The unexpected drop in China’s trade surplus had far-reaching consequences for the U.S. dollar, ultimately causing it to close lower on Thursday against all the major currencies. Meanwhile, an impressive supply-driven rebound in oil futures buoyed the Canadian dollar and Norwegian krone, both of which were the strongest performing currencies among the G-10 currencies.
USD/JPY drove forex action Thursday when a 20% decline in the Chinese trade surplus rekindled worries about the world’s second largest economy and fueled a flight-to-safety into the Japanese yen. USD/JPY slid off the overnight high of 104.63 to below Fibanacci support at 103.50 and then flirted with its 100-day and 200-hour moving averages before recovering late in the U.S. session. The dollar last traded at 103.63 giving the yen a constructive gain of 0.54%.
The euro capitalized on broad selling pressure against the dollar, overcoming early pressure tied to a report from Reuters that the European Central Bank was expanding its bond-buying program to include bonds with a yield less than -0.4%. EUR/USD dipped below 1.100 during European trade but was on the plus side by the North American open. The euro struggled with the 23.6% Fibonacci retracement at 1.1030 for a few hours, but eventually got enough traction to finish the day at 1.1050 for a 0.40% gain, snapping a three-day losing streak.
Even sterling ended the day in the plus column despite a negative open. Cable was as low as 1.2130 overnight as a UK high court began judicial hearings regarding the UK referendum to leave the European Union. The first case to be heard comes from the London investment fund SCM which intends to challenge the prime minister’s assertion that parliament can be bypassed when invoking Article 50. Cable turned an early loss into a 0.30% gain in tandem with the other currency pairs.