US Dollar extended NFP-inspired rally to a new high

Summary:

  • Safe havens Japanese yen and gold benefited from mounted risk-off sentiment as U.S. – North Korea tensions escalated.
  • The greenback rallied to a new high from last Friday, watching the potential to extend its rallies.
  • Oil failed to go up and remained range-bound despite decrease in U.S. inventory last week by 7,840,000, according to API. Keep an eye on the upcoming stock data from EIA due at 22:30GMT today.

North Korea Peninsula tensions rose again yesterday (Tuesday 8 August). North Korea threatened missile strike on the United States if it attempted to attack the country in recent days and said “under no circumstances, will it put its nuclear weapons or ballistic missiles on the negotiating table”. US President Donald Trump yesterday respond angrily and warned: “North Korea best not make any more threats to the United States, or they will be met with fire and fury like the world has never seen.” North Korea warned several hours later that North Korea’s military is “examining the operational plan” to strike areas around the US territory of Guam. All these geopolitical developments caused risk-off sentiment to mount and therefore the safe-havens gold and yen rallied and closed higher after trading wildly in a range while the dollar index went up and created a new high from last Friday, potentially extending its rallies.

Technical

The dollar index (DXY) recovered quickly to create a new high from last Friday after it moved out of the short-term range-bound trading. Its short term moving averages turned higher again and diverged above its long term moving averages after moving away from the group which contracted further and converged. Wait and see if it could rally further.

DXY 2017-08-09

(DXY H4 chart)

As to non-U.S. currencies, major currencies fell except yen. The euro fell below a major support at H4-period EMA60, potentially ending its uptrend on this timeframe. The sterling has been in downtrend for some days and fell as much as over 300 pips, potentially breaking down and testing downside support at daily EMA60. The Australian dollar fell further to a daily support at EMA30. Generally speaking, the non-U.S. currencies could maintain their downtrend if the greenback continued to rally strongly.

AUDUSD 2017-08-09

(AUD/USD daily chart)

Let’s take a look at precious metals now. Gold traded in a wide range, dictated by risk sentiment amid a standoff between the bulls and bears. Looking forward, decline in gold would be probable on the back of rebounding dollar if the short-term factor, in my opinion, of the North Korean Peninsula issue started to recede. The decline yesterday brought the price down to H4-period EMA169 which acts as a short term support. The upside resistance levels to watch stand at 1266.7 follow by 1273.9.

GOLD 2017-08-09

(Gold H4 chart)

By Jason Zou —— Chief Analyst of AvaTrade China

Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.

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