Dollar little changed after record trade deficit
US trade deficit widened to new record of $69.86b in Aug, much worse than expectation of narrowing to $66.7b. However the positive side of the trade balance report is that total exports rose 2.3% to $ 122.4b, matching the strong rise in June, suggesting global demand remains resilient. Import also rose strongly by 2.4% to $192.3b, indicating local demand remains strong. Dollar is little changed after the report and continues to trade sideway after recent rally loses steam and made a short term top.
The Fed’s Beige Book will be next. It’s generally expected that it will continue to show moderating growth in regional economies and may have less impact to the market as traders now have more information on Fed member’s mind after yesterday’s FOMC minutes.
USD/JPY
Daily Pivots: (S1) 119.45; (P) 119.64; (R1) 119.94;
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USD/JPY’s consolidation from 119.82 continues with 4 hours MACD dragged below signal line and RSI retreated from overbought region. A short term top is formed at 119.82 after failing to sustain above 100% projection of 116.08 to 118.39 from 117.37 at 119.68. Further consolidation will likely follow and pull back towards 118.88 cluster support (38.2% retracement of 117.37 to 119.82 at 118.88) could be seen as long as USD/JPY stays below 119.82 high. On the upside, a firm break above 119.82 is needed to confirm rally from 117.37 has resumed. Otherwise further consolidation is still in favor.
In the bigger picture, USD/JPY has now broken through 118.88 resistance and multi-year trend line resistance (147.68 to 135.20 then to 121.38, now at 118.37 level). The strong medium term rise from 108.99 could either be resumption of the year long up trend from 101.65 to 121.38, in other words, the correction from 121.38 has totally finished at 108.99 already. Or it could just be part of the consolidation that started at 121.38. We’ll hold on to this view as long as USD/JPY stays above 118.28 resistance turned support (61.8% retracement of 117.37 to 119.82 at 118.30) or before sign of reversal.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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