Equity, USD underperformance and Fixed income rebalancing also hint at EUR supply

First of all note the rebalancing act will end a day earlier as most countries are closed on Good Friday which will lead investors to manage their books before Thursday’s close
as there is no WMR fixing on Friday 30th.
Only Japan will see their closing rates set on Friday Tokyo fixing around 1am GMT. It’s not rare to see a late spurt in USDJPY into that rate setting , to be monitored. So far there hasn’t been a recognisable pattern in JPY for fiscal year end, maybe there’s not so much for exporters to repatriate or importers to buy this year.

US monthly underperformance in equities and a relatively weaker USD should see investors’ “capital neutral portfolio’s” in need of some USD buying. Since the rest of the world also has seen equitiy weaknes, the signal may not be as big as last month’s USD selling but not negligable due to the FX impact.  Add to that a rebalancing of fixed income that took place over the first quarter into EUR assets, the need may relatively be bigger in EURUSD or  EUR crosses remaining on the offered side per deduction.

There’s always our friends at the German central bank to manage monthly EU contribution flows , which translate into regular EURGBP buying up to the 12.00 gmt mark, which we saw yesterday for instance, to take into account, but finding GBP pretty resilient once these flows are done . I’m on the EURGBP sell rallies side towards 0.8775 or 0.8800.

In other words, don’t be surprised to see USD demand vs the majors and some more EUR supply in the next couple of sessions but foremost be ready for a higher volatile 48hrs. Seen the run up to Easter, things may get a little less liquid, my post is rather a warning against sudden non fundamentally driven moves than a directional play.
You’ll find me in the sell EURUSD and EUR cross rallies camp for now.

Stay safe and Happy hunting

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