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Dollar Ends the Year With Accelerated Selloff

Dollar selloff accelerates further as 2019 is heading to an end. The signing of US-China trade deal phase one should now be confirmed, but that provides little support to the greenback. Instead, Dollar dives through some key technical levels. As for today, Sterling is the strongest one, followed by Canadian, and then Aussie. Euro is the second weakest, followed by Yen. We’ll see how things go when 2020 starts.

Technically, USD/CAD’s break of 1.3042/52 support zone carries rather bearish medium term implications. Fall from 2018 high at 1.3664 could be reversal the whole up trend from 2017 low at 1.2061. We’d now expect further fall to 1.2781 support or even to next fibonacci level at 1.2673. AUD/USD also breaks 0.7013 projection level rather firmly. Focus is now immediately back on medium term key resistance at 0.7082. Firm break there will be an important sign of medium term bullish reversal.

Happy New Year to our readers. All the best in 2020. We’ll be back on January 2.

Trump announces to sign China trade deal phase one on Jan 15

US President Donald Trump announced in Twitter that he’s going to sign the phase one trade with with China on January 15. White House will be the location, with high level representatives of China present. Though, there was no mentioning of Chinese President Xi Jinping.

Trump added that he will go to Beijing at a later date to kick start phase two negotiations.

US consumer confidence dropped to 126.5, little to suggest consumer spending will gain momentum

Conference Board US Consumer Confidence dropped slightly to 126.5 in December, down from upwardly revised 126.8, missing expectation of 128.0. Present Situation Index rose from 166.6 to 170.0. Expectations Index dropped from 100.3 to 97.4.

“Consumer confidence declined marginally in December, following a slight improvement in November,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “While consumers’ assessment of current conditions improved, their expectations declined, driven primarily by a softening in their short-term outlook regarding jobs and financial prospects. While the economy hasn’t shown signs of further weakening, there is little to suggest that growth, and in particular consumer spending, will gain momentum in early 2020.”

China CFETS lowers Dollar weighting in RMB index, increase Euro weighting

Starting on January 1, US Dollar’s weighting in the China Foreign Exchange Trade System (CFETS) RMB Index would be lowered. CFETS is overseen by the PBoC and the RMB index measures the value of Yuan against a basket of 24 major currencies, with weights based on international trade.

After the adjustment, Dollar’s weighting will be lowed from 22.4% to 21.59%. Euro’s weighting will be increased from 16.34% to 17.40%. CFETS said the adjustment was to make the index more representative, taking into account trade data from 2018.

China PMI manufacturing unchanged at 50.2, non-manufacturing dropped to 53.6

The official Chinese PMI Manufacturing was unchanged at 50.2 in December, slightly above expectation of 50.1. PMI Non-Manufacturing dropped to 53.5, down from 54.4, missed expectation of 53.6.

Special analyst Zhang Liqun said there was signs of stabilization but “foundation still needs to be consolidated”. Also “efforts should continue to be made to implement the various policies and measures to achieve the “six stability” and to strengthen the foundation for economic stability as soon as possible.

Wen Tao of Logistics Information Center noted the effect of release of market demand during the holidays. Also, there are productions of consumer goods ahead of Chinese New Year.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
01:00 CNY Manufacturing PMI Dec 50.2 50.1 50.2
01:00 CNY Non-Manufacturing PMI Dec 53.5 53.6 54.4
14:00 USD S&P/CS Composite-20 HPI Y/Y Oct 2.20% 2.20% 2.10%
14:00 USD Housing Price Index M/M Oct 0.20% 0.30% 0.60% 0.70%
15:00 USD Consumer Confidence Dec 126.5 128 125.5 126.8

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