(MENAFN- DailyFX) Asia Pacific Market Open Talking Points US Dollaroutperformed asBritish Pound ,Euroweakened during European tradeUSDgains accelerated on rosy retail sales and risk aversion on trade war worriesAUD/USDmay reverse on bearish technical warning signs, eyeing rising support
Not sure where the US Dollar is heading next? We recently released thethird quarter US Dollar fundamental and technical forecast !
US Dollar Rallies as Retail Sales, Trump Trade War Threat Sank Stocks
The US Dollar had multiple fundamental themes to propel its best performance in a day since July 5. During the European session, British Pound and Euro weakness in disappointing UK employment andGerman ZEW Survey data- respectively - likely drove traders into the Greenback. 'No-deal' Brexit fears seemed to have compounded Sterling declines asUK Conservative Lawmaker Grieve noted the difficulty of blocking one .
Better-than-expected US retail sales then fueled a cautious tone of risk aversion as local front-end government bond yields rallied. The data printed 0.4% m/m in June versus 0.2% expected, still weaker than May's 0.5% growth. Then, theS & P 500accelerated its selloff when US President Donald Trump said that he could still impose further tariffs on China 'if he wanted', undermining last month's G20 Summit truce.
What is interesting is that by the end of the day, looking at Fed funds futures, odds of a 50 basis point rate cut later this month actually rose slightly to a nearly 30% chance from 25% yesterday. This is a reminder that more aggressive easing from the Fed may not necessarily bolster sentiment if the underlying reasons for such actions are dire. The markets are already anticipating perhaps three rate cuts by year-end.
Moreover, this speaks to concerns over the health and vigor of the global economy where you could see this impact oncrude oilprices. The commodity tumbled nearly three percent on Tuesday in its worst performance in two weeks,taking out rising support from early Juneand opening the door to perhaps testing 56.11 ahead.
Wednesday's Asia Pacific Trading Session
Turning my focus towards Asia Pacific markets, S & P 500 futures are pointing cautiously lower which hints at a tepidly pessimistic session ahead. A lack of critical economic event risk does place the focus for forex on sentiment. If the highly-liquid US Dollar continues its rise ahead, this could bode ill for the pro-risk Australian and New Zealand Dollars.
AUD/USD Technical Analysis
Taking a closer look at AUD/USD technically shows early warning signs of a reversal that could potentially be in the cards. After range resistance held (0.7022 – 0.7048), Tuesday's candle formed a Bearish Engulfing. This is coupled with negative RSI divergence, showing fading upside momentum. A confirmation close to the downside opens the door to testing potential rising support from mid-June.
AUD/USD Daily Chart
Chart Created in TradingView
FX Trading ResourcesSee how the S & P 500 is viewed by the trading community at theDailyFX Sentiment Page See our free guide to learn what are thelong-term forces driving Crude Oil prices See ourstudy on the history of trade warsto learn how it might influence financial markets!
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or@ddubrovskyFXon Twitter
DailyFX
MENAFN1607201900760000ID1098766291
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.