WORLD MARKETS FALL AS TRADERS WORRY ABOUT US-CHINA RELATIONS
World markets fell today as traders continued to worry about the escalating rhetoric between the United States and China. Last week, Bloomberg published a report that showed China had infiltrated the US technology industry by having a chip inside devices made for companies like Apple and Amazon. On the same day, Vice President Mike Pence delivered a speech that condemned the Chinese trade and security practices. This came a few weeks after the two countries imposed heavy tariffs on one another. A new report in the New York Post revealed that while Chinese have sounded optimistic about trade, they remained worried that Trump’s policies will have negative effects. In fact, this weekend, the PBOC reduced the Reserve Requirement Ratio (RRR) with the aim of stimulating the economy.
The problems in the emerging markets continued today with traders continuing concerns over the strong US dollar. The Indonesian Rupiah fell to a fresh 20-year low. This led the central bank to step in and prevent any continued declines in the currency. YTD, the rupiah has fallen by more than 11% against the USD as the country’s debt continues to remain in focus. At the same time, the Saudi Riyal declined sharply after a famed journalist and critic of the crown prince was killed in Turkey. In the United States, there are new calls to end the close relationship between Presidnt Trump and King Salman.
The USD rose against the euro after disappointing data from Germany. The data on German industrial production declined by minus 0.3%, which was lower than the 0.4% gain that traders were expecting. On Friday, data showed that manufacturing orders rose by more than traders had expected. Today’s data is a continuation of the weak industrial data which is a reflection of the ongoing problems in trade. In addition to this, Daimler, the manufacturer of Mercedes reported that sales dropped by 8.6% mostly because of the new emissions standards. In addition, the company needs more investments in electric cars and it faces a challenge in trade fears.
The EUR/USD pair struggled to move up, ultimately reaching a high of 1.1548. It then eased those gains and headed down to the important support of 1.1463. The pair is now trading at 1.1470, which is lower than the 14 and 28-day exponential moving average. The two EMAs show that the pair’s downward momentum could continue. This is reinforced by the Bollinger Bands which is as shown below. If the pair continues moving lower, traders should pay attention at the next support of 1.1420.
The GBP/USD pair dropped sharply from an intraday high of 1.3133 to a current low of 1.3046. As shown below, the pair has formed a symmetrical triangle pattern. The Moving Average of Oscillator is at the lowest level since Tuesday last week while the MACD is showing more bearish signals. The pair could continue moving lower and if it does, it will test the 1.3000 level support.
The USD/CAD pair rose today as the USD strengthened. It reached an intraday high of 1.3000 which is also the 50% Fibonacci Retracement level on the hourly chart below. The double EMA shows that more upward movements will continue while the Money Flow Index is currently at 98, which is the highest level since early September. This is an indication that the pair could see some slight downward movements before it continues the upward trend. If this happens, it will test the 38.2% Fibonacci Retracement level and then start moving up