The US didn’t just fire another tariff shot at China; it was a fusillade. The Office of the US Trade Representative issued a bulletin last night that stated, in part, “As a result of China’s retaliation and failure to change its practices, the President has ordered USTR to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports.”
The US dollar soared, and stock markets tanked. Asia equity indices closed deep into the red with the Nikkei 225 down 1.19%. European bourses did not fare any better. The DAX lost 1.43%, and the FTSE100 is down 1.31%. US equity futures indicate a negative opening on Wall Street.
The US dollar opened in New York with gains against all of the G-10 major currencies, The Australian dollar dropped 0.97%, falling from 0.7445 to 0.7386. Traders view AUDUSD as the most vulnerable to a slow down in China triggered by a trade war.
President Trump is winning friend and influencing people at the NATO summit. Not really, but Canada just announced it was assuming command of a new NATO training mission in Iraq. Trump said, “Germany is a captive to Russia.” He complained that Germany expects the US to defend them against Russia while simultaneously sending billions of dollars to Russia for energy payments.
EURUSD opened near the bottom of its overnight range, garnering a modicum of support from comments by European Central Bank (ECB) Francois Villeroy suggesting an ECB rate hike as early as the summer of 2019
The Bank of Canada is universally expected to raise interest rates by 0.25 bps this morning. The new tariff announcement has traders worried it would be a dovish hike due to the negative implications of a trade war. If so, USDCAD will revisit 1.3250. However, if the BoC is truly “data dependent, not headline dependent”, 1.3050 is in the cards.
This morning’s US data (PPI, Wholesale Inventories) will not have limited impact on trading
.USDCAD Technical Outlook
The USDCAD technicals are bullish while prices are above 1.3100, looking for a break of resistance at 1.3180to extend gains to 1.3205 and then 1.3260.. A break above this level would starget a retest of the June 27, 1.3385 peak. A move below 1.3100 targets support at 1.3050 and then 1.3005. For today, USDCAD support is at 1.3130, 1.3105 and 1.3080. Resistance is at 1.3180, 1.3205 and 1.3250
Today’s Range 1.3080-1.3180