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
  • Nasdaq, Dow Jones, S&P 500 gap higher to start August trading in positive territory. Get your market update from @RichDvorakFX here:https://t.co/uLKKosCwow https://t.co/32qjSjtZiC
  • NY Fed accepts $921.32 billion in reverse repo operations $USD $DXY
  • Heads Up:🇧🇷 Balance of Trade (JUL) due at 18:00 GMT (15min) Expected: $8.694B Previous: $10.4B https://www.dailyfx.com/economic-calendar#2021-08-02
  • Technical Levels: #Dollar, #Aussie, #Loonie, #Gold, #Silver, #Oil, #Bitcoin & More!! (Webinar Archive) - https://t.co/tbSdlhqwbP
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 92.59%, while traders in France 40 are at opposite extremes with 79.11%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/2ztlwRMCsR
  • Commodities Update: As of 16:00, these are your best and worst performers based on the London trading schedule: Gold: 0.10% Silver: -0.17% Oil - US Crude: -3.80% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/Mc50z2D90D
  • US Dollar Index (DXY) moves within 0.5% of its 2021 high. The DXY index is displaying conflicting technical signals. Get your $USD market update from @FxWestwater here:https://t.co/5a4YkhwBwk https://t.co/sMmBAcQzP2
  • Forex Update: As of 16:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.44% 🇦🇺AUD: 0.20% 🇪🇺EUR: 0.04% 🇳🇿NZD: -0.06% 🇬🇧GBP: -0.18% 🇨🇦CAD: -0.27% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/XXzkPbgClH
  • The US 10 Year Treasury yield has continued to decline, now at 1.15% $ZN #Trading https://t.co/HdcjskFwi3
  • Crude oil getting whacked today with prices down -4% on the session. Currently probing its 50-day moving average with subsequent support appearing at the psychological $70.00/bbl level before traders eye July lows. Link to Analysis - https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2021/07/31/crude-oil-forecast-price-action-mired-by-shaky-risk-appetite.html #OOTT $CL_F $USO https://t.co/1CkmlXdPQa
Tariffs News Triggers Risk Aversion, Beware Dollar, Euro and Pound Trades

Tariffs News Triggers Risk Aversion, Beware Dollar, Euro and Pound Trades

John Kicklighter, Chief Strategist

Talking Points:

  • US President Donald Trump suggested that details on steel and aluminum tariffs are due next week, sending risk assets sliding
  • The US Dollar was another loser on the trade war escalation, leaving Fed rhetoric about four rate hikes being 'gradual' behind
  • FX traders and international traders should be mindful of the UK PM's Brexit draft rebuttal, Italian election, Chinese Congress

What makes for a 'great' trader? Strategy is important but there are many ways we can analyze to good trades. The most important limitations and advances are found in our own psychology. Download the DailyFX Building Confidence in Trading and Traits of Successful Traders guides to learn how to set your course from the beginning.

US Markets Seemed Ready to Halt Risk Aversion, Then...Tariffs

Risk trends were already sour through the Asian and European sessions Thursday with the time zones' indices and other capital market assets fading. These region's markets never made the same effort at an intense rebound following February's collapse that the United States benchmarks did. That suggests that the recovery in speculative appetite was unique to the country and thereby unlikely to sustain itself - rarely does a single country or asset type find an enthusiastic drive in sentiment where the rest of the world heads the other direction. That being said, the US markets opened with a notable sense of restraint and stability. Yet, regardless of how that effort may have played out if undisturbed, it was severed by the revival of a headline that we have seen frequently these past few weeks: tariffs. US President Donald Trump prepared the markets for details on tariffs he intended to impose on steel and aluminum imports to the United States next week. We had this threat of the next escalation in trade wars circling in the background, but it quickly came to the fore this past session.

Dow 30 Daily Chart and Consecutive Day Runs

Trade Wars, Huh, What are They Good For?

The US seems intent to raise tariff on trade partners for its perceived slight through unfair trade practices, but it is very unlikely to end with the many countries this effects to simply sit idly by suffering the loss of export-derived GDP. Retaliation is highly like, and so begins the trade war in earnest. There are no winners in a trade war. The US has relatively recent history to refer to when evaluating the impact such policy can have. The Bush-era tariffs were brought to an end with a net loss of jobs and economic loss for the US owing in large part to the higher costs of imported goods that resulted. Another side effect of this policy course is a more active currency war. The US has already been accused of pursuing policy aimed at devaluing the Greenback - most recently by some ECB members in the central bank's minutes. The policy path the US is on will likely see trade partners either decide to or forced to circumvent the US Dollar which will be a permanent downgrade for the currency. These concerns started to dawn on traders and handily offset some provocative rhetoric from New York Fed President Dudley who raised the stakes on the 'gradual' language used with referencing rates - he said four 25 basis point hikes in 2018 would still be gradual.

EUR/USD Daily Chart

Gold and Oil Have a Steak In It

The Dollar and explicit 'risk' assets are the only markets with skin in the game when it comes to trade wars. Crude oil posted a notable reversal/rebound Thursday afternoon with the headlines. The intraday rebound would result in the largest 'bullish tail' since May 5th - though it notably didn't turn the day bullish. The impact on gold was far more remarkable. The precious metal similarly reversed course midday. For gold though, the tail was the largest since July 2016. Given the safe haven status the commodity has established over the decades, the slide in equities was a rather direct appeal for the commodity. That said, the attraction runs deeper than that. As we had seen in 2008 through 2011, gold took on an equally systemic appeal as an alternative to 'fiat currency'. With the Dollar, Euro, Pound and Yen fundamental concerns; there is a growing appeal of an alternative to government-led currencies.

Gold Daily Chart and 'Tails' Indicator

Beware the Other Major Event and Thematic Event Risk Ahead

While the US-led tariffs on the horizon are a global concern in a risk-sensitive market, they are not the only fundamental catalyst and theme we need to keep an eye on. Coming up Friday, the constant influence from Brexit threatens to see a particularly charged impact with UK Prime Minister Theresa May set to deliver her government's rebuttal to the rejected EU draft on Wednesday. The rejection led to a hefty Sterling drop. Given the lack of clarity on the UK's demands of late, a vague response will not likely be read encouragingly by the EU nor hte Pound. For those tracking the EUR/USD or EUR/JPY, it is probably best to avoid exposure into the weekend. The Italian election is on Sunday, and its outcome could hold significant consequences for the political stability of the Eurozone. Looking a little further ahead, we have a range of rate decisions, GDP readings and more next week. With volatility actually translating from fundamentals, traders should remain on their toes. We discuss all of this and more in today's trading video.

Daily Chart of Equally-Weighted Pound Index

To receive John’s analysis directly via email, please SIGN UP HERE

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

DISCLOSURES