Dollar rises as import tariffs boost inflationary pressures

Trade war concerns resurfaced overnight when news broke out that the US will announce tariffs on further $200 billion of imports from China with levies of 10% on the products.

Trade war concerns resurfaced overnight when news broke out that the US will announce tariffs on further $200 billion of imports from China with levies of 10% on the products. China said it was “shocked” by the news and that it will have no choice but to retaliate, adding that the actions “were hurting China, hurting the entire world and hurting the US itself.” Global stock index futures and the yuan slumped, while the US dollar appreciated on assumption that the Federal Reserve will have to hike interest rates more aggressively in order to counter the increase in the price of goods and services in the US as a result of the tariffs. The impact of import tariffs won’t show up in Thursday’s CPI report, but if it turns out that inflation was already higher than expected in June then this may further boost expectations over rising price levels and in turn sharp rate hikes from the Fed. In other words, the dollar could appreciate further, especially against her weaker rivals. One such currency is the Swiss franc, given the Swiss National Bank’s dovish policy stance.

USD/CHF could break higher

The USD/CHF could therefore be an interesting pair to watch for a potential breakout in the coming days. The Swissy currently resides inside a short-term consolidation pattern after its rally from mid-February stalled in May around 1.0050. The tight consolidation since then has allowed the Relative Strength Index (RSI) to work off its overbought conditions. With the USD/CHF still technically bullish and RSI no longer suggesting rates are overbought, a new rally could commence soon. A breakout above the triangle pattern could push rates initially to parity and subsequently above resistance around the 1.0050 hurdle next. And should there be acceptance above 1.0050 this time around then we could see the onset of a more meaningful rally thereafter, possibly to a new high for the year above the old high of 1.0340. However, if the Swissy breaks from the consolidation to the downside then all bets would be off. In this potential scenario, a re-test of the 200-day moving average at 0.9745 or key support around 0.9635-50 area would not come as major surprise to us. But our base case is that rates are probably going to break higher for the reasons stated above.

Source: and

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account