US Federal Reserve is increasingly worried about trade wars, Dollar is falling and traders are waiting for the results of the NFP today
The Dollar Index (USD/DXY) slipped after the FOMC’s June meeting minutes revealed that the Fed is showing no signs of pausing rate hikes. However, US policymakers are worried about intensifying trade disputes. The Euro was the best performing Major currency, rising 0.27% on better-than-expected German Factory Orders. US ADP private sector jobs created missed forecasts, while Weekly Jobless Claims rose.
Wall Street stocks lifted, the NASDAQ rallied 1.2% on a strong advance of technology shares.
In other data released yesterday, US ADP private sector jobs created missed forecasts, while Weekly Jobless Claims rose. Today, analysts expect US Employment in June to slip to just under 200,000 Jobs Created against May’s gain of 223,000. Wages, which the Fed monitors closely is expected to rise slightly on an annual basis.
Markets face an anxious day ahead as they await the release of US June Payrolls and the imposition of US tariffs on Chinese goods.
Make no mistake, the Fed is getting more worried about trade wars. “Most participants noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending.”
It’s all about trade. Hopes that a trans-Atlantic tariff agreement rose on news that the US had proposes zero tariffs auto imports and exports between the US and the European Union saw the Euro and European shares rally.
The US is scheduled to impose tariffs of US$ 34 billion on Chinese goods later today. China has said that they will impose tariffs of equal value on US agricultural and auto exports.
US data underperformed while Europe’s (Germany) were better-than-forecast. The yield on the US Ten-year bond was unchanged at 2.83%. However, the yield on the US two-year note rose 3 basis points to 2.55%.
Expect the slow start today with the ranges established last night to remain intact. The US Dollar, balance is more offered than the bid. Emerging Market currencies had strong rises against the Greenback. The South African Rand rose 1% while the Turkish Lira was up 1.88%. However, the Chinese Yuan weakened.
The Dollar Index (USD/DXY) – finished down 0.14% to 94.403 at the New York close. Immediate resistance remains at the 94.70 level (overnight high was 94.590). The next resistance level is at 95.00 which is strong. Immediate support can be found at 94.20 (overnight low 94.177) and then 94.00. The overall wider 94.00-95.50 range is intact. For today expect to trade 94.15-94.55.
EUR/USD – rallied to trade to 1.17202 overnight high following the robust German factory orders data. The Euro traded to an overnight low of 1.16500 which is strong support. Immediate support can be found at 1.1670. Immediate resistance lies at that 1.1720 level with further resistance at 1.1750. Likely trading range today 1.1670-1.1720. Just trade the range shag on this one and everything else today.
AUD/USD – finished little-changed at 0.7385 (0.7381 yesterday). The Aussie rose to an overnight high of 0.7408 on the generally weaker US Dollar before slipping to 0.7385. Base metals all extended their falls. Copper slid 0.6%, Tin fell 0.84%, and aluminum was down 0.43%. Iron Ore prices were lower. AUD/USD has immediate resistance at 0.7410/20. Immediate support can be found at 0.7360 and then 0.7335. A wider range of 0.7340-0.7440 should hold in the current environment. For today, look to trade a likely 0.7360-0.7410 range. Am neutral on the Aussie, there’s too much going on in the markets today.
GBP/USD – had a decent rally to 1.3275 (overnight high) before falling to close at 1.3222, slightly lower from yesterday’s 1.3233. The Financial Times carried an article which highlighted the security risks of a rigid Brexit stance by the European Union given the ever-present threat of cross-border terrorism. UK Prime Minister May continues to face an uphill struggle over Brexit negotiations and could face another challenge to her leadership. Immediate resistance lies at 1.3240 and then 1.3270. Immediate support for Sterling can be found at 1.3200 and then 1.3170. Look to trade a likely range of 1.3210-1.3260.
USD/JPY – traded within a tight 110.29-110.73 range and we can expect similar today. There was no change in the US Ten Year yield as well as Japan’s 10-year JGB (0.03%). Japanese Leading Economic Indicators and Household Spending are due out today. USD/JPY has immediate resistance at 110.70 and then 111.00. Immediate support lies at 110.50 and 110.20. Likely range today 110.25-110.75. Prefer to sell rallies. Risk appetite is fragile.
Events and economic data releases today: Japanese Leading Economic Indicators, Household Spending, UK Halifax House Price Index, Canadian Employment Change, Unemployment Rate and Trade Balance, US Non-Farms Payrolls Change, Unemployment Rate, Wages, and Trade Balance.
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