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FX Traders Hold Out Hope Even If U.S.-China Deal “Was” 90% Done

By Kathy LienJun 26, 2019 04:02PM ET
www.investing.com/analysis/fx-traders-hold-out-hope-even-if-uschina-deal-was-90-done-200435002
FX Traders Hold Out Hope Even If U.S.-China Deal “Was” 90% Done
By Kathy Lien   |  Jun 26, 2019 04:02PM ET
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Kathy Lien, Managing Director Of FX Strategy For BK Asset Management

Daily FX Market Roundup June 26, 2019

With less than 48 hours to go before the beginning of the G20 Summit in Osaka Japan, the focus is shifting back to U.S.-China trade relations. Wednesday morning during the early European trading session, USD/JPY shot higher on reports that a trade deal between the U.S. and China is 90% done. Unfortunately the interview with U.S. Treasury Secretary Mnuchin was misquoted and instead of saying that it is 90% done, he actually said they “were about 90% of the way” there. In this case, tenses make all the difference because a deal that is close to being done is very different from an agreement that was almost done and abandoned near the end.

Regardless, the dollar gave back only a small portion of its gains as FX traders hold out hope for a deal. At minimum, investors are hoping that trade talks will resume after this weekend’s meeting between the 2 leaders. We think they will but President Trump is extremely difficult to predict. Today, he said he’s optimistic about trade talks but he’s “very happy with where we are now” and is still considering more tariffs. Based on these comments alone, it doesn’t seem like the President is walking into the talks with a different attitude than before. So while USD/JPY shot higher ahead of the G20 Summit, unless there is meaningful progress before the markets close on Friday, we expect to see profit taking.

Meanwhile, the improvement in risk appetite drove all other major currencies higher. The New Zealand dollar led the gains, rising to fresh 2-month highs. This may be surprising to many because the Reserve Bank said lower interest rates may be needed, given the downside risks. They felt that the global economic outlook has weakened and there is risk of ongoing subdued domestic demand. Softer house prices could also dampen spending while uncertainty weighs on business investment. NZD/USD fell immediately after the rate decision but recovered in minutes. The RBNZ’s dovish tone was widely expected and no new revelations were made. Interest-rate futures are pricing in a 66% chance of a cut in August and 79% chance in September, which is a not much different than last week. Instead, the immediate focus is on G20 and as a high-beta currency, improvements in U.S.–China trade relations can be extremely positive for NZD.

USD/CAD dropped to its lowest level in 6 months on the back of oil. Crude prices rose more than 3% following a major refinery outage on the East Coast. Apparently the damage is so severe that it could permanently shut down the oldest and largest refinery in the region. The Canadian economy is performing well compared to its peers. There was only one piece of data released so far this week and while it’s a minor one, the increase in wholesale sales is indicative of broader demand. GDP numbers are scheduled for release on Friday and given low expectations, there’s reasonable chance for an upside surprise. The next level of support in USD/CAD is 1.30.

FX Traders Hold Out Hope Even If U.S.-China Deal “Was” 90% Done
 
FX Traders Hold Out Hope Even If U.S.-China Deal “Was” 90% Done

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OTOBONG EKPE
OTOBONG EKPE Jun 27, 2019 5:31AM ET
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thanks @ Kathy....
Mikey Trader
Mikey Trader Jun 27, 2019 2:58AM ET
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Bad week for shortists. Any statement from white house relating to the trade war seems to push usd related currency pairs to gap up. Not a good time for forex trading at the moment...
Shedrack Mwainyekule
Shedrack Mwainyekule Jun 27, 2019 1:36AM ET
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thank you Kathyyour analysis are so helpful
Alabi Toheeb
Alabi Toheeb Jun 27, 2019 1:36AM ET
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Hi there
Suhasbhau Padhye
Suhasbhau Padhye Jun 27, 2019 12:17AM ET
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thanks kathy..
Partap Singh
Partap Singh Jun 26, 2019 9:27PM ET
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thank you Kathy
Daniel Tumusiime
Daniel Tumusiime Jun 26, 2019 6:07PM ET
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Great Analysis , always watching out for your articles , thank you
Agiel Duhaney
Gilles94 Jun 26, 2019 5:57PM ET
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Thanks   for the  analysis  Kathy,,,,,,,,,  useful  to  consider.
Kenneth Gold
Kenneth Gold Jun 26, 2019 5:52PM ET
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The word hope, a comforting word when situations are Sire and unsettling.
Kenneth Gold
Kenneth Gold Jun 26, 2019 5:52PM ET
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correction: dire
Rick Anthony Gomes Boissiere
Rick Anthony Gomes Boissiere Jun 26, 2019 5:34PM ET
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decent review, thanks
Petar Milosevic
Petar Milosevic Jun 26, 2019 4:52PM ET
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Dolar was so bad,so American administration used manipulation and tweeting to try change sentiment.Also,the FED board used that,if you compare Powel'speaks,but it is so strange,like Trump and FED are on oposite sides....
Paras Kumar Kalra
Paras Kumar Kalra Jun 26, 2019 4:29PM ET
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hello kathy mam...pls suggest how much gold can go 1500???
Marita Karin
Marita Karin Jun 26, 2019 4:29PM ET
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seems to go there... but before that, corrective side should anticipated...
László Szabó
László Szabó Jun 26, 2019 4:18PM ET
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Hi Kathy!
 
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