Trump’s Comments negatively affect US Dollar

Published on: 07/24/18 2:25 PM

Category: Uncategorised

A lot has happened in the foreign exchange world since we have last spoken, especially with President Donald J. Trump. The USD/JPY currency pair is currently testing the 111 psychological level. Today, it hit a low of 110.85 and hit a high of 111.51. Ever since Trump commented on CNBC the other week, the dollar has been going down and has been projected to continue this trend. At the beginning of the month, the dollar was at a level of 95.31. Since then, it has dropped all the way down to 94.2810.

So far, Trump has not been able to get the Fed to hold interest rates. This has increased the risk of a trade war and has really hurt the dollar this month. People are thinking that this fact alone will cause an all-out currency war created by the Trump administration. The good news is at the G20 this year, delegates agreed together that exchange rate commitments should remain in place. They stated that competitive devaluations and targeted exchanges rates for the sake of competitive advantage need to be avoided at all costs. In this upcoming week, quarter two GDP will be analyzed so we can expect some movement in the markets.

As far as technical analysis is concerned on the USD/JPY pair, the pair will most likely continue to decline. One of the reasons for this, according to FXStreet Chief Analyst Valeria Bednarik, is because technical indicators in the daily chart have retreated overbought settings. Because of this, the daily chart pattern has been nearly in a vertical decline. In the end, only time will tell where this pair is heading.

On the other side, you have the currency pair EUR/USD rallying. The pair hit highs of 1.1738 Friday and ended up closing at around 1.1719. The pair has broken all three DMAs and is trying to get back up to its July high at 1.1790. As far as technical analysis is concerned on the daily chart, the pair is neutral and it may even consolidate. The support levels for the pair continue to be 1.1695, 1.1650, and 1.1620 while the resistance levels are 1.1750, 1.1790, 1.1825.

With Trump continuing to escalate the trade war, he is just hurting the dollar. There was another round of selling the other day based on what Trump commented. He basically said that he wants to impose trade tariffs on China on imports. On Twitter, Trump stated that a stronger dollar along with higher rates would hurt the United States’ competitive edge. Like I said earlier, we will just have to sit back and see how President Trump’s comment on the trade war and monetary policy affect the US dollar.