FX Today: Optimism could fade on escalating trade tensions

Omkar Godbole FXStreet Contributor

The uptick in the US stocks on Tuesday put a bid under the US dollar, but the optimism could be short-lived on escalating trade tensions.

On Tuesday, the US revealed plans for a 25 percent tariff on 1,333 Chinese products ranging from industrial robots to locomotives. The total value of the goods subject to the tariffs is approximately $50 billion. In response, the China Commerce Ministry strongly condemned the new penalties and vowed to retaliate on the same scale and strength.

Clearly, two of the biggest economies in the world are cruising towards a full-fledged trade war and the markets are unimpressed. For instance, the S&P 500 futures dropped 0.25 percent in Asia. Also, equities in South Korea, Australia and Singapore fell, however, stocks in China turned in a positive performance, despite trade concerns.

Nevertheless, the USD/JPY pair dipped slightly to 106.41 in Asia, tracking the decline in the S&P 500 futures and Asian indices. Meanwhile, the Aussie dollar ran into bids despite trade fears, courtesy of a solid retail sales print.

Preview of key US data coming up - Nomura

The FX markets will likely take cues from the equity markets in Europe. Risk aversion will likely hurt GBP, USD and bode well for the anti-risk currencies. Meanwhile, the common currency could take a hit if the Eurozone preliminary CPI estimate prints well below estimates.

What's brewing in the majors?

EUR/USD: Having breached the key ascending trendline, the common currency looked primed for a downside break of the 11-week trading range. Jim Langlands believes the EUR could be in for another choppy day of trading as the daily chart real hint in either direction, although the 4-hour charts still look a bit heavy. The immediate support is lined up at 1.2240 (March 20 low) and the resistance is seen at 1.2345 (April 2 high).

GBP/USD: The currency pair found bids in Asia and moved to 1.4097 - the highest level since March 28, despite trade war fears. The UK construction PMI release (due at 08:30 GMT) could move the pair, but gains will be transient if stocks report losses. Jim Langlands expects the pair to trade in a range of 1.40/1.41.

USD/JPY: The pair may drop in Europe if the major European indices drop. It appears the currency pair is creating an inverse head-and-shoulders pattern with a neckline resistance around 107.00. However, an upside break would require a blowout US wage growth figure and risk-on action in stocks.

Major news

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.