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*Good morning/afternoon everyone!*
President Trump’s threat to impose another 200B in tariffs on China sent ripples throughout the financial markets. Investors are selling equities, currencies and buying Treasuries. Yields are down across the board and Dow futures, which are down 300 points are pointing to a very ugly NY open. The U.S. dollar is up against all of the major currencies except for USD/JPY and this price action is consistent with risk aversion. While China doesn’t want a trade war, they said they aren’t afraid of one, so headline risk is a serious one over the next few trading days. Expect the language to harden and currencies to soften. GBP/USD is trading at a one year low this morning as pound’s troubles are doubled by Brexit complications -- the government refuses to accept
the Parliament’s proposal on the meaningful vote. EUR/USD is trading below 1.15 as ECB Liikanen’s view that rates can remain unchanged after the 2019 if needed compound the currency’s losses. USD/CAD is trading at a fresh 1 year high on the back of falling oil prices but the worst performing currency this morning is the Australian dollar, which is down across the board following the RBA minutes which showed concern about the rise in the Australian dollar and its impact on growth and inflation. In other words, risk aversion is being compounded by bad news. Looking ahead, we expect all of the major currencies to remain under pressure with further losses likely.
*The MAIN THEMES I see today are*
-EUR, -GBP, -AUD, -CAD
+USD (but -USDJPY)
neutral CHF, NZD
*Today’s Initial Trades*
Here’s the summary --
1. Buy USDCAD at 1.3270, Stop at 1.3242, Target 1.3298
2. Sell AUDJPY at 80.99, Stop at 81.27, Target 80.71
3. Sell EURJPY at 126.91, Stop at 127.19, Target 126.63
Close ALL open day trades by 10:20AM NY / 15:20 GMT