US-China trade talks resume

22 February, 2019

Most major emerging market currencies held steady against the Dollar as investors closely monitored high-level trade talks between the United States and China in Washington.

While a major breakthrough deal seems unlikely, any short-term agreements to extend the March 1 deadline will be a welcome development for financial markets. We see emerging market currencies and global equities pushing higher on such an outcome as risk sentiment receives a boost. A return of risk appetite will be bad news for the Dollar which already faces multiple headwinds in the form of a ‘patient’ Fed and disappointing economic data from the United States. The combination of Dollar weakness and a renewed hunger for riskier assets should make EM currencies one of the main talk points across financial markets in the upcoming trading week.

In China, the Yuan weakened from a three-week high against the Dollar as investors waited for the outcome of high-level trade talks in Washington. We see the Yuan appreciating and driving other emerging market currencies higher if trade talks are able to end on a positive note. Traders will continue to closely observe how the USDCNY behaves above 6.70. A breakdown and daily close below this level should inspire a decline towards 6.68.

Currency spotlight – GBPUSD


It has been another unpredictable and volatile trading week for the British Pound thanks to political drama in the United Kingdom and Brexit noise.

Sterling’s valuation has been erratic due to the growing sensitivity towards Brexit-related headlines and news flows. With investors clearly pessimistic over Theresa May’s trip to Brussels concluding on a positive note, the Pound is likely to take a hit if she comes home empty-handed with no deal in place.

While the British Pound remains fundamentally bearish, there is still some light at the end of the tunnel for bulls. If the government ends up extending Article 50 in an effort to prevent a no deal outcome, this removes a major element of uncertainty over Brexit. However, a major risk accompanied by extending Article 50 is that the UK may be trapped in a Brexit limbo.

Focusing on the technicals, the GBPUSD staged an impressive rebound earlier in the week thanks to Brexit noise. Although the GBPUSD is currently trading around 1.3040 as of writing, bears can still make another return if prices sink back under the psychological 1.3000 level.

Currency spotlight – Gold


Gold tumbled from a 10-month low this week as investors engaged in a bout of profit-taking.

Regardless of recent losses, Gold bulls remain in control with a rebound expected as a ‘patient Fed’, global growth fears and geopolitical risk factors stimulate appetite for the safe-haven asset. In regards to the technical picture, Gold is heavily bullish on the daily charts as there have been consistently higher highs and higher lows. A breakout back above $1330 is seen opening the doors towards $1338. If $1330 proves to be a reliable resistance, Gold is likely to sink back towards $1310.


Source link  
Dollar's fall halted at 98.4 support level

The Dollar index (DXY) fell by about 0.38 percent before paring back losses, as the 98.4 support level kicked in. Although the September US inflation...

Dollar paring early October losses

The Dollar index (DXY) continues to pare losses seen earlier this month, as investors await the minutes from the September FOMC meeting...

Gold hammered by resurgent Dollar

Gold tumbled more than $30 on Wednesday, almost breaking below $1500 as political uncertainties in the United States and Brexit...


Time to prepare for 100 in the Dollar Index?

The Greenback is on a tear and the breach above 99 in the Dollar Index makes 100 look very appetizing on the menu. The stunning run of buying...

Time to expect a jump to $60 in WTI Oil?

The breaking development that transpired throughout the weekend, where attacks on Aramco Oil plants in Saudi Arabia could take away up to 5.7...

Risk sentiment brightens

A wave of optimism is sweeping across financial markets with stocks in Asia pushing higher on renewed optimism over a potential breakthrough...


Pound regains mojo on positive GDP

It has not been a bad start to the trading week for Sterling which is standing tall against every single G10 currency as of writing. Mildly encouraging remarks...

Gold finds comfort near six-year high

Everyone wanted to piece of Gold yesterday after US manufacturing activity decelerated in August for the first time in three years...

Get ready for another volatile month

August has been a challenging month for markets. While many traders were out of their desks enjoying the summer season, US-China trade...

  


Share it on:   or