Gold Receives Enduring Support. Where Do Currency Markets Stand?

It is challenging to untwine where the adverse reaction in US equities (S&P 500: -1.75%) to Fed Chair Powell's speech on Wednesday stems from: a gloomy economic outlook, or a reluctance to open the door to negative rates. But when the Fed gets worried about the risks of corporate failure and associated permanent job losses, it should be time to take notice.
 
Although we see random low volume bounces on the e-minis. In general, I would expect to see further de-risking as news flows are failing to shift the needle in a positive direction so far. 
 
Gold Markets 
 
Risk aversion and the backdrop of unprecedented central bank easing should keep offering support to gold. Strategic demand should remain firm on dips provided prices stay above $1670. Initial resistance is likely into $1725-30 ahead of $1745-50, a daily close above, which opens up $1800.

Currency Markets 
 
After Fed Chair Powell's comments highlighting prolonged downside risks and the call for more action, risk assets headed lower, with the S&P500 down 2% while Treasuries rallied. The USD traded broadly higher on risk aversion and with the Fed chair pushing back on negative rates.
 
The Euro 
 
EUR/USD has been in a holding pattern over the past couple of weeks. But the market bias remains to fade any strength as the dollar remains on the front foot.
 
Australian Dollar 
 
Australian employment in April had a massive decline, too -594.3k vs. -575k consensus. The downside surprise is not huge, so the AUD/USD has only moderately sold off. The rise in the unemployment rate was less than expected, at 6.2% vs. 8.2% consensus and 5.2% prior, reflecting a considerable drop in the participation rate, to 63.5% from 66.0%, which means lots of people packed it in and left the labor force.
 
Over the past week, AUDUSD has been trading choppy. Decent waves of demand have taken it above 0.6520, but gains have been tough to sustain. The pair reverted lower as risk sentiment deteriorated as traders now pivot to sell on rallies.
 
New Zealand Dollar 
 
The NZD remains heavy as the RBNZ kept the door open for negative rates. Relative divergence in QE has been supportive of AUD/NZD. The markets remain better seller off Kiwi in upticks. 
 
Japanese Yen
 
While risk remains under pressure, the marking bias is to sell USDJPY on strength. But there are several ways to get long JPY one that mainly sticks out is versus the GBP as Sterling should be set from some short-term pain as short GBP/JPY is sticking out like a sore thumb.
 
The Pound 
 
The UK is on a different path in terms of re-opening the economy. Sunday's statement by the Prime Minister and Tuesday's extension of leave to September confirms a shift in Westminster: the UK is heading for a slower and longer lockdown lasting well through the summer, while other countries move quicker. In the short term, this will weigh on sterling; perhaps longer term, it may be rewarded.