DOLLAR STRENGTHENS AS US-CHINA NEGOTIATIONS EXCITE THE MARKET
Global stocks rose today as traders’ optimism about a trade deal between the United States and China rose. Last week, the US and China announced that they would restart the talks on trade and during the weekend, it was confirmed that Xi Jinping and Donald Trump will meet to seal a deal in November. The officials of the two countries will meet in Washington on Wednesday and Thursday before the US is scheduled to impose new tariffs on China. While a deal is not guaranteed, traders hope that the timing of the deal – before the midterm elections – will increase pressure on the United States side. Germany’s DAX, EU’s Stoxx, and Chinese Shanghai Composite rose by 1.05%, 0.80%, and 1.11% respectively.
The dollar rose today ahead of the release of the minutes of the Federal Reserve on Wednesday. The Fed minutes are important because they show traders the thinking of the Fed members. In the past, these minutes have caused major movements in the markets because they reveal in details the deliberations between the hawkish and dovish officials of the Fed. This is also an important week because key leaders of central banks will meet in Jackson Hole Wyoming for the annual symposium. In the past, the symposium has caused major movements in the markets.
Gold rose by more than 1% today as traders’ optimism on trade rose. Other metals too like copper and platinum were higher as traders hoped that the new talks will be positive for the market. Gold has had a rough period in the past few weeks. Last week, it reached a low of $1159, which was the lowest level since January last year. This was the sixth consecutive week of declines and the worst performance since December.
The euro was little moved today as the Greek bailout came to an end. In 2016, the country was rescued by the European Union and the IMF with more than $360 billion. These funds have helped the country stabilize but it is not out of the woods yet. A recent report found that a third of its citizens are in poverty and the government has promised to reduce its fiscal spending. There are however concerns about Italy. It has the biggest debt to GDP ratio and the plans of the new government are expected to increase deficits.
On Wednesday last week, the EUR/USD pair reached a weekly low of 1.1300. Since then, the pair has been moving higher and today, it reached an intraday high of 1.1445. This was the highest level in almost two weeks. The pair’s ADX is currently at 32 and its price is in the middle band of the Bollinger Band. The price is also in line with the 25 and 15-day Exponential Moving Average (EMA). The current trend seems weak, which means that the pair is likely to continue the downward movements.
On Thursday, the XAU/USD pair reached a low of $1160. This was the lowest level since January last year. Today, the pair continued the upward trend started on Thursday. It reached an intraday high of $1190. On the 30-minute chart below, the pair has formed a symmetrical triangle pattern. The price is between the 38.6% and 50% Fibonacci Retracement pattern. In the near-term, the pair is likely to test the $1180 level, which is closer to the 38.2% Fibonacci and the support shown below.
In April, the GBP/USD pair reached a high of 1.4374. Since then, it started a sharp decline and last week, it reached a YTD low of 1.2660. The pair is now trading at 1.2760, which is below the 50 and 100-period exponential moving average (EMA). The ADX on the four-hour chart is at 35 and the RSI is rising at 57. The pair is likely to resume the downward momentum as the Brexit debate continues.