Asian stocks were under renewed selling pressure this morning as global trade concerns and chaos across emerging markets weighed on risk appetite. Global trade developments have certainly placed investors on an emotional roller-coaster ride this week with the initial optimism over NAFTA talks outweighed by U.S.-China concerns. Market sentiment is likely to remain cautious, especially after President Donald Trump threatened to withdraw the United States from the World Trade Organisation.
I usually wouldn’t pay attention to stuff like this. I take it as negotiating bluster. But the world is changing and suddenly we have a time window change of direction where precious metals are suddenly strong and the Greenback can’t seem to right the ship. Sometimes big things develop out of little beginnings.
Last week has been a terrible one for President Domald Trump. His former campaign chairman Paul Manafort was found guilty on eight counts of bank and tax fraud on Tuesday, while his ex-personal lawyer Michael Cohen pleaded guilty to campaign finance violations and other charges on the same day.
There is mixed sentiment towards the Greenback at the start of the new trading week. The dollar has edged marginally higher against the euro, the pound and the Australian dollar with the Greenback broadly stronger against those in the EMEA as all eyes return to the Lira after Turkish markets resume trading following a week-long holiday.
The U.S. dollar is lower against most major pairs on Friday. The greenback was waiting for U.S. Federal Reserve Chair Powell’s speech at the central bank summit in Jackson Hole but in the end no new information was provided. Chair Powell reiterated the data dependency of the central bank and shared his optimism regarding inflation. The market is already pricing in two US rate hikes in 2018 and the somewhat dovish remarks from Powell did not add support to the U.S. dollar.
A double zig-zag can be in progress on the USD Index down from the 96.98 level. We specifically see sub-wave c) of y in play which can look for support and a bullish reversal near the 95.90/95.70 region.
If you get the dollar right, you will get a lot of things right. Hard-lined policy in Washington has created a safe-haven flight to the dollar. Trade policy and sanctions have resonated an uncertain atmosphere for growth in many areas of the world
With price pressures still running at a subdued level throughout the developed world, hotter-than-expected inflation readings have been hard to come by of late. Perhaps today’s Canadian inflation data marks a turning point for that trend.
The Dollar Index retreated from its 2018 peak of 96.98 following news that China will resume trade talks with the United States later this month. The news allowed the Yuan and other emerging market currencies to rally after a steep selloff led by the Turkish crisis and ongoing trade tensions.
Technically speaking, the dollar index formed a clear “ascending triangle” pattern through May, June and July. The bullish breakout from that pattern, in-line with the recent uptrend, suggests that rates may have further to rally in the days and weeks to come.