SHANGHAI (Feb 20): China's yuan strengthened against the dollar on Thursday, as market sentiment improved after US President Donald Trump said a new trade deal with Beijing was possible.

Renewed tariff threats under the Trump administration have been weighing on the yuan in recent months, and the president's latest comment eased investor worries about a further deterioration in the Sino-US trade tensions in the short term, currency traders said.

During Trump's first term as president, a series of tit-for-tat US-China tariff announcements drove the yuan down more than 12% against the dollar between March 2018 and May 2020.

As of 0331 GMT, the onshore yuan was 0.07% higher at 7.2724 to the dollar, while its offshore counterpart traded at 7.2731.

Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1712 per dollar, and 1,144 pips firmer than a Reuters estimate of 7.2856.

The central bank has set its official guidance on the firmer side of market projections since mid-November, which analysts and traders see as a sign of unease over the yuan's decline.

The yuan's strength also comes as authorities face a delicate balancing act between financial and currency stability and monetary easing, traders and analysts said.

China left lending benchmark loan prime rates (LPRs) unchanged for the fourth straight month in February.

"The US's relatively mild 10% tariffs on Chinese goods, with room for trade negotiation, suggested that the trade war shocks could be more affordable to China, reducing the urgency for immediate rate cuts," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Meanwhile, the state-owned Economic Daily said on Thursday that the central bank's recent improvements to its macroprudential policy toolbox were a key initiative for preventing and fending off financial risks and maintaining the stability of financial markets.

"The global economic and financial situations remain severe and complex, with the adverse impact of changes in the external environment deepening and factors of instability and uncertainty clearly increasing," the newspaper said in an editorial.

The newspaper listed examples of improvements including the central bank's recent move to boost capital flows by allowing companies to borrow more overseas and the regular issuance of yuan bills in Hong Kong to stabilise foreign exchange market expectations and increase market resilience.

Source: Theedgemarkets

EUR/USD gains ground to around 1.0430 in Thursday’s early European session.

The pair keeps the positive outlook above the 100-period EMA with a bullish RSI indicator. 

The immediate resistance level emerges at 1.0461; the first downside target is seen at 1.4936. 

The EUR/USD pair recovers some lost ground to near 1.0425 during the early European trading hours on Thursday. The weakening of the US Dollar (USD) provides some support to the major pair. However,  tariff concerns from US President Donald Trump and geopolitical tension.

Technically, the bullish outlook of EUR/USD remains intact as the major pair holds above the key 100-period Exponential Moving Averages (EMA) on the 4-hour chart. However, the Relative Strength Index (RSI) is located below the midline, near 42.85, suggesting that further downside cannot be ruled out. 

The first upside barrier for EUR/USD emerges near 1.0461, the high of February 19. The key resistance level to watch is the 1.0500-1.0505 zone, representing the psychological level and the upper boundary of the Bollinger Band. A decisive break above this level will see a rally to 1.0533, the high of January 27. 

On the other hand, the crucial support level for the major pair is seen at 1.0410, the confluence of the 100-period EMA, and the lower limit of the Bollinger Band. A breach of this level will see a drop to 1.0352, the low of February 6. The additional downside filter is located at 1.0285, the low of February 10. 

EUR/USD 4-hour chart

Source: FXSTREET

US President Donald Trump said it would be possible to reach a fresh trade deal with China, signalling he is open to heading off a brewing trade fight between Washington and Beijing.

“It’s possible, it’s possible,” Trump told reporters on Air Force One on Wednesday, when asked if he would make a new agreement with China. 

Trump did not describe the parameters of a potential deal, and any agreement would face significant obstacles — some of the president’s own making. Trump has ratcheted up pressure on China with an additional 10% tariff on all imports from the country, punishment for what he said are unfair Chinese trade practices and failure to stop the flow of fentanyl into the US.

The president nonetheless heaped praise on Chinese President Xi Jinping, but once again did not say if or when they would speak directly. 

“There’s a little bit of competitiveness, but the relationship I have with President Xi is, I would say, a great one,” Trump said. 

Trump brokered what was billed as an initial trade deal with China in Jan. 2020, under which Beijing promised to crack down on theft of US trade secrets and technology, pledged to purchase an additional US$200 billion (RM886 billion) in American products by the following year and lower some trade barriers for US exports. But the relationship was derailed just weeks later when the coronavirus pandemic swept the globe, which Trump blamed on China. 

“They had about US$50 billion worth of our product, and we were making them buy it. The problem is that Biden didn’t push them to adhere to it,” Trump said, referring to his predecessor. 

‘Off the cuff’

Trump’s comments, made during Asian market hours, are the latest example of the president’s ability to influence market sentiment with a few short words, forcing China-focused traders to parse scant details and tone for clues as to the future of the US-China relationship.

Their initial read settled on mildly positive. The Chinese yuan climbed on Trump’s comments, gaining 0.2% in the offshore market after three straight sessions of drops. The onshore yuan rose 0.1%. Chinese stocks pared some of their early declines, and the Hang Seng China Enterprises Index, which comprises Chinese stocks listed in Hong Kong, trimmed its intraday drop to under 1.5% from as much as 2.4%. 

“Markets are still getting used to the barrage of social media posts, comments to reporters and interviews that President Trump is giving,” said Khoon Goh, the head of Asia research at ANZ Banking Group. “This is so different from the previous administration.”

Trump’s comments on China are “just an off the cuff comment and I wouldn’t read too much into it”, he added.

Eddie Cheung, a senior strategist at Credit Agricole CIB in Hong Kong, said Trump’s approach to China has been “milder than expected” so far, which has given some support to markets. “But it’s reasonable to assume there will still be bumps on the way towards such a trade deal.”

Read also:
Trump expects visit from Xi but no timeline given, says discussing TikTok with China
Trump says he will announce a range of tariffs over 'next month or sooner'

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Source: Theedgemarkets

GBP/JPY could navigate the support region around the five-month low at 187.05.

The 14-day RSI remains below the 50 level, indicating strengthening bearish momentum.

The immediate resistance appears at the nine-day EMA of 190.69.

GBP/JPY extends its decline for the second consecutive day, trading around 189.30 during Asian hours on Thursday. A daily chart analysis suggests that the currency cross remains within a descending channel pattern, signaling a continued bearish bias.

The 14-day Relative Strength Index (RSI), a key momentum indicator, remains below the 50 level, reinforcing the bearish momentum. Moreover, the GBP/JPY cross continues to trade below the nine- and 14-day Exponential Moving Averages (EMAs), indicating weaker short-term price momentum.

Regarding its support, the GBP/JPY cross could navigate the region around a five-month low at 187.05, which was recorded on February 7, followed by the lower boundary of the descending channel around the 185.50 level.

On the upside, the GBP/JPY cross could test immediate resistance at the nine-day EMA of 190.69, followed by the 14-day EMA at 190.91. A break above these levels could weaken the bearish bias and support the currency cross to test the descending channel’s upper boundary at the 192.00 level.

A break above the channel would weaken the bearish bias and support the GBP/JPY cross to explore the area around the two-month high of 198.26.

GBP/JPY: Daily Chart

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Japanese Yen.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Source: FXSTREET

WTI attracts some sellers on Thursday and snaps a three-day winning streak to a one-week high.

Indications of a rise in US Crude inventories and worries about Trump’s tariffs weigh on Oil prices.

Concerns over supply disruption in Russia and a weaker USD could lend support to the black liquid.

West Texas Intermediate (WTI) US Crude Oil prices extend the overnight pullback from the vicinity of the $73.00 mark, or a one-week top, and drift lower during the Asian session on Thursday. The commodity slides to the $71.75 area, or a fresh daily low in the last hour, and for now, seems to have snapped a three-day losing streak. 

Market sources, citing the American Petroleum Institute (API) report, said on Wednesday that US Crude stocks rose by 3.34 million barrels last week. This, along with concerns that US President Donald Trump's trade tariffs could weaken the global economy and dent fuel demand, fails to assist Crude Oil prices to capitalize on a three-day-old recovery from the year-to-date low touched earlier this week. 

Apart from this, worries about slowing demand from the Eurozone and China exert additional pressure on the black liquid. That said, supply disruptions in Russia could help limit deeper losses. In fact, Russia said that oil flows from the Caspian Pipeline Consortium – a major route for crude exports from Kazakhstan – were reduced by 30%-40% after a Ukrainian drone attack on pumping stations.

Furthermore, the emergence of some US Dollar (USD) selling, despite the Federal Reserve's (Fed) hawkish outlook, could act as a tailwind for Crude Oil prices. Traders now look forward to the release of the official US Crude inventories data, due later during the North American session. Nevertheless, the mixed fundamental backdrop warrants some caution before placing aggressive directional bets.

Source: FXSTREET