Daily Financial Markets Update: Risk Off on Chinese Trade, Oil Supply Glut

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Daily Financial Markets Update: Risk Off on Chinese Trade, Oil Supply Glut

The Chinese trade balance report showed a smaller than expected surplus of 210 billion CNY versus the projected 339 billion CNY figure, spurred by double-digit declines in exports and imports. This indicated that global demand is still very weak, dragging commodity prices down. Later on, a report from the American Petroleum Institute showed yet another buildup of 4.4 million barrels in crude oil stockpiles ahead of today’s release from the Energy Information Administration.

Commodity currencies took the biggest hits, with USDCAD bouncing off the 1.3275 area to the 1.3400 levels, NZDUSD finding resistance at .6800 and retreating to .6742, and AUDUSD dropping close to the .7400 support level. AUDJPY is down to 83.38, CADJPY is down to 83.68, and NZDJPY is down to 75.82.

European currencies down despite upbeat data

Economic reports from the euro zone came in mostly better than expected, led by the German industrial production report which showed a 3.3% gain. Meanwhile the French government budget deficit shrank to 9.2 billion EUR and the trade balance held steady at a shortfall of 3.7 billion EUR as expected.

EURUSD retreated to a low of 1.0978, GBPUSD fell from 1.4284 to 1.4193, EURGBP is down to .7734, EURJPY is down to 123.58, and GBPJPY is down to 159.79.

In Switzerland, the CPI showed a 0.2% rebound in price levels versus the projected 0.1% drop and the previous 0.4% decline. USDCHF rallied up to .9279 and EURCHF is holding steady around 1.0950.

RBNZ and BOC statements coming up

Major event risks lined up for the next few hours include the interest rate statements from the Bank of Canada and the Reserve Bank of New Zealand. In their previous rate statement, the BOC didn’t express too much concern about falling crude oil prices, reiterating that a bounce could take place soon and that additional easing isn’t warranted yet. In addition, the BOC is waiting for the release of the government budget to see if fiscal measures could be enough to keep the economy afloat.

Meanwhile, the RBNZ might issue a dovish statement or even cut interest rates, as Governor Graeme Wheeler previously kept the door open for another easing move. Dairy prices have been consistently tumbling, forcing Fonterra to slash milk payout forecasts for farmers. NZDCAD bounced off support at the .9000 handle on falling crude oil prices and is testing resistance near .9050 ahead of these monetary policy announcements.

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.