Dollar trades flat while awaiting more news about the US-China deal
Daily Currency UpdateThe US dollar index is trading flat this morning following yesterday’s weak data. Retail sales except autos fell 1.2 percent month-to-month, the most significant drop since 2009. However, consumer confidence is a big part of consumer spending, and several factors hit the consumer negatively in December including the stock market selloff and the government shutdown. This is why we should take this data with a grain of salt.
Regarding the US-China deal, the US Treasury Secretary Steven Mnuchin tweeted that the meetings with China’s Vice Premier Liu He were “productive.” However, people familiar with the discussions seem to be less cheery, saying China is resisting US demands for further structural economic reform. In general, market participants are becoming increasingly cautious as the round of talks looks set to wrap up without a resolution.
In other news, President Donald Trump is expected to sign Congress’ compromise funding bill later today, while at the same time making use of his executive powers to declare an emergency at the border to unilaterally shift about $7 billion of federal funds towards the construction of his wall.
At the time of writing, we were awaiting the US industrial production news for January, with expectations for output growth to cool to 0.1 percent from December’s 0.3 percent. Finally, the latest University of Michigan sentiment numbers land at 10:00 am.
Key MoversThe Loonie continued suffering the consequences of poor manufacturing sales numbers, which came in at - 1.3 percent when the forecast was +0.7 percent in yesterday’s trading session. The Loonie reached an intraday high of 1.3340 at 10:00 am.
However, this morning the USD/CAD is falling 0.10 percent (stronger Loonie) helped by a robust crude oil WTI price, increasing 0.80 percent and touching 55 US dollars a barrel a few minutes ago.
Technically speaking, as mentioned yesterday, the USD/CAD pair continues respecting strong resistances around 1.3320 – 1.3330, which have been tested during the first week in February. Regarding the supports, around 1.3275 is becoming an important support in intraday trading, which is the same as yesterday. The levels of 1.3270 – 1.3250 will be critical to be held to see a bounce (weaker Loonie). The essential thing to understand is that the support and resistance levels once broken can be used as signals of a reversal or continuation of the trend; for now, the USD/CAD trend is up in the long term.
German Prelim GDP printed weaker than expected yesterday at 0.0 percent versus forecasts for 0.1 percent while avoiding a technical recession. This wasn’t exactly good news and the EUR/USD pair fell to a low of 1.1234 this morning.
Prime Minister Theresa May suffered another defeat in the Commons yesterday. A motion endorsing the government’s negotiating strategy was voted down by 303 to 258, and although it doesn’t have any legal force – a point made by Downing Street – it’s still surely a blow for the PM, who is seemingly putting the blame on Labour saying that leader Jeremy Corbyn has “yet again put partisan considerations ahead of the national interest".
Traders are getting a little more used to the Brexit merry-go-around and the British Pound was mostly unaffected by the result. It had been pressured lower in the few hours preceding the vote anyhow.
It doesn’t look like markets will settle heading into the end of the week either as investors await any news resulting from the US-China trade talks, Trump signing a bill to keep the government open, and more Brexit headlines.
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The NZD/USD pair has done little since this time yesterday, trading within a range between 0.6829 and 0.6860. It opens this morning at 0.6850 with the range likely to remain narrow, at least until we start hearing news from the US-China trade talks.
NZD/USD is holding firm this morning, trading at 0.6845. This represents an increase of 0.73 percent following the post-RBNZ statement rally. The central bank was a lot less dovish than many market participants were expecting, and a short squeeze ensued. Investors will now be looking to local business manufacturing data, as well as US-China talks, of course.
- USD/CAD: 1.3230 - 1.3300 ▼
- EUR/USD: 1.1250 - 1.1300 ▲
- GBP/USD: 1.2750 - 1.2850 ▲
- AUD/USD: 0.6845 - 0.6920 ▲
- NZD/USD: 0.6808 - 0.6850 ▲