DOLLAR EXTENDS LOSSES AFTER MIXED JOBS NUMBERS

Today, the much-talked about trade war between the United States and China started officially. At midnight today, the United States started levying tariffs on imported Chinese goods worth about $38 billion. After the tariffs went into place, China responded by issuing tariffs of its own and blamed the US for starting the biggest trade war in history. Trump has announced that he will retaliate against the Chinese retaliation by imposing tariffs on Chinese goods worth $200 billion. All this brought confusion to the markets as traders braced for more uncertainty ahead. Surprisingly, Chinese and other Asian stocks ended the day higher with the Chinese Shanghai composite index rising by 50 basis points. On the other hand, US futures point to a lower opening with the Dow and S&P losing 35 and 20 basis points respectively. In addition, the Chinese yuan extended its gains against the dollar as the PBOC provided support.

Yesterday, the Federal Reserve released the minutes for their June meeting. The minutes showed that the Fed officials were in agreement that the economy was strong and that gradual interest hikes were necessary. This is an indication that the officials will likely have two more rate hikes this year. Some officials were also concerned about the wording of their future meeting statements. The past statements have been about reassuring the markets about the Fed’s commitment to stability. However, the officials were cautious about the impacts of a trade war between the US and the rest of the world.

The dollar extended the losses for the fourth straight day after the disappointing jobs report. The data from the labor department showed that while more people than expected were employed in May, the unemployment rate and the wages disappointed. The unemployment jumped to 4.0% while the average earnings rose by 2.7% which was lower than the expected 2.8%. A positive for the jobs numbers was the participation rate which jumped to 62.9%.

The Canadian dollar jumped against the dollar after a better-than-expected jobs number. The Canadian economy added 31.8K jobs in June which was better than the expected 24.0K jobs. The participation rate jumped 65.5%, which was better than the expected 65.3%. The improving economy is an indicator that the Bank of Canada may be positive about increasing interest rates in the near future.

EUR/USD

It was a tough week for the dollar, which fell by almost a basis point against the euro. The pair is now trading at 1.1750, which is the highest level since mid-June last month. It is now trading above the 25 and 50-day moving average and above the important support levels of 1.1680 and 1.1720. As the ECB starts talking about normalization, and as the crisis in the EU ease, there is a likelihood that the EUR/USD pair will continue moving higher.

USD/CAD

The Canadian dollar continued showing its strength against the US dollar today after the strong employment numbers from Canada. The pair is now trading at 1.3140. The dollar started losing against the Loonie at the end of June. As the Bank of Canada officials meet next week, there is a probability that the strength of the Canadian dollar will continue. If it does, traders should wait for the pair to hit the important support level of 1.3000.

GBP/USD

The cable continued the rally started on Thursday last week when it reached a low of 1.3050. The pair is now trading at 1.3250, which is close to the lowest level since Wednesday last week. The pair is likely to become a bit volatile on Monday when the markets open after traders get the outcome of the meeting between Angela Merkel and her cabinet officials. If there is a deal, the pair is likely to hit the important resistance level of 1.3310. A bad outcome could make the pair lose all the gains achieved in the past week.