News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • So much for that Evergrande recovery. Shares of the troubled Chinese property developer are down approximately -12% today following yesterday's impressive rally (biggest in a year) https://t.co/Nome25d9Bt
  • Retail trading platform Robinhood announces hire of new Chief Compliance Officer amid regulatory scrutiny
  • There is a ridiculous number of scheduled Fed speeches on the docket next week. Powell specifically will be speaking multiple times including at an ECB hosted forum on central banking (which also has a panel with Fed, ECB, BOE and BOJ heads)
  • USD Ascending Triangle, Bullish for Q4 - #DXY chart on @TradingView https://t.co/iCnRSo9N4V
  • Credit rating agency Standard & Poor's is due to give its sovereign credit rating update on Germany today ahead of weekend national elections
  • RT @BIS_org: Since the early 1990s, changes in the #MonetaryPolicy stance have affected a rather narrow set of prices – mostly in the servi…
  • Huawei's CFO Meng Wanzhou reached deal with the US Dept of Justice to return her to China - Dow Jones
  • Cleveland Fed President Loretta Mester says: - sees US GDP in 2022 between 3.75 and 4% - Supports tapering in November and concluding over the first half of 2022 - After liftoff, accommodative policy needed for some time
  • Fed Chairman Jerome Powell doesn't comment on the growth forecast or monetary policy in his introductory remarks
  • Kansas City Fed President Esther George says: - The labor market friction is fading barring a resurgence of virus - A 'normal' economy is likely to remain elusive for some time - Asset buying effects complicate the judging rate change plan
DXY Index Finds Support at Daily 21-EMA as Trade Concerns Linger

DXY Index Finds Support at Daily 21-EMA as Trade Concerns Linger

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- The DXY Index has fallen back to its daily 21-EMA, which proved to be supportive of price back in early-June.

- Proliferation of trade tensions with China and the EU continues to be the main focal point for market participants.

- Sentiment for the US Dollar remains mixed despite the pullback in recent day.

For longer-term technical and fundamental analysis, and to view DailyFX analysts’ top trading ideas for 2018, check out the DailyFX Trading Guides page.

The US Dollar (via the DXY Index) is posting a gain for the first time in four days as ongoing trade tensions with the United States' allies and rivals alike continue to simmer. Both China and the EU have staked out aggressive positions against the US under WTO rules, with the threat of a legitimate trade war seemingly increasing every day.

In general, an escalation of trade tensions leading to an outright trade war should be a negative development for the US Dollar. While we don't have much proper historical data to reference - there haven't been that many significant trade issues impacting markets since 2001 (when China joined the WTO and the EU was in existence) - the isolated instances we have suggest that a US-driven trade war would be a net-negative for the US Dollar.

As such, it's worth noting that the US Dollar has been trading like a risk currency in recent days, rallying when US Treaury yields and US stocks go up, and falling when yields and stocks go down. That the US Dollar is gaining today speaks to the fact that yesterday's slide by US equity markets hasn't found follow through in futures market trading overnight.

DXY Index Price Chart: Daily Timeframe ( to June 2018) (Chart 1)

DXY Index Finds Support at Daily 21-EMA as Trade Concerns Linger

The pause in the US Dollar's drop over the past few days comes at an interesting time for the DXY Index, with price falling to the daily 21-EMA for the first time since the June 14 ECB rate decision. Throughout early-June, the daily 21-EMA was been a magnet for support in the DXY Index, with no two consecutive daily closes coming below the moving average since April 17 and 18.

The driving force behind the DXY Index climbing back to its highest level since July 2017 was the clear policy divergence forming between the Federal Reserve and the European Central Bank, with the Fed eying up to four more hikes before the ECB even begins to raise rates even once. This perception hasn't changed; but the reappearance of trade war fears has momentarily shifted attention from central banks.

Read more: Euro Forecast: Euro Turn to June CPI for Next Catalyst

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES