The other shoe dropped. Financial markets were nervously awaiting China’s response to the US tariffs. The US put tariffs on about $50 billion worth of Chinese products which included TV’s, and motorcycles. China responded with tariffs on $50 billion worth of US goods which include soybeans, and some aircraft.
The news triggered a rise in risk aversion trades led by demand for Swiss francs, Japanese yen and gold. The shiny metal soared, rising from $1,331.81 to $1,344.88.
Despite all the to-ing and fro-ing price action among the G10 major currencies wasn’t very impressive and inside the well-defined recent trading bands.
USDJPY traded in a narrow 106.40-65 range in Asia. Prices dropped to 106.00 in Europe after the China tariff announcement. Since then, they have held to a 106.00-106.15 range.
USDCHF dropped to 0.9553 from 0.9597 when the tariffs were announced, a rather tepid move that suggests FX traders aren’t overly bothered with the trade spat.
EURUSD drifted in Asia inside a 1.2258-1.2285 range then spiked to 1.2313 on the tariff news. They have since retreated to 1.2285 supported by a tick lower in the Eurozone February unemployment rate. (Actual 8.5% vs January 8.6%) Eurozone inflation was mixed. The Preliminary March reading was 1.4% as expected, but Core CPI was lower than forecast at 1.0% instead of 1.1%.
GBPUSD bounced inside a 1.4030-95 range with weaker than expected UK Construction PMI data (Actual 47.0 vs forecast 50.8) doing more damage to Sterling than trade jitters.
AUDUSD had a lively overnight session, rising from 0.7680 to 0.7715 after a 0.6% gain in February Retail Sales (forecast 0.3%) China’s tariff announcement knocked it for a loop and prices dropped to 0.7664 by the New York open. NZDUSD was bid at the open and traded firmly in Asia and Europe.
Oil Prices traded sideways until the China news and then dropped, falling from $63.61/barrel to $62.19.Traders are also worried about rumoured Saudi Arabia price cuts to Asia and rising Russian production.
USDCAD traded softer in Asia, basking in the glow from a potential successful NAFTA deal and tested support in the 1.2780 area. It held. Trade war fears led to a rally to 1.2832 by the New York open.
This morning’s US ADP employment, report showed a gain of 241,000 jobs. (forecast 205,000) FX markets barely reacted because the data is not a good indicator of nonfarm payrolls results. Other data (Markit Composite PMI, ISM non-manufacturing PMI) are likely to be overshadowed by trade war fears and equity price action. European bourses are having a bad day, and US equity futures predict a negative opening on Wall Street.
USDCAD Technical Outlook
The short term USDCAD technicals are bearish while prices are below 1.2905, looking for a break of 1.2780 to extend losses to 1.2585 which would be the 61.8% Fibonacci retracement of the February 1-March 19 range. However, the intraday technicals are modestly bullish. The move above 1.2810 snapped the downtrend line and suggests further gains to 1.2860. For today, USDCAD support is at 1.2780 and 1.2740. Resistance is at 1.2850 and 1.2905.
Today’s Range: 1.2780-1.2880