GREENBACK RISES AS THE US IMPOSES TARIFFS ON CHINESE GOODS
Asian markets fell today after Donald Trump put new tariffs on Chinese goods. The 10% tariff will apply to Chinese goods worth more than $200 billion. The tariff will then rise to 20% in 2019 if the US does not make a deal with China. In return, China said that it too will announce fresh tariffs on US goods. The US markets ended the day lower yesterday, with the S&P 500 having its worst day in more than a month.
After initially falling, the Australian dollar rose after positive housing data and the RBA minutes. The house price index for the second quarter was minus 0.7%, which was better than the expected minus 7.0%. This rate was unchanged from the first quarter’s decline. The index measures the change in house prices in Australia’s eight capital cities. This year, a decline in house prices in Sydney and Melbourne has led to the index being in the negative territory. The AUS200 too rose after the data.
The RBA minutes for the previous meeting provided a catalyst to the Australian dollar and the AUS200. The minutes noted that the economy was doing well, with the impacts of the recent drought being well mitigated. They also noted that while there was no strong case for a near-term adjustment in monetary policy when it happens, it will be most likely to the upside.
The EUR/USD pair is little moved from yesterday’s close of 1.1677. This level is between the range of 1.1522 and 1.1734 where the pair has been for the past week. It is in line with the 14 and 21-day EMA on the 30-minute chart and between the 61.8% and 100% Fibonacci Retracement level. Today, with no major economic data scheduled, the pair is likely to continue trading between this range.
The AUD/USD pair started falling in February as shown below. Since then, it has fallen from a high of 0.8930 to a low of 0.7080. It is now trading at 0.7175, which is slightly higher than yesterday’s close. This price is in line with the 21 and 14-day EMA with the RSI at 51 and declining. It is also lower than the 100-day EMA. Even with today’s positive economic data, the downward momentum is likely to continue.
At the end of last month, the AUS200 index fell sharply from a high of A$6385. It found a floor at A$6095 a week ago. In the past few days, the index has moved higher, establishing higher highs and higher low patterns. It is now trading at A$6159. The current price is at the middle Bollinger Band, heading lower. This is an indication that the index could fall slightly to the lower middle band of A$6125.