The US dollar caught a bid overnight on reports that China plans to curb its rare-earth element exports to the US.
The move would restrict vital parts for US weaponry and F-35 fighter jets, and plans are drawn to limit up to 17 rare-earth element materials. China currently controls around 80% of worldwide supply, so this is often likely to be a stimulating twist in US-Sino saga as we head into a replacement round of the trade war.
The US dollar index (DXY) printed a bullish engulfing and bullish outside day, regaining the maximum amount as 0.6% by its intraday high although closed below the 20 and 50-day eMA’s. USD/JPY broke to a 4-mont high and stopped just shy of 106 during its most bullish session in 6-weeks. USD/CNH, which can likely be closely watched around trade war developments, also produced a bullish outside candle and closed back above 6.4120 support
Commodity FX majors (AUD, CAD and NZD) lost ground to the dollar and produced bearish reversal patterns on the daily chart. Although the dollar made notable ground against the Mexican peso (USD/MXN) and therefore the South African rand (USD/ZAR) which produced an outsized engulfing candle during its most bullish session in one month.
Whilst Wall Street set new record highs on an intraday basis, major cash market indices like the S&P 500 and Nassq-100 closed beneath their opening prices. a robust rise in yields likely weighed on US indices with the 10-year yield breaking above 1.3%. Softer industrial production data weighed on European bourses, sending the DAX -0.3% lower, although volatility was contained overall.
Asian indices continued to outperform over the near-term with the ASX 200 closing at a 12-month high. RBA’s minutes ruled out any tapering of QE any time soon, saying an end to bond buying would put “significant” upside pressure on the Australian dollar .
The Hang Seng rallied to a 30-month high during its first day’s trade after the Chinese Lunar New Year . The Nikkei 225 closed to its highest level since August 1990 after the BOJ (Bank of Japan) ignored any concerns over an asset bubble thanks to their QE programme.
USD/JPY broke to a replacement cycle high during a ‘bid’ to hit 106 and closed firmly above its 200-day eMA. a robust trend is starting to repose on the daily chart with higher highs and lows, and it’s taken just 30 sessions to rally from the January low to February high compared with over 62 days to say no from 106 to the January low.
Switching to the four-hour chart shows rising volume heading into resistance and an elongated bullish engulfing candle before the breakout which was followed by a firm close above resistance. 106 – 106.10 makes a possible interim target but, given strength of underlying momentum, we favour an eventual break above it.
AUD/USD: Stepping aside. Momentum reversed around 0.7800 and stopped just shy of our second bullish target.
GBP/CHF: Prices still march higher in line with the dominant trend. The bias remains bullish above the recent swing low of 1.2350 on the four-hour chart.
EUR/USD: faraway from watchlist. A bearish engulfing candle formed on the four-hour chart before prices reached the initial target around 1.2190.
USD/CHF: faraway from watchlist. Momentum quickly reversed after a false break below 0.8883 support.