The dollar is recovering against the currencies and China is preparing to lower the Chinese yuan against the US trade war
The Dollar rebounded off its lows as traders reassessed the impact of trade tariffs between the US and its partners. Risk aversion eased while trade tensions lingered with tariffs resulting in a disruption of supply chains. The Offshore Chinese Yuan extended its drop to six-month lows and led Asian currencies lower. The Kiwi was the worst performing currency among the G-10 currencies, slumping 0.57%.
Outlook: The Dollar’s rally against its Rivals was more the result of weakening Asian, EM and risk currencies. The effect of tariffs and the possibility of trade wars will weigh on trade-sensitive currencies. There was talk that China may be willing to weaken the Yuan as a trade weapon against the U.S. . S President Trump backed down on new investment restrictions against China which allowed stocks to recover.
Trading View: Markets will continue to focus on trade and the moves in Asian and risk currencies. Market positioning from the latest CFTC/Reuters report was light and in the current environment will remain so.
Economic data releases and events were sparse yesterday. US Consumer Confidence fell short of expectations. Later today we see the release of US Headline and Core Durable Goods Orders which will have an impact. The RBNZhas its rate policy meet tomorrow.
Events and economic data releases: US Headline and Core Durable Goods Orders, US Goods Trade Balance for June.
USD/DXY – The Dollar Index rose 0.43 % to close at 94.692. USD/DXY traded to a high of 94.772 before easing a touch at the close. The low traded was 94.171. Immediate resistance lies at the 94.80-95.00 area. Immediate support can be found at 94.50 and then 94.20. The likely range for today is 94.30-94.80. The wider range is between 94.20-95.20. Look to trade this range.
EUR/USD – dropped to 1.1648 after trading to a high of 1.1720. The Euro was sidelined with the stronger USD/Asians weighing on the Single Currency. German PM Merkel played down any hopes for a deal on immigration. EUR/USD traded to an overnight low of 1.16349 before steadying to close at 1.1648 in New York. Immediate support lies at 1.1630 and then 1.1600. Immediate resistance can be found at 1.1680 and 1.1700. The 1.1700/20 area remains a good sell while the 1.1580-1.1600 is good support. Look to a likely range of 1.1630-1.1680 today. Trade the range shag.
AUD/USD – slipped to 0.7390 from 0.7420 yesterday. The Aussie’s fall was mild compared to the drop in the Kiwi and other Asian currencies. Which leaves the downside a bit vulnerable should Asian currencies weaken further. AUD/USD low was 0.7380. Support at 0.7370/80 remains strong and should hold in our day. The speculative community turned long Aussie bets. Although the net amount is small, the spec traders are long. Look to trade a likely range of 0.7375-0.7425 today. It trades the range shag on this one too.
USD/JPY – closed at 110.07 after falling to a low of 109.37 on the rise in risk aversion yesterday, which eased today. USD/JPY has immediate support at 109.80 and then 109.50. Immediate resistance can be found at 110.20 and then 110.50. The latest CFTC report saw the speculative community increase their long JPY contracts. Look to trade a likely range today of 109.60-110.20.
GBP/USD – slipped on the stronger Greenback to 1.3220 after trading to an overnight low of 1.3192. Speculation that the next BOE move on interest rates will up continue to underpin the Pound. Sterling reached an overnight high of 1.3292. Brexit uncertainty and an overall stronger US Dollar are a headwind to Sterling. Immediate support can be found at 1.3200 and then 1.3180. Immediate resistance lies at 1.3240 and then 1.3270. Look to trade a likely range of 1.3200-70 today.
NZD/USD – The NZD/USD lumped to close at 0.6850, down 0.57%. The RBNZ has its policy meeting tomorrow. The weaker Asian currencies weighed on the Kiwi. New Zealand’s trade balance, released a few minutes ago, jumped to a higher than expected trade surplus on a strong rise in exports. The Kiwi had no impact from the surprisingly strong data. So far. Immediate support for the Kiwi lies at 0.6840 and 0.6820. Immediate resistance can be found at 0.6880 and then 0.6910. Look to trade a likely range of 0.6840-0.6910. Prefer to buy dips.
USD/ ZAR – The rand (ZAR) remains vulnerable to geopolitical developments, having lost ground on Monday as trade wars returned to the spotlight.
The local currency opened at R13.54/$ on Tuesday morning, after trading 0.79% weaker by Monday's close at R13.57/$, due to fresh US-Sino trade war threats, according to analysts from NKC Economics.
By 09:56 on Tuesday morning, the local currency was trading 0.28% weaker at R13.58 against the greenback.
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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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