‘EU is a failing economic model’ UK will thrive outside the EU with NO DEAL Brexit
The US Dollar rebounded after 6 days of losses after the US and China implemented further tariffs of US$16 billion on each other’s goods. The Australian Dollar plummeted as the ruling Liberal Party of current Aussie Prime Minister Malcolm Turnbull imploded following the second challenge to his leadership. Commodities and stocks fell. The Kiwi and Loonie had their wings clipped while EM currencies led by the South African Rand resumed their slide.
Outlook: After five straight days of losses, it was inevitable that the Dollar gains back some ground. FOMC meeting minutes reinforced their intention of increasing interest rates in the near-term, highlighted by Kansas City Fed head Esther George. George said she sees two more rate hikes this year.
The US trade dispute with China saw no let-up even as delegates from the two countries are wrapping up 2 days of trade negotiations. The USD/CNH soared 0.7% to 6.89 from 6.8450 yesterday.
Trading View: The Jackson Hole conference opens today with a speech by Fed Head Jerome Powell amidst President Trump’s displeasure with the US central bank this week.
Markets will also focus on the Australian political turmoil today where three challengers from the ruling Liberal Party will determine PM Turnbull’s future.
On the trade front, President Trump is unlikely to further ground given his current political woes following the Manafort and Cohen bombshells. Data releases yesterday saw most Euro area Manufacturing and Services PMI’s close to forecasts. US Flash Manufacturing and Services PMI both missed expectations, as did New Home Sales.
USD/DXY – The Dollar Index held the strong support around the 95.00 level, managing a good bounce to 95.611, where it closed. The overnight high traded was 95.709, which is the immediate resistance for today. The next level falls to 96.00. Overnight low traded for the USD/DXY was 95.161. Immediate support today can be found at 95.40 and then 95.10. The Dollar’s rise was broad-based. After a slow start in Asia, expect volatility to pick up as events unfold. Likely range today 95.10-96.10. Look to trade that range, pick the bones out of it!
AUD/USD – Australian politics has seen 5 Prime Ministers in the past 10 years. Traditionally there is no big difference in the policies between the two major parties, Labour and Liberal. Prior to this challenge, the ruling Liberal/National Party have had 2 changes, while Labour has had three. Analysts have said that the current politics risk a Ratings downgrade due to the leadership challenge. It’s difficult to see any Ratings downgrade if there is no big change in policy. It’s all about personalities. That said, all the resource and risk currencies fell against the Greenback last night. The Kiwi got smacked, losing 0.97%, while the Loonie dropped 0.56%. The South African Rand (more of an EM currency) slumped 1.4% as speculation mounted of US tariffs on the country from a Trump tweet.
AUD/USD has immediate support at 0.7240 (overnight low), followed by 0.7210 which is strong. Immediate resistance can be found at 0.7280 and then 0.7320. Likely range today 0.7225-0.7285. Look to buy dips, the specs are well short.
EUR/USD – traded lower against the Dollar, slipping 0.37% to 1.1545 at the New York close. The Euro hit an overnight low of 1.15298. Immediate support can be found at 1.1520 and then 1.1480. Immediate resistance lies at 1.1560, followed by 1.1580. Euro-area Manufacturing and Services PMI’s were close to forecasts. Latest data releases have shown that Europe’s economy is stabilising following a slowing earlier this year from the quick pace in 2017. Look to trade a likely range today of 1.1520-1.1590. Just trade the range shag on this one.
USD/JPY – closed higher by 0.63% at 111.25 on broad-based US Dollar strength. The Dollar traded to an overnight high at 111.316. Immediate resistance can be found at 111.50. The next resistance level at 111.70 is strong. The overnight low traded was 110.515. The 110.50 level has held well and is now strong support. Immediate support on the day lies at 111.00, followed by 110.80. Japanese National Core CPI is due out today. An escalation of a trade war between the US and China will not be good for risk and be a head wind for further Dollar gains. Likely range today 110.75-111.55. Prefer to sell rallies.
GBP/USD – reversed gains on growing chances of a no-deal Brexit. With a little over 7 months before the UK leaves the European Union (29 March 2019), Britain has yet to secure a deal with the European trading bloc on terms of departure. Meantime UK data released yesterday beat forecasts. CBI (Confederation of British Industry) Realised Sales rose more than double of what was expected. The British Pound fell to 1.2815 at the New York close, down 0.70% against the Greenback. The overnight low traded was 1.28046. Immediate support lies at 1.2800, followed by 1.2770. Immediate resistance can be found at 1.2840 followed by 1.2870. Likely range today 1.2800-1.2900. Prefer to buy dips.
USD/ZAR – The rand slumped against the dollar after a tweet by US President Donald Trump on the country’s land debate fueled speculation of possible sanctions against the country.
The currency weakened as much as 1.7% after Trump said he asked US Secretary of State Mike Pompeo “to closely study the South Africa land and farm seizures and expropriations”. The South African government hit back, tweeting that it “totally rejects this narrow perception which only seeks to divide our nation.”
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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