DOLLAR STRENGTH CONTINUES AS TRADE WORRIES FALL
The dollar index continued rising today after a statement from Treasury Secretary Steven Mnuchin who said that the trade war between the US and China was on hold. This came after weeks of increased pressure between the two countries after the US announced tariffs of goods worth more than $50 billion. China responded by targeting key industries and companies in the United States. The current situation came as China accepted to boost trade with the United States by increasing imports by more than $200 billion. Some analysts have called the new target unrealistic as this would double the amount of goods the US exports to China. Last year, the US exported goods worth more than $116 billion to the country. As a result, the US stocks markets point to a higher open with the Dow gaining by more than 225 points.
The New Zealand dollar fell slightly after disappointing data from Statistics New Zealand. The agency reported that the core retail sales in the quarter rose by 0.6%. This was lower than the expected 1.1%, and last quarter’s 1.8%. In the quarter, electronic spending rose while spending on clothing declined. Supermarkets and grocery spending was up by 1.0% while pharmaceuticals was up by 2.7%. In general, retail sales increased by 0.1% compared to last quarter’s 1.7%.
The Japanese yen fell against the dollar following the release of its exports and imports data. The data showed that the country’s trade balance in April was about $656 billion. This was lower than the trade balance in March, but higher than the expected $406 billion. In the month, the imports rose at an annual rate of 5.9% which was lower than the expected 9.6%. Exports rose by an annualized rate of 7.8% compared to the expected 8.1%. The reduction in China-US trade tensions also led the yen to fall as traders moved from the safe haven currency.
The EUR/USD pair has shifted lower for the past few weeks after reaching an YTD high of 1.2565. Today, the pair was little moved after the easing of trade tensions between US and China. The pair is now trading at 1.1756, which is in line with the 25-day SMA and slightly higher than the 50-day SMA. As shown below, the bears power is currently struggling to cross the highest point since Friday with the RSI at 50. The pair could gain slightly but as fundamentals favor the dollar, the pair could continue the downward momentum.
The NZD/USD pair fell from 0.6930 and reached an intraday low of 0.6882 following the disappointing retail data. Since then, the pair has recovered slightly and is currently trading at 0.6907. The pair’s parabolic SAR and double moving average indicators are showing signs of further upward momentum. This trend is confirmed by the RSI, which is currently at 60. This means the pair could continue moving higher in the short term.
The USD/JPY pair rose after weak trade data from Japan. The pair moved from a low of 110.75 to an intraday high of 111.36, which is the highest level since February. At the current price, the pair is trading at the 14 and 28-day SMA with the RSI trading at 57. This implies that the pair could continue with the upward trend. However, traders should be cautious because bulls might start offloading their positions which could see the pair move lower, potentially to the 110.9 support level.