Fear and loathing in FX

Traders loathe a trade war and fear higher US interest rates. Both issues regained prominence today, and the US dollar soared as a result. USDCNY fixed above 6.700 for the first time in a year. It may have just been a result of the US dollar’s recent rally or as some believe, The Peoples Bank of China’s not-so-subtle response to US trade tariffs.

On Wednesday President Trump promised “tremendous retribution” against the European Union with an eye on auto tariffs. Trump is also annoyed at the EU for fining Google $5.0 billion. This morning the EU trade commissioner Cecilia Malmstrom said that the EU is readying retaliatory tariffs of their own.

President Trump took another shot at Canada. He is demanding an investigation to see if imports of uranium are a threat to national security. He also said that the US may have a separate deal with Mexico and would have separate talks with Canada later. “So long Nafta-we hardly knew ya.” USDCAD rallied. The break above 1.3220 targets 1.3270 and then 1.3385 .

The US dollar was in demand across the board when New York opened. EURUSD dipped to 1.1576 from 1.1615. Prices rebounded to the 1.1600 area despite stronger than expected US economic data. The Philadelphia Fed manufacturing survey rose to 25.7 (forecast 22.0) while initial jobless claims were 207,000. (forecast 220,000). EURUSD technicals are bearish below 1.1740 with the break below 1.1610 suggesting further losses to 1.1510.

Sterling opened at 1.2998 and dropped to 1.2959. It is another day and another weak UK economic report which combined with this week’s string of weak data and ongoing Brexit issues have the technicals points to further weakness, toward the 1.2850 zone.

The surging greenback has hammered WTI oil and gold prices. Gold has lost 7.2% of its value since June 14 while oil shed 10.7% from the start of this month.

Trade tensions are exacting a toll on Walls Street. The Dow Jones Industrial Average, the S&P 500 and the NASDAQ are all down in early trading.

Enlarge
EURUSD daily.                                                                                                                                    Source: Saxo Bank

Access both platforms from your single Saxo account.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)