MARKETS RISE AS US-CHINA TALKS RESUME, TURKEY CRISIS FADES

There was relief in the markets today after a report from the Wall Street Journal said that the United States and China were restarting their failed talks on trade. China will dispatch the deputy minister of trade to the US to hold discussions with the US trade representative office. The hope is to resolve the ongoing trade conflict, which has seen the two largest economies impose tariffs on one another. The US wants China to improve its trade practices on technology transfer, to lower the tariff and non-tariff barriers, and reduce the trade deficit with the US by increasing its purchases. The Chinese stocks ended the day lower with the Shanghai composite losing 60 basis points. European stocks were higher with the DAX and Stoxx gaining by 35 and 65 basis points respectively. US futures point to a higher open with the S&P and Nasdaq gaining by 50 and 60 basis points respectively.

The Office of National Statistics (ONS) released better than expected retail sales data for the month of July. The overall retail sales rose by a monthly rate of 0.7% and an annual rate of 3.5%. This was higher than the expected 0.2% and 3.0% gain. The core retail sales for the month rose by 0.9%, which was higher than the expected 0.1%. On an annual basis, the sales rose by 3.7%. This was the highest growth of retail sales from May.

The Australian dollar was little moved against the dollar today after the country’s statistics office released disappointing jobs numbers for the month of July. On the positive side, the unemployment rate fell to 5.3% from last month’s 5.4%. Meanwhile, the participation rate during the month fell to 65.5%, which was worse than the expected 65.7%. The employment change in the month was minus 3.9K. This was lower than the 58.2K jobs created in June and the expected 15K.

The dollar index strength eased a bit after the crisis in Turkey softened. Yesterday, Qatar announced that it would support the Turkish government by investing more than $15 billion into the Turkish economy. Turkey was among the first countries to express solidarity with Qatar after it was blockaded by Saudi Arabia and other gulf states. The US also released impressive economic data. The initial jobless claims were at 212K, which was better than the expected 215K while the continuing jobless claims were at 1,721K which was better than the expected 1,750K. The jobless claims are now at the lowest level in more than 40 years. In addition, the building permits for July rose by a monthly rate of 1.5%, which was better than the expected 1.4%. In total, the number of building permits issued were 1.311M, which was higher than the expected 1.310M. On the negative side, the Philadelphia manufacturing index for August plunged to 11.9 from the 25.7 reported in July.

EUR/USD

The EUR/USD pair rose from yesterday’s intraday low of 1.1300 and is currently trading at 1.1385. This price is in line with the 21-day moving average on the four-hour chart but lower than the 42-day moving average. The money flow index is currently at 37. Today’s rise could be interpreted as a false breakout, which means that the pair could resume the downward momentum.

GBP/USD

The GBP/USD pair remains in the lowest level since June last year. Today, it was little moved after the positive retail sales data from the UK. It is now trading at 1.2710. On the daily chart, it is below the 21, 50, and 100-day exponential moving averages, with the RSI at 23 and the Williams Facilitation Range at minus 91. While the pair is likely to continue moving lower, these levels provide opportunities to long-term contrarian pound bulls.

AUD/USD

On Wednesday, the AUD/USD pair reached a low of 1.7200, ending a sharp decline that started on Thursday last week. Today, the pair reached an intraday high of 0.7280. On the hourly chart, today’s price is on the 23.6% Fibonacci Retracement level, where it is finding some resistance. There is a likelihood that the pair will continue the downward movement and test the 1.17200 level. If it moves up, traders should focus on the 0.7300, which is close to the 38.2% Fibonacci level.