JFD Team | Jul 23, 2020 03:21AM ET
Although the dollar continued trading lower against most of the other G10 currencies, EU and Asian stocks traded in negative water, as US-China tensions escalated further. The US announced it will close China’s consulate in Houston, with China considering retaliating by closing the US consulate in Wuhan.h3 EQUITIES REVERSE SOUTH AS US-CHINA TENSIONS ESCALATE/h3
The US dollar continued trading lower against the majority of the other G10 currencies on Wednesday and during the Asian morning Thursday. It lost the most ground against NZD, CHF, and EUR, while it gained only versus NOK and JPY. The greenback was found virtually unchanged against SEK.
It looks like the psychological 27000 area continues to hold DJIA from pushing further north. The index keeps on flirting with that resistance zone, while balancing above a short-term tentative upside support line drawn from the low of July 10th. For now, we will remain somewhat positive with the near-term outlook, however, to get a bit more comfortable with larger extensions to the upside, a break above the 27035 barrier would be needed.
A push above the current highest point of this week, at 27035, would confirm a forthcoming higher high, this way possibly attracting some more buying interest. DJIA could then travel to the current highest point of July, at 27493, a break of which might set the stage for a push to the 27493 level, marked by the high of June 10th. Slightly above it, sits another potential resistance zone, at 27631, which is the highest point of June.
On the other hand, if the index suddenly reverses south, breaks the aforementioned upside line and falls below the current lowest point of this week, at 26637, that may spook the buyers from the field temporarily. Such a move might signal a change in the current short-term uptrend and could increase the selling activity even more. The price may then fall to the 26442 zone, or even to the 26240 territory, marked by an intraday swing high of July 14th. If the slide continues, the next potential support area could be near the 25993 level, which is the low of July 14th.
NZD/USD continues to move higher this week, while trading above its short-term tentative upside support line taken from the low of June 30th. Although the rate has already distanced itself quite a bit from that upside line, the pair is showing a willingness to move further north. However, to get a bit more excited about higher areas, a break above yesterday’s high would be needed. This is why we will take a somewhat-bullish approach for now.
If the acceleration continues and the rate climbs above 0.6689 barrier, which is yesterday’s high, that will confirm a forthcoming higher high and may open the door towards higher areas. More buyers could join in, this way lifting NZD/USD to its next possible obstacle, at 0.6714, a break of which might clear the way to the 0.6740 level, marked by the current highest point of 2020.
Alternatively, if the 0.6689 barrier is too much to handle for the bulls at this time and instead, the pair falls back below the 0.6644 hurdle, marked by an intraday swing low from yesterday, that could lead to a larger correction lower. NZD/USD might then travel to the 0.6632 zone, which if fails to provide support and breaks, may send the rate further down, potentially aiming for the 0.6600 level, marked by the high of July 9th. Slightly below it runs the aforementioned upside line, which could provide additional support.
As every Thursday, we get the US initial jobless claims for last week. The forecast suggests that another 1.3mn people signed for unemployment benefits, the same number as the week before. With the slowdown in claims showing signs of a halt, this may raise concerns over the pace of the economic recovery in the US. That said, with less than two weeks to go before the extended unemployment aid for millions of Americans expires, this week, the main development in the US may be the debate in Congress over a new coronavirus-aid bill. As we noted yesterday, House Speaker Nancy Pelosi said on Tuesday that the USD 1trln package proposed by the Republicans is not sufficient, and thus, it may need a final decision above that number to refuel the latest rally in equities.
Tonight, during the Asian morning Friday, New Zealand’s trade balance for June is coming out, but no forecast is available.
As for the speakers, we have two on today’s agenda: ECB Vice President Luis de Guindos and BoE MPC member Jonathan Haskel.
{{youtube|{"id":"kOahoFybccM","title":"Daily Market Review: Investors Feel the Heat of US-China Tensions"}}}
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.