Chinese Foreign Exchange Concerns:
With both the US and Canada enjoying their Labor Day long weekend, the Forex majors experienced a peaceful, sideways drift to begin the week. With North America out of action, Asia stepped up to the crease with China once again the focal point.
August saw China’s foreign exchange reserves experience their largest monthly fall on record as Beijing continues to intervene in the currency market to try to halt wildly sliding markets. This fall is attributed to capital outflows and the series of surprise currency devaluation moves by the PBOC. The drop in Chinese foreign exchange reserves, the largest in the world, throws up questions around the sustainability of an artificially supported Yuan.
This has huge implications on Forex markets with foreign exchange reserves eventually having to be topped up sometime in the future. Add the positive USD implication with the impending US rate rise to the equation and things could quickly get interesting in the USD demand space.
Today sees China release its Trade Balance data for August. A number sure to continue the above narrative one way or the other.
Williams on the Fence:
The Wall Street Journal’s Fed watcher Jon Hilsenrath today published an interview with San Francisco Fed President John Williams. The headline read San Francisco Fed’s Williams Sees Rate Increase ‘This Year’ If Risks Dissipate but the tone of the interview portrays the usually hawkish Williams as very much sitting on the fence when it comes to September.
“All of the data that we have had up until now has been, I think, encouraging. It has been about as good, or better, than I was expecting, in terms of the U.S. economy.”
“But there are some pretty significant—and I would say have now grown larger—headwinds that have developed.”
As always with gated articles, copy and paste the headline into Google News to read.
There’s not much we didn’t already know, but it’s still a good interview that highlights many of the issues the Fed are weighing up heading into their next meeting. Well worth the morning read.
On the Calendar Tuesday:
AUD NAB Business Confidence
CNY Trade Balance
Chart of the Day:
Today we take a quick look at silver trading as the metal sits at an important weekly level.
Click on chart to see a larger view.
After both gold and silver peaked in 2011, it has been a long, unceremonious slide back down to where price currently sits. As you can see, we’ve marked some previous touches inside this weekly support/resistance zone.
Just like the gold chart that we’ve spoken about before on both the blog and social media, the bearish trend just looks too strong. With each bounce off the weekly support level, price continues to make lower highs on the lower time frame charts. Probably not a tide worth swimming against.
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Dane Williams – @VantageFX
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