 2000 at 1.0786/62, then the recent year-to-date low at 1.0635. A move below these latter levels should finally allow momentum to re-accelerate for a medium term move lower," CS notes. 

"Short term resistance moves to 1.1056/78, which now ideally caps the market to maintain the potential for a top. Thereafter, more important resistance is at 1.1148/66," CS adds. 

• USD/JPY drifts lwr from 108.62 NorAm high ending NY 107.83 near flat

• March range 111.72-101.18 tells story of March vol, pair opened month 107.50

• Fed's add'l liquidity pgm relieves USD/JPY funding pressure nN9N28J01B

• Easing dollar liquidity boosts yen into Japan fiscal year end nL1N2BO1A1

• Pair back below 200-DMA 108.34, offered ahead of 55-/100-DMA by 109.00

• Below 21-DMA (107.68) adds to bearish momentum, eyes monthly Tenkan 106.71

• Reduced USD liquidity angst may see JPY firm on haven flows as virus linger

• GBP/USD ending Noram -0.39% at 1.2370; NY range 1.2471-1.2241

• Pair put in day's high post-Lon fix, aided by Fed repo facility nL1N2BO0MO

• Month/quarter-end saw market buy early-Asia virus related dip

• Sterling firms on increased Fed liquidity, res near 1.25 looms nL1N2BO0W6

• Pair once again offered ahead of 30-DMA by 1.2505; support 1.2241 Tues low

• EUR/GBP dips 0.24% to 0.8867; Tues range 0.8973-0.8812; European virus woes & weak growth weigh on EUR

Sterling rallied off Tuesday's NorAm low at 1.2332 to session highs at 1.2413, before slipping back to 1.2390, after the Fed created a new funding mechanism for foreign central banks to access dollar liquidity nN9N28J01B.
Though the new program is not expected to be in place until April 6, the facility would add liquidity infusions through Fed swap lines nL1N2BC11P and further reduce competition for dollar funding that has helped narrow currency basis swap spreads across the sovereign risk curve.
Such facilities are of particular benefit to current account deficit economies like the UK GBPCBS3M=TTKL, and high beta emerging markets like Brazil, India and Turkey, as they scramble to finance their external USD debt.
Recent GBP strength, on the back of heightened global liquidity, has run into considerable resistance ahead of 1.2500 as GBP/USD bulls remain wary of the UK's ability to navigate virus-related economic shutdowns and a timely resolution to EU-UK trade negotiations.
GBP/USD tested support at the 21-DMA by 1.2341 on Monday and Tuesday, regaining 1.2400 after both attempts.
Bulls need a rise above the March 27 high at 1.2484 and above the 30-DMA at 1.2507 to gain momentum for a test of further DMA resistance all the way to the 100-DMA at 1.2877.

TD Research discusses CAD outlook and adopts a tactical and structural bearish bias, expressing that via recommending long USD/CAD* targeting a move towards 1.4650 and a short CAD/JPY* as its ToTW this week targeting a move towards 73.00.

"We think the CAD stands to uniquely suffer. We think it is both a heroic and dangerous assumption that the CAD stands a chance to perform in these markets. The USD is also now tracking cheap across the board on our HFFV estimates. Our positioning metrics show that a short build that is about 2 standard deviations wide is about equivalent to the short build observed in 2008 and 2016 extremes," TD notes. 

"But we think this is a strategic short build and we reckon that the recent dip in USDCAD should be bought. Beyond the sudden stop nature of this crisis, the CAD is uniquely positioned to suffer compared to many of its G10 peers...we like short CADJPY as our trade of the week. With xccy basis bid again, the JPY might return to market risk dynamics," TD adds. 

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*Recorded in eFXplus Orders

• EUR/GBP hits 0.8860 after extending south from 0.8972 (Asian session high)

• 0.8860 is the lowest level since March 13 (0.8846 was the low that day)

• Bids may emerge around 0.8850 (GBP/EUR 1.13) if EUR/GBP extends south

• Gilt yields rise after DMO ramps up debt auctions nL8N2BO2EJnL9N29P02N

• UK Q4 current account deficit GBP 5.6bln vs GBP 7bln f/c nL8N2BO1J7

• Record grocery sales as Britons stockpiled pre-virus lockdown nL8N2BO24E

  
  

• 0.6150 is low for AUD/USD since it reached 0.6214 just before 0600GMT

• 0.6214 = high since March 16. 0.6070 was Asia low, pre-China PMI beat

• See: nL1N2BO04PnL4N2BN1SR. 0.6070 = lowest level since Friday

• Drop to 0.6070 was fuelled by Tokyo fix-related USD buying nL4N2BO11O

• U.S. dollar may be set for another damaging bout of strength nL8N2BN83U

• Australia's AAA rating under a cloud as debt, deficit blow-out nL4N2BO0UK