U.S. Dollar finishes Mixed; Chinese Revaluation Likely to Pressure Aussie Dollar
economic reports this morning helped weaken the Dollar after Weekly Initial Job
Claims and Industrial Production were less than stellar. The job claims report
showed more Americans filed for unemployment aid while factory production came
in below expectations. Both reports signaled interest rates would remain low.
Last night China
reported that its Gross Domestic Product grew 11.9 percent from a year ago.
This was slightly better than the median guesses of 11.7 percent.The news, that Chinaâ€™s economy accelerated more
than expected in the first quarter, raised concerns that it may be overheating,
prompting more talk of a possible interest rate like. Traders are also increasing
speculation that China
may revalue its currency as soon as next week. If this takes place, look for
the Japanese Yen to strengthen and the U.S. Dollar to weaken along with the
Australian and New Zealand Dollars.
News that Chinaâ€™s
GDP was up slightly more than expected during the first quarter helped to
pressure the USD JPY. Technically, the charts indicate that downside momentum
could take this market down to 92.26 over the near-term. Traders should also
note that the general consensus suggests that the Japanese Yen is likely to
gain when China
decides to revalue its currency.A
revaluation of the Yuan is likely to put pressure on commodity-linked
currencies to the benefit of the lower yielding Japanese Yen.
Short-covering ahead of next weekâ€™s Bank of Canada meeting
on April 20th may have helped to underpin the USD CAD. The chart formation
suggests the possibility of a short covering rally to 1.0020 to 1.0046.
Oversold conditions are also helping this market recover after touching a new
low for the week on Wednesday.
For over a year, Bank of Canada Governor Mark Carney has
pledged to keep interest rates at a record low of 0.25% through June. Canadian
financial markets are indicating, however, that rates may rise as early as June
1. This helped pressure the USD CAD below parity recently.The bigger picture suggests the Canadian
Dollar is likely to continue to rise because of the stronger-than-expected
economic recovery and expectations for interest rate increases.
The AUD USD rose overnight following Chinaâ€™s strong GDP report. Weaker
demand for higher yielding assets, however, quickly brought in sellers. The
recent two day rally may be setting up the market for a break. This is possible
due to the closing price reversal top at .9387 which is still weighing on the
markets. A trade through .9223 will turn the main trend down. Bullish traders
appear to be approaching the long-side with caution following rumors the
Chinese will revalue the Yuan next week. This action could spell decreased
demand for Australian commodities and raw materials.
The NZD USD felt similar pressure but this market continues
to remain glued to a major 50% price level at .7124. This price is controlling
the short-term direction of the Kiwi. The longer-term charts indicate that downside
pressure is likely as long as the Kiwi remains below .7200. A break through
.7086 will turn the main trend down. Traders may begin selling the New Zealand ahead of next weekâ€™s possible
revaluing of the Yuan by China.
The GBP USD closed higher after a report showed the
opposition Conservative Partyâ€™s lead over the Labor Party widened, easing
concerns that the May 6th election will produce a hung parliament. Traders had
been pressuring the British Pound lately because of concerns that a hung
parliament would result in a government too weak to tackle the U.K.â€™s
huge budget deficit. Gains could be limited on speculation that bullish traders
will begin to liquidate their long positions ahead of the election.
Technically, this currency found support following an early
test of an uptrending Gann angle support at 1.5397. Look for this market to
continue to remain strong as long as this angle holds as support. The next
upside objective is a 50% level at 1.5618.
The EUR USD finished down off its low. Following a sharply
lower opening, the Euro mounted a small comeback throughout the day as reports
surfaced that the International Monetary Fund will meet with Greece on Monday to discuss
financial aid options.
Market participants are feeling jittery again because of
concerns over Greece.
Investors are worried that the IMF/EU $61 billion financial aid plan will not
be enough to help the Greek economy and restore confidence in the Euro. At this
time, the Euro is facing serious credibility issues.
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Mon 9 July 2018 AA 12:00 EZ- Draghi EU Parliament Testimony Tue 10 July 2018 AA 08:30 GB- Ind/Prod Output, Trade AA 09:00 DE- ZEW Survey Wed 11 July 2018 A 12:30 US- PPI A 14:00 CA- Bank Of Canada Decision A 14:30 US- EIA Crude Thu 12 July 2018 AA 12:30 US- CPI Fri 13 July 2018 A 14:00 US- Prelim University of Michigan
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