ASIC and FCA licensed Retail FX broker AETOS Capital Group have provided their daily commentary on traditional markets for May 14, 2019.
The much-anticipated Chinese retaliation has released its plan to impose higher tariffs on $60 billion worth of U.S. goods, the finance ministry said on Monday, after the United States announced a tariff hike on $200 billion of Chinese products last Friday.
As a result, the Chinese yuan dropped to its lowest levels against the USD since December as the trade war between the United States and China has well and truly escalated through the raising of tariffs on each other’s goods.
AUD/USD is also on a slippery slide dropping to as low as 0.6938 overnight.
The cause of all this was when U.S. President Donald Trump said Beijing “broke the deal” by reneging on earlier commitments made during months of negotiations, while China said on Sunday it would not swallow any “bitter fruit” that harmed its interests.
Rising tensions between the two countries has also increased fears that China may sell its vast holdings of Treasuries as punishment or as a negotiation tactic against the United States, this would place the USD in a vulnerable position and on the defensive against some of the other major currencies.
The NAB Business Confidence Index will be released at 11.30AM (AEST) today, this measure declined unexpectedly last month however consensus is pointing towards a move back into positive territory.
AUD/USD Daily Chart
AUD has dropped even further past last week’s 0.6960 low and is near 61.8% of the 2019 range at 0.6967. Not much support below there until the Jan 3 flash-crash low at 0.6715 otherwise the lower channel line may act as a temporary speedbump at 0.6937. Signs of any rallies are fading fast as the break deeper is now in full view.
The EUR may also benefit against the dollar, rising as high as 1.1262 overnight, because the eurozone has a balance of payments surplus, and during times of trade war a surplus currency can strengthen over a deficit currency, so keep watching this pair as the war continues.
The European Union and Japan may also be affected as speculation grows on whether Trump will impose tariffs on imported cars and auto parts from these regions. The recent “Section 232″ investigation report in February, widely believed to have concluded that car and auto part imports pose a risk to national security. The president’s 90-day deliberation period is due to end on May 18, if not extended (Reuters).
Across the channel and the GBP also slipped to its lowest levels in two weeks on concerns that the British parliament will fail to reach a cross-party deal on Brexit with British PM May under extreme pressure to resign from her post.
EUR/USD Daily Chart
EUR/USD bulls have managed to register a daily close above the 30-DMA, now at 1.1231, shifting bullish focus to the May 1, 1.1265 peak and 1.1273 Fibonacci level, a 76.4% retrace of the 1.1324 to 1.1110 recent drop. A daily close back below the 30-DMA will weaken the underlying market structure and signal a possible market top whereas a close above could signal a break of the channel. Keep a close watch for now.
Major Economic Events happening this week (AEDT Time Zone)
|Economic event (Date)||Previous||Forecasted||Actual|
|AU – NAB Business Confidence (14 May)||0||1||–|
|DE – Inflation Rate YY Final (14 May)||1.3%||2%||–|
|GB – Claimant Count Change (14 May)||28.3K||24.2K||–|
|DE – ZEW Economic Sentiment Index (14 May)||3.1||5||–|
|AU – Westpac Consumer Confidence Index (15 May)||100.7||100.4||–|
|DE – GDP Growth Rate QQ Flash (15 May)||0%||0.4%||–|
|CA – Inflation Rate YY (15 May)||1.9%||2%||–|
|US – Retail Sales MM (15 May)||1.6%||0.3%||–|
|US – Michigan Consumer Sentiment (18 May)||97.2||97.5||–|
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