Chinese officials tried to calm the markets yesterday. After a meeting, People’s Bank of China (PBOC) officials said that they would not use the yuan as a negotiation tool in current trade conflict. This news follows days of declines in which the yuan reached the lowest level this year. As the trade conflict continues, currency manipulation is one way a country can aim to seek leverage. By lowering the value of its currency, China can make its exports more attractive. The services sector in China grew at the fastest pace this year according to the services PMI data released by Caixin. The PMI was 53.9, which was better than the expected 52.7.
The Australian dollar is continuing the rally which started yesterday after the Reserve Bank of Australia’s (RBA) interest rate decision. The AUD/USD pair is trading at 0.7408. The catalyst for the movement today was the retail sales data for the month of May. In that month, the sales increased by 0.4%, which was better than the expected 0.3%. The retail sales data is a good indicator of the performance of the economy because it surges when people have more disposable income. On the other hand, the country’s trade balance numbers disappointed. The balance for May was A$0.82 billion which was lower than the expected A$1.21 billion.
The dollar is under increased pressure after yesterday’s positive auto sales data. The data showed that in the first half of the year, auto sales jumped by 1.9%, with June sales increasing by 5%. The increase was mostly by Toyota, General Motors, and Fiat Chrysler which saw improved sales. Ford and Honda’s sales were flat while the sales of Nissan were 5% lower. This is an indication of the effect of the tax cuts. However, as the Trump administration raises tariffs, there is a likelihood that these sales could cool in the coming months.
The EUR/USD pair is trading at 1.1663, almost unchanged from yesterday’s close. With the US markets being closed today, the key drivers for the pair will be politics and the EU services PMI numbers. As shown below, the pair is forming a symmetrical triangle pattern with the current price being the middle band of the Bollinger bands. Today, the pair will likely move sideways but if there will be a break-out, the price is likely to move higher to 1.1700 or lower to the 1.1590 level.
The positive retail sales data pushed the Aussie to the highest level since Monday last week. The AUD/USD pair crossed the major resistance level of 0.7407. Today, with no major economic data expected and with volumes expected to remain low, the pair is likely to trade in a sideways direction. If the upward rally continues, the pair will likely find resistance at the 0.7440 level.
After forming a triangular pattern, the GBP/USD pair broke-out to the higher side yesterday. The pair is now trading at the 1.3200 level, which is a major resistance point. The key catalyst for the pair will be Brexit news and the UK services PMI numbers which will be released in the morning. Positive PMI numbers will likely see the pair continue moving higher, potentially to the 1.3250 level.