Image Source:    AUD/USD rallies to near 0.6300 as the market sentiment becomes favorable for risk-sensitive assets. The risk-appetite of investors improves on the assumption that the scope of the trade war will be limited between the US and China. US-China trade war and RBA dovish bets would limit the Australian Dollar’s upside.  surges to near the key level of 0.6300 in Wednesday’s European session. The Aussie pair strengthens as the risk appetite of investors has improved amid expectations that the trade war won’t be global and will be limited between the United States (US) and China.S&P 500 futures are slightly down in European trading hours but have recovered their losses significantly. The US  (DXY), which tracks the Greenback’s value against six major currencies, declines sharply to near 107.50, the lowest level in more than a week.Market participants are anticipating a lethal trade war between the US and China as the latter has retaliated with levies of 15% on coal and LNG and 10% for crude oil, farm equipment, and some autos against US President Donald Trump’s decision to impose 10% tariffs on them.Though a steady market environment has offered some relief to the Australian Dollar (AUD), investors expect the relief would be short-term as Australia would be the victim of the US-China trade war, being a leading trading partner of China.Apart from that, firm market expectations that the Reserve Bank of Australia (RBA) will pivot to policy normalization from the policy meeting on February 18 would also weigh on the […]

Photo by  on    GBP/USD claws higher ahead of US data US ADP payrolls & ISM services PMI data is due UK services PMI is in focus ahead of the BoE rate decision tomorrow GBP/USD tests 1.25 resistance GBP/USD is rising for a third straight session, capitalizing on a weaker USD as investors way up trade tariff developments and look ahead to more do I stay too.GBP/USD briefly spiked lower at the start of the week before quickly recovering as U.S. President Trump paused trade tariffs on Mexico and Canada for one month but pressed ahead with 10% trade tariffs against China. Retaliatory levies in the US from China were lower than expected, helping to ease worries of an all-out trade war.U.S. data this week has been mixed, with the ISM manufacturing PMI returning to expansion after 26 months of contraction. However, yesterday’s JOLTS job openings data were weaker than expected, falling to 7.6 million in December from 8 million and down from 8.156 million. US ADP payrolls are due later today and are expected to rise 150,000 from 120,000. Meanwhile, the services PMI very results for January are also expected to rise to 54 points 354.1.These data points come ahead of Friday’s on from payrolls which are expected to ease from 256k to 170k.GBP will look to UK services and composite PMI data today, although this is the second reading, so it tends to be less market-moving. Attention will turn to tomorrow’s BoE rate decision, where the central bank is expected to […]

The USD/JPY price analysis shows a strong yen with rising expectations for Bank of Japan rate hikes this year amid upbeat data. Meanwhile, the greenback remained fragile after Trump paused tariffs on Canadian and Mexican goods in the previous session.The yen strengthened against the dollar on Wednesday as data revealed solid wage growth in Japan in December. Notably, real wages rose by 0.6% annually, boosting BoJ rate hike bets. Market participants are now pricing 30-bps of rate hikes by the end of this year. Moreover, Japan’s central bank might be motivated to hike interest rates if Trump’s tariffs significantly strengthen the dollar.Meanwhile, the yen also strengthened due to safe-haven demand amid fears of a trade war between the US and China. Trump’s 10% tariff on Chinese goods took effect on Tuesday. Meanwhile, China responded immediately by imposing tariffs on some US goods. Moreover, the two top leaders do not seem ready to negotiate better trading deals. Therefore, market participants are worried about a prolonged trade war. The dollar eased on Wednesday against most of its peers amid relief over the pause in tariffs on Canada and Mexico. However, this might be brief if Trump decides to impose more tariffs.  USD/JPY key events today US ADP non-farm employment change US ISM services PMI  USD/JPY technical price analysis: Bears eye 152.00 after breakoutUSD/JPY 4-hour chartOn the technical side, the  price has broken below the 154.01 support level. As a result, the price has made a lower low, confirming a continuation of the downtrend. The price […]

Another day, another plunge from the absolute scorching highs that we saw right at the open on Monday of this week, as Tuesday has been more of the same. The reality, though, is nothing’s changed. The only thing that’s changed is we are not going to see a tariff war. At least we shouldn’t. Having said that, there are still structural issues that keep Canadian assets weak, especially in the face of the US dollar, which enjoys a much higher interest rate than the Canadian dollar. That being said, this week is going to be particularly interesting because not only the trade tariffs, but we also have employment on Friday from both of these countries. What I think this is setting up for is a potential buy on the dip scenario. Support Just Below1.43 has been rather reliable support for a while, and I would anticipate there at least will be some type of reaction when we get down there. Furthermore, we have the 50 day EMA and the 1.42 level underneath there that offers support. So, I am looking forward to buying this . I just don’t want to jump in out of the blue and do it. This might be a Friday afternoon trade, I don’t know, but this is a pair that you need to watch because everything that made this pair rise the way it did is still very much on the table.(Click on image to enlarge)Canada doesn’t even have a functioning government at this point, and of […]

Image Source:   Although the US is energy  and a net exporter of petroleum products, we still import certain blends of crude. Canadian tar sands oil is the heavy type for which American  are configured as is Mexican oil. Shale oil is lighter. So we buy what we are set up to handle and sell what we’re not. This is just one example of the complex set of trade ties that bind the North American continent together.There’s unlikely to be any economic benefit from tariffs, which can also correctly be termed import taxes. They can further non-economic goals, such as Mexico’s agreement to station 10,000 troops on our border to prevent illegal immigration. Opinions vary as to whether they’re inflationary, although most analysts agree that they’re a net negative on GDP growth. Much depends on whether retaliation leads to a ratcheting up and extended period of trade friction.Based on the rhetoric leading up to Saturday’s announcement, they’ll be more impactful on Canada and Mexico than the US. Both countries’ currencies initially weakened vs the US$. Theoretically our trading partners could fully absorb the cost of the tariffs. In practice, as with sales taxes, it will be split between producers and consumers.Goldman Sachs estimates that the 10% import tax (ie tariff) on Canadian crude will be 2/3rds absorbed by Canadian producers and 1/3rd by US refineries which will presumably pass this on to consumers via price hikes for gasoline and other refined products. Last year we imported  (MMB/D) of crude and 0.3 MMB/D of refined products […]