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.

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
EUR/USD
Bearish
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • (Weekly Fundamental) Australian Dollar Outlook: Tied to Biden Stimulus Bets, S&P 500, US Dollar, Treasuries $AUDUSD #SP500 #stimulusbill #USD https://www.dailyfx.com/forex/fundamental/forecast/weekly/aud/2021/01/16/Australian-Dollar-Outlook-Tied-to-Biden-Stimulus-Bets-SP-500-US-Dollar-Treasuries.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/H7aus0Aljt
  • The inside bar pattern occurs regularly within financial markets. Incorporating the inside bar strategy can enhance a trader's market analysis. Find out how more here: https://t.co/E3EWOYTYNw https://t.co/7zI3p6UNVs
  • Bank of Japan to mull widening of its long-term yield band -BBG $USDJPY
  • While the rise in longer-dated Treasury yields have been impressive as of late, March highs remain a key focus for resistance The medium-term uptrend remains intact, maintained by rising support from August Fading fiscal stimulus expectations (size) may sour yields ahead https://t.co/L3vBcF0ts7
  • Trading bias allows traders to make informative decisions when dealing in the market. This relates to both novice and experienced traders alike. Start learning how you may be able to make more informed decisions here: https://t.co/rz7fqhRoMG https://t.co/vFJ8zmphMm
  • While the US Dollar has been holding its ground, its downside bias against the Singapore Dollar, New Taiwan Dollar Thai Baht and Indonesian Rupiah remains intact as it hovers at support. Get your market update from @ddubrovskyFX here: https://t.co/p7gAztWuVG https://t.co/zB1pOS6U4D
  • The $VIX is now running 227 trading days above the 20 handle. It is also working its way quickly into a dead-end descending triangle. These don't really break lower... https://t.co/39Pr7YrQ08
  • WTI Crude amongst the many market participants taking a hit today, down almost 3% $WTI $USD https://t.co/eg2phm1wUO
  • The power of suggestion: even though the market recognized the mistake with mixing Tesla founder Musk's suggestion to use the Signal app with the stock SIGL, it is still trading >2,000% above pre-remark levels and maintains heavy volume. Us speculators are an interesting people
  • Forex Update: As of 21:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: -0.07% 🇨🇭CHF: -0.35% 🇪🇺EUR: -0.65% 🇨🇦CAD: -0.75% 🇦🇺AUD: -0.95% 🇳🇿NZD: -1.19% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/6NZVebT00L
US Dollar Index Poised to Climb Higher on Escalating US-China Tensions

US Dollar Index Poised to Climb Higher on Escalating US-China Tensions

2020-07-24 07:00:00
Daniel Moss, Analyst

US Dollar, Federal Reserve, US-China Tensions, Euro Open – Talking Points:

  • Market sentiment soured during APAC trade as US-China tensions continued to escalate
  • Significant decline in demand for central bank liquidity swaps may hamper the US Dollar’s upside
  • The US Dollar index is struggling at key support as RSI divergence hints at impending reversal

Asia-Pacific Recap

Escalating US-China tensions soured market sentiment as the haven-associated Japanese Yen surged against its risk-sensitive counterparts.

The US Dollar extended its slide as continuing jobless claims increased for the first time since March.

Gold climbed back above $1,890 as yields on US 10-year Treasuries fell back below 0.6%, fueling non-yielding bullion’s burst to nine-year highs.

Looking ahead, US Manufacturing PMI data may prove marke-moving should it fail to quench expectations.

Please add a description for the image.

China Asks US to Close Chengdu Consulate

The tit-for-tat exchange between the world’s two largest economies continues to escalate as China requested the US close its Chengdu consulate, retaliating to the enforced closure of the Chinese consulate in Houston by the Trump administration.

The Chinese Foreign Ministry stated that “the current situation in China-US relations is not what China desires to see, and the US is responsible for all of this”. Spokesperson Wang Wenbin stressed that measures taken by United States are “breaking down the bridge of friendship between the Chinese and American people”.

That being said, Mike Pompeo’s comments just hours before the announcement suggest the Secretary of State isn’t interested in cultivating a relationship with Beijing, as the “old paradigm of blind engagement with China must not continue and we must not return to it”.

Pompeo stressed that “there can be no return to past practices just because they’re comfortable, or convenient” as he called on his fellow members of the “Five Eyes” alliance – the United Kingdom, Canada, New Zealand and Australia – to “push back against the Chinese Communist Party”.

Traits of Successful Traders
Traits of Successful Traders
Recommended by Daniel Moss
Traits of Successful Traders
Get My Guide

Moreover, President Donald Trump seemed to dismiss the importance of ratifying a trade deal with the US' largest trading partner, stating the importance of the phase-one trade agreement reached late last year “means much less to me”.

With Beijing stating it will “take necessary measures to safeguard its legitmate rights and interests” it seems more and more likely that a complete, irreperable breakdown in Sino-American relations could eventuate.

To that end, a period of risk aversion looks likely, potentially fueling a resurgence in the haven-associated US Dollar and hampering the performance of risk-sensitive assets.

Central Bank Liquidity Swaps Hampering US Dollar

US Dollar Index Poised to Climb Higher on Escalating US-China Tensions

Data Source – Federal Reserve

However, the US Dollar had a somewhat muted reaction to the escalation in rhetoric, lagging its haven-linked counterparts and nudging slightly slower as foreign central banks aggressively roll back liquidity swaps with the Federal Reserve.

The accelerated decline in demand for US Dollar liquidity speaks to the calm in global debt markets, suggesting that foreign central banks now have sufficient reserves to be able to supply commercial banks with the funds they need.

With the TED spread – an indicator of potential credit risk – sitting at its lowest levels since early March, a continuation of this trend looks likely.

Therefore, the US Dollar may not respond as aggressively to a surge in risk aversion should credit markets remain relatively stable and could continue to underperform the haven-associated Japanese Yen and Swiss Franc.

US Dollar Index Daily Chart – Testing Yearly Low as RSI Hints at Reversal

US Dollar Index Poised to Climb Higher on Escalating US-China Tensions

US Dollar Index (DXY) created using TradingView

From a technical perspective, the US Dollar looks poised to claw back lost ground against its major counterparts as the RSI fails to follow price to lower lows, suggesting underlying exhaustion in the 4-month downtrend.

As price struggles to close below the March low (94.66) a correction higher seems on the cards, with the RSI climbing back above 30 possibly preceeding a push to resistance at the June low (95.72).

On the other hand, a daily close below the March low (94.66) could carve a path for the US Dollar index to test support at the September 2018 low (93.81)

USD Forecast
USD Forecast
Recommended by Daniel Moss
Get Your Free USD Forecast
Get My Guide

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

Building Confidence in Trading
Building Confidence in Trading
Recommended by Daniel Moss
Building Confidence in Trading
Get My Guide

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

DISCLOSURES