The US dollar remains close to the 5-week minimum against the Japanese yen on Tuesday after worries about tensions in trade negotiations between the US and China revived fears about the outlook for global economic growth. The US currency is losing ground for the third session in a row on Tuesday amidst rising effervescence around the US-China trade dispute and President Trump’s threats of further tariffs.
However, markets appear skeptical over the likeliness of further deterioration in the negotiations and hopes of an eventual deal seem to still hold, particularly in light of the visit of a Chinese delegation to the US later in the week in order to resume trade talks.
The Australian dollar rises against the US currency, as the immediate focus of investors is aimed at the forthcoming meeting of the Reserve Bank of Australia (RBA).
The greenback moves narrowly to most major currencies, even after senior US trade officials have announced that China has withdrawn from some of its trade commitments.
The US dollar index, which measures the strength of the greenback against a basket of six major currencies, fell to 97.50 points at 06:30 a.m. ET after moving evenly before the session closed on Monday. If the US dollar index breaks below 97.15 (low May 1) would aim for 97.01 (55-day SMA) and finally 96.75 (low Apr.12). On the flip side, the next up barrier emerges at 98.10 (high May 3) seconded by 98.32 (2019 high Apr.25) and then 99.89 (high May 11, 2017).
The EUR/USD pair failed to capitalize on the early uptick to multi-day tops and slipped below the 1.1200 handle. The pair built on the overnight goodish bounce from the bearish gap opening and gained some follow-through traction on Tuesday. The up-move to 1.1218 seemed unaffected by the disappointing release of German Factory Orders, which expanded 0.6% month-over-month – less than expected during March.
The uptick, however, turned out to be short-lived, rather met with some fresh supply amid a modest pickup in the US Dollar demand. After spending the majority of the early part of Tuesday’s trading session in the negative territory, the USD caught some bids and was seen as one of the key factors behind the intraday slide.
It would be prudent to wait for a strong follow-through selling before traders start positioning for the resumption of the pair’s prior/well-established bearish trend and a possible slide back towards challenging year-to-date lows support, closer to the 1.1100 round figure mark. Furthermore, German data has once again disappointed expectations earlier in the day and also appear to be weighing on the spot. In addition, the mood among traders appears mixed today over concerns on the US-China negotiation and rising skepticism following Trump’s comments.
The USD/JPY fell by 0.1% to 110.63 yen. In the previous session, the US currency surpassed its 5-week low of 110.285 yen per dollar. The Japanese currency generally wins during geopolitical or financial stress, as Japan is the world’s largest lender.
The USD/JPY pair failed once again to sustain at higher levels near 110.85 area and turned gradually lower to print fresh daily lows at 110.54, as risk-off moods intensified following some headlines reported by the Chinese Communist Party paper, People’s Daily on the renewed US-China trade spat.
The Yen caught a fresh bid-wave and quickly erased losses incurred against its American counterpart following the above-mentioned headlines.
Although the US dollar has rebounded after yesterday’s gap-down open and then lower to a 5-week bottom at 110.28 in Asian morning, as 110.95 has capped recovery, consolidation with downside bias remains for re-test of 110.28, a break would extend recent decline from Apr’s 4-month peak at 112.39 towards 110.00 but 109.71 should hold.
On the upside, only above 111.05 would indicate temporary low made and risk retracement towards 111.35/37.