US President Trump’s announcement on additional tariffs on new import products from China last Friday shocked the markets. All related asset classes fell significantly lower as risks amid China’s retaliation increased. With the Nonfarm payrolls disappointing and a rather quiet week on the US economic calendar, the dollar could weaken further. Treasury yields seem to be pricing in another rate cut.
Dollar Falls on Market Reaction
With investors running to safety due to increasing trade escalation between the US and China, markets have remained highly risk-averse since last week. Following a rather poor NFP release last Friday, the slide on the common currency pair is likely to persist to lower levels. A chance for a breather could appear after today’s ISM NMI release, where economists expect an expansion from 55.1 to 56.4.
USDJPY Heads Towards Fresh 2019 Low
The breakout below the 78.6% Fibonacci retracement near 106.60 this morning revalidates the initial market response following Trump’s announcement. With no lower support near the said level, the 2019 flash-crash low of 105 comes back on the investors’ radar. This will remain the next major support until a downside breakout takes us to 104.60.
Gold Reaches May 2013 High
Increased tensions in the Middle East and trade war escalations are likely to keep market participants closer to safe-haven assets. With chances of a September rate cut increasing and central banks looking to accommodate as much as needed. Gold is likely to extend its up move in the coming days, and perhaps even for the medium term.
XAUUSD Could Retrace A Tad Lower
The price extension to 1460 this morning really shows off this week’s market sentiment. Following a breakout above last month’s high at 1453, investors now eye the 1475 level, reached in April 2013. With a retracement expected to weigh on the exchange rate, a short-term decline can be expected from intraday flows, but nothing that could change the longer-term outlook.
Oil Turns Lower By Trade War Narrative
The oil markets were hit hard last week, sliding lower amid a poor API report on weekly crude oil inventories and by Trump’s sudden trade shift against China. With new tariffs adding concerns about oil demand and the ISM manufacturing worsening, oil prices could dampen lower in the short and mid-term.
WTI Could Break Down to Fresh Lows
With oil prices failing to fall outside the ascending channel investors now will keep a close eye at 54.85support. The 3-week low at 53.62 will be the next minor support should bulls weaken their bets, but this level could be still a few days out of reach given the stochastic is oversold.