European and US stocks ignore the new currency war
Global stocks were mixed today as investors continued to reflect on the ongoing trade war between China and the US. In Europe, the Stoxx 600 rose by 0.6% while in France, the CAC increased by 0.9%. In London, the FTSE increased by 0.2%. In Asia, Hang Seng declined by 0.7% while Japan’s Topix declined by 0.4%. Meanwhile, in the US, futures pointed to a higher open, with the Dow and the Nasdaq futures gaining by 250 and 85 points respectively. These gains happened after investors shrugged off the decision by Trump to label China a currency manipulator. Analysts believe that the move will largely be symbolic.
The kiwi was relatively unchanged today after New Zealand released better-than-expected jobs numbers. In the second quarter, the employment change increased by 0.8% after slipping by -0.2% in the first quarter. The unemployment rate dropped to 3.9% from the previous 4.2%. The wages increased by an annualised rate of 2.2%. The participation rate, which measures the percentage of people of working age that are either working or actively looking for work remained unchanged at 70.40%. Investors were expecting a slight increase to 70.50%.
The Japanese yen eased slightly against the USD after the country released key economic data. In June, household spending increased by an annualized rate of 2.7%. This was lower than the previous gain of 4.0% but higher than the consensus estimates of 1.3%. Average cash earnings increased by 0.4% in the month after slipping by -0.5% in the previous month. In recent days, the Japanese yen has strengthened against the USD. Investors believe that the country’s Government Pension Investment Fund might be forced to accelerate overseas purchasing of assets to offset the buying of the yen. This will be an indirect method of currency manipulation, which is under spotlight in Washington.
The Australian dollar was relatively unchanged after the RBA delivered its interest rates decision. As was widely expected, the bank left interest rates unchanged at 1.00%. This is after slashing rates by 25 basis points in each of the past two decisions. In a statement, the central bank governor, Philip Lowe warned that global risks had risen, which could necessitate additional rate cuts. In the past few days, the Australian stock market has lost more than $80 billion. This is because the country’s economy is widely dependent on the Chinese market.
The EUR/USD pair declined today, falling below the important support level of 1.1200. This was the first day in three days that the pair has declined. On the hourly chart, the 14-day RSI dropped from a high of 84 to the current 46. The current price of 1.1185, is along the 40-day EMA (white) and slightly below the 20-day EMA (red). The pair is also along the 61.8% Fibonacci Retracement level. There is a possibility that the pair will continue moving lower to test the 50% Fibonacci Retracement level at 1.1150 (green).
The NZD/USD pair was relatively unchanged today after the country’s statistics office released the employment numbers for the second quarter. The pair rose to a high of 0.6587 immediately after the release but then pared those gains. The four-hour chart shows that the pair ended the steep decline that started on Thursday last week yesterday, after reaching a low of 0.6488. This was an important support level as shown by the green line. The Average True Range (ATR), which is a measure of volatility reached the highest level since March 26. The pair could go up to test the 50% Fibonacci Retracement level at 0.6640.
The AUD/USD pair has been on a steep downward trend since July 19th, when it was trading at the 0.7082 level. Yesterday, the pair formed a double bottom at the 0.6747 level. Today, the pair moved slightly higher after the RBA rates decision. On the four-hour chart, the pair is trading below the 25-day (red) and the 50-day (blue) EMAs. It is also below the 100-day EMA shown in green below. The pair could retest the 50% Fibonacci Retracement level of 0.6915, shown in orange.