DOLLAR FALLS AS MARKET WAITS FOR FED MINUTES
World stocks rose today as talks between the United States and China were set to start in Washington. In Europe, the DAX and Stoxx were up by 0.45% and 0.20% respectively while in Asia, the Nikkei rose by 0.60%. Chinese stocks were the outliers as the Shanghai and China A50 declined by 0.70% and 0.25% respectively. Investors are optimistic that new talks on trade between the two countries will yield results. However, they come at a difficult period for Donald Trump, who faces a congressional election in November. He is also under legal scrutiny after his former campaign manager was found guilty and his former lawyer pleaded guilty.
The US dollar continued its decline, with the dollar index falling by more than 20 basis points. The dollar’s decline was attributed to the continued attacks of the Fed by the US president. The president believes the Fed is working against his policies by continuing to hike interest rates. They are expected to have another hike in September and another one in December. The continued tightening has caused the dollar to strengthen, which has, in turn, affected the country’s exports. Traders believe that the Fed will hit a break in the coming year as other central banks consider tightening. Traders were also waiting for the Fed minutes which are scheduled to be released at 1900 GMT.
The New Zealand dollar continued to rise against the US dollar. This increase was partly because of the weaker USD. It was also partly due to the economic data from New Zealand, which showed improvement in retail sales. In the second quarter, the retail sales jumped by 1.1%, which was higher than the expected 0.4%. The core retail sales – which exclude the volatile food and energy products – rose by 1.4%, which was better than the expected 0.4%. Retail data is important because it is a measure of consumer confidence.
The EUR/USD pair continued moving up today, touching a daily high of 1.1615. This was the highest level since August 8. It was also an important level because the pair completed the cup pattern. The pair is likely to fall as it forms the handle pattern. This movement is likely to accelerate as traders wait for the minutes from the Fed. If it does, it will test the support of 1.1500 as shown below.
The NZD/USD pair continued moving higher, accelerating an upward trend started last week. The pair reached an intraday high of 0.67200. On the hourly chart, this pair is above the 21 and 50-day moving average, with the MACD showing signs of more upward movements. As shown below, the pair is forming a cup and handle pattern. There is a likelihood that it will continue to move up until it finds resistance at 0.6760 level. Before then, any pullback may be seen as an ideal buying point.
The EUR/GBP pair moved up slightly today and reached an intraday high of 0.9000. In the recent weeks, the pair has edged up, forming higher highs and higher lows. On the four-hour chart, it has made near-perfect diagonal support and resistance levels. It is now trading at 0.8990 as it tries to reach the resistance level of 0.9030. The price is also in line with the upper Bollinger Band. The pair is likely to continue moving up, within the narrow range shown below.