Dollar and stocks tumble but are trade war concerns justified

Concerns over a trade war have put downward pressure on the stock markets and the US dollar. Wall Street sold off sharply yesterday and shares have opened weaker again today. The dollar has sold off against the yen and the euro, although it is holding its own relatively better against other currencies, most notably the commodity currencies.

Risk is off the menu in response US President Donald Trump’s plans are to impose a 25% tariff on steel imports and 10% tariff on aluminium. Mr Trump is trying to shore up the struggling industries in order to boost the economy and create more jobs. However, his protectionist policies have prompted retaliation from across the world. According to the Financial Times, Cecilia Malmstrom, the EU trade commissioner has said that the bloc will consider imposing its own “safeguard” tariffs on imports of steel and aluminium. Ms Malmstrom said Brussels would wait for the formal announcement of US tariffs before taking any action. Mr Trump plans to formally announce the plans next week. Mexico, Brazil and Canada and have all warned of retaliation too.

As a result of Trump’s unexpected announcement, the dollar has given back a big chunk of its gains made following the hawkish remarks from the new Fed Chair Jerome Powell. The dollar has actually fallen to a fresh multi-month low against the safe haven Japanese yen, which has come to life in recent days amid heightened volatility in the stock markets.

Are the markets overreacting?

Will we really see the start of a trade war? The truth is, the world relies on the US in one way or the other. Retaliation could only hurt the retaliator. So these warnings may not be backed up by action. In fact, there is even the small possibility that Trump may do a U-turn. However, Trump does seem to enjoy global confrontation and with mid-term elections fast approaching, he may press ahead as he aims to protect domestic companies from what he feels unfair trade arrangements.

So, as we head into the weekend, sentiment towards both the stock markets and the dollar are clearly negative. The dollar is doing slightly better against commodity currencies, which tend to be move up and down with risk appetite changes. However, against the euro and in particular, the yen, a safe haven currency, the greenback looks rather weak.

USD/JPY drops to key support area

The USD/JPY is actually heading into a significant area of potential support around the 105.00 to 105.30 area. In addition to this being a psychologically-important level, there is also the 127.2% Fibonacci extension level of the upswing from the 2017 low to consider at 105.30. What’s more, the latest breakdown has not been confirmed by the momentum indicator RSI, which is in a state of a positive divergence (making a higher low). Thus, the selling pressure may be waning. However, this is only a warning sign for the sellers, not a bullish signal yet. The bulls would want to see price go back and hold above the recent low at 105.55 if we are to see an imminent trend reversal. Even then, price will still have to break through resistance levels like 106.40, 107.33 and 108.05 before we could be confident of a trend reversal. But if the weakness persists and there’s acceptance below 105.55 then the USD/JPY could head further lower at the start of next week.  


Source: eSignal and FOREX.com.

本レポートに記載されている情報や見解は、一般的な情報としての使用のみを目的としたもので あり、通貨、CFD、その他あらゆる金融商品の、購入や売却に関する勧誘や依頼の意図は全くあ りません。本文書に盛り込まれている、いかなる見解や情報も、予告や通知なく変更することが あります。本文書は、特定の投資目的や、何らかの財務的背景、特定の受領者の意思などに沿っ て書かれ配布されたものではありません。本文書内で引用・言及されている、あらゆる過去の価 格データ・価格推移データは、当社独自の調査や分析に基づいており、当社はそのデータの提供 元やそのデータそのものの信頼性につき、いかなる保証もせず、また筆者や訳者、各国の支社・ 支店も、本文書の内容の正確性や完全性についても一切保証しません。本文書については英語版 を原版とし、翻訳版と原版で相違がある場合には、原版の内容が優先するものとします。本文書 の内容に基づく直接または間接の損失、そして本文書を信頼したことによる、いかなる人物や団 体が結果的に引き起こした損失についても、当社は一切その責を負いません。

先物取引、先物オプション取引、外国為替証拠金取引(またはFX)、CFD、その他、入金額より もレバレッジをかけて、より大きな金額で取引をする金融商品には、当初入金額を超える大きな 損失を被るリスクがあり、すべての人に適するわけではありません。レバレッジを大きくして取 引すると、その分リスクも高くなります。金スポットや銀の取引は、米国商品取引法(U.S. Commodity Exchange Act)の規制で保護されていません。また、差金決済取引(CFD)は米国 在住者の取引は許可されていません。外国為替証拠金取引(FX)や商品先物取引を行う前には、 投資目的、投資経験、リスク許容範囲等について十分検討する必要があります。本文書内にある、 いかなる見解、ニュース、調査、分析、価格その他についても、「本文書を読むいかなる人物や 団体も、FOREX.comが、投資、法的、税務に関して助言するものではないことを理解している」 ことを前提として、一般的な情報として提供されるものです。いかなる投資、法的、税務に関す る事柄についても、適切な専門家や助言者に相談をしてください。FOREX.comは、米国の商品先 物取引委員会(CFTC)、英国の金融行動監督機構(FCA)、オーストラリアのオーストラリア証 券投資委員会(ASIC)、日本の金融庁の規制を受けています。