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US AM Digest: Trade War Tit-for-Tat Ratchets Up Between China and US

US AM Digest: Trade War Tit-for-Tat Ratchets Up Between China and US

2018-04-04 13:29:00
Justin McQueen, Analyst
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USD: Trade wars continues to dictate the latest state of play in FX with China earlier announcing reciprocal tariffs on US products worth as much as USD 50bln, which took the greenback from 90.20 to lows of 89.90. Alongside this, US equity futures also fell on the news, with DJIA index futures pointing to a 400+ point drop at the Wall Street open, while naturally, investors flocked to the safe havens with JPY and gold the notable beneficiaries. However, the USD has since recovered from the European morning lows to reclaim back the 90 level, with the greenback finding brief support from today’s stellar ADP jobs report, which beat expectations at 241k (Exp. 210k), while the prior month had been revised higher to 246k.

EUR: Trading slightly firmer this morning, largely owing to the softness in the USD-index amid China’s retaliation to US tariffs. Today saw the flash estimates for Euro Zone March inflation data, which printed in-line with expectations at 1.4%, core inflation remained at a subdued 1%, subsequently disappointing the ECB hawks, which remains some way off the ECB’s price target (below but close to 2%). As such, EURUSD has failed to consolidate above 1.23. Key trendline support around 1.2340.

NZD: The Kiwi flying high this morning and is among the best performers in the G10 space, which is now eyeing 0.7300 to the upside. This is despite the risk off sentiment, with much of the support coming from cross related selling vs. AUD, which has now fallen to the lowest level since Jul’17, given the Australian dollars greater exposure to the trade spat between China and the US.

DailyFX Economic Calendar: Wednesday, April 04, 2018 – North American Releases

US AM Digest: Trade War Tit-for-Tat Ratchets Up Between China and US

The North American will see the release of the US services PMI at 13:45GMT, which is seen ticking up to 54.3 from 54.1. Elsewhere, 14:00GMT will see the bulk of the US data with ISM Non-Manufacturing PMI, durable goods and factory orders due to be released, factory orders expected to see a notable rebound to 1.7% from -1.4%. Oil traders will be keeping a close eye out on the latest DoE Crude Oil Inventories, as a reminder, last night’s API report showed surprise drawdown of 3.280mln (Exp. Build of 0.200mln) in the headline figure. Additionally, last week’s DoE release reported US crude production rising 0.24% to 10.433mln bpd. In terms of central bank speakers, Fed’s Bullard (Non-Voter) will give his latest assessment on the US economy at 13:45GMT, while Fed’s Mester (Voter) is scheduled to speak at 15:00GMT

DailyFX Webinar Calendar: Wednesday, April 04, 2018

US AM Digest: Trade War Tit-for-Tat Ratchets Up Between China and US

IG Client Sentiment Index Chart of the Day: NZDUSD

US AM Digest: Trade War Tit-for-Tat Ratchets Up Between China and US

NZDUSD: Retail trader data shows 32.4% of traders are net-long with the ratio of traders short to long at 2.09 to 1. In fact, traders have remained net-short since Mar 20 when NZDUSD traded near 0.7178; price has moved 1.5% higher since then. The number of traders net-long is 1.8% higher than yesterday and 12.4% lower from last week, while the number of traders net-short is 28.6% higher than yesterday and unchanged from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests NZDUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZDUSD-bullish contrarian trading bias.

Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page

Five Things Traders are Reading

  1. US Dollar Shrugs Off Trade War Headlines - For Now” by Christopher Vecchio, Sr. Currency Strategist
  2. Ripple (XRP) Struggles With Chart Resistance; Price Action Points Lower” by Nick Cawley, Market Analyst
  3. Chart Outlook for EUR/USD, Yen-crosses, Gold, DAX & More by Paul Robinson, Market Analyst
  4. Narrowing ISM Non-Manufacturing Survey to Keep EUR/USD Afloat” by David Song, Currency Analyst
  5. EUR Unmoved by Inflation Data; Trade Wars in Focus” by Justin McQueen, Market Analyst

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