U.S. Trade Representative, Robert Lighthizer, showed skepticism and highlighted that there are still some outstanding issues with the ongoing trade negotiations. Will China accept President Trump’s request to lift all tariffs against the U.S. agricultural products in return for a delay of additional U.S. tariffs on Chinese import?
The trade talks still have a long way to go before they can conclude and trade uncertainties between China and the U.S. will continue to weigh on market sentiments in the near future.
The U.S. Federal Reserve Chairman, Jerome Powell reiterated that the Fed would remain “patient” on further interest rate hikes, citing various “crosscurrents and conflicting signals.” U.S. dollars initially dipped in early intra-day trading on last Tuesday but later rebounded to close higher for the day. The currency pair managed to hit a high of 1.14192 on Thursday though it was short-lived and closed lower after the U.S. Dollars recovered despite weak U.S. data. The pair eventually closed below 1.14 at 1.13624 for the week but still marked its second consecutive weekly gain (∆+0.28%). We expect bullish momentum to pick up, but it may need some catalyst to trigger a break above the 1.14 level. The ECB Press Conference and U.S. NFP data release will be key focuses for the week. In January, the ECB left its monetary policy unchanged and continued its pledge to keep rates low through the summer while leaving the door open for a rate hike in September. If the Bank changes this pledge, the euro may plunge. If the status quo is kept, EUR/USD may stay depressed and range around the 1.14xx levels. Hence, would positive US-China trade or Brexit outcome be the much-needed catalysts for the pair to enable a breakthrough?
Price closed at 1.32046 (∆+1.16%) for the week. The pair marked its second consecutive weekly advance, gaining more than 1% from prior weeks. The increase in volume is much higher than the last week of December. From the chart, the buying force was only modestly stronger than the selling force with pullbacks seen on last Thursday and Friday. Brexit and U.K. political developments continue to dent sentiments surrounding GBP/USD as investors await further news surrounding the U.K.'s impending departure from the European Union. Will the U.K. exit the European bloc at the end of March regardless of a deal or would they opt for an alternative, such as a "People's Vote" or further delay the departure date? These are big questions in every investor’s mind. We could see the price retest the support level between 1.3019 and 1.312 before it resumes its advance to the next key level of 1.35495.
The AUD/USD pair continues its bearish trend and extended its slide amid strong US data, mixed Chinese data, and ongoing trade talks. The Caixin Manufacturing PMI beat expectations and hit 49.9 points, which was better than the official government PMI. This helped the AUD recover some grounds due to its close trading relationship with China. Price closed at 0.70786 (∆-0.69%), and the weekly candle indicated strong bearish momentum as it approached the support level of 0.70148. The price could break below if upcoming economic data and/or RBA’s rate decision does not favor buying of the AUD/USD. In a shorter-term perspective, bears are still in favor.
The NZD/USD pair lacked any firm directional bias and seesawed between moderate gains and minor losses. Prices slid by -0.64% week over week and closed at 0.67956 for the week. Volume picked up slightly which suggested some overhead bearish pressure acting on price, so there may be room for more downside in the near term. Will the support level 0.66785 continue to hold and enable price to bounce from it? We believe the pair may continue to be vulnerable and possibly bound between 0.67 – 0.69 until a stronger or impulsive move occurs to break the said boundaries.
The CAD failed to build on its bullish momentum with the USD/CAD eventually closing higher than prior week at 1.33051. It closed with a firm bull candle at above 1.32683 resistance level. The bullish momentum is stronger than previous week decline and with higher volume too. It was mainly due to the disappointing Canadian GDP results coupled with the U.S. Dollars strengthening. As long as the weekly support trendline is not broken, the price may rise to the next resistance level around 1.34 – 1.355 zones.
It would be interesting to see if the bulls can maintain their current dominant position and break through the nearest 1.004 resistance zone. Price closed at 0.99893 with a Doji candle and higher volume. The rally is likely to get extended towards mid-1.0000s and could eventually conquer the key 1.0100 barrier. On the flip side, the 0.997 – 0.992 region now becomes an immediate support area to defend. If it is broken, the fall might accelerate towards the 0.990 horizontal level en-route the 0.989.
The USD/JPY had a great run up last week and closed at 110.910 (∆+1.14%). Momentum is rising which is a sign of bullishness, and the ultimate goal is to break above 113.9 and to retest the next resistance at 117 level. However, it could take some time to accumulate strength to achieve the goal as volume remained flat. As we are aware, the market is unpredictable. Let ‘s see how it will unfold over time.
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support