Dollar spikes while China-US tensions make Dow Jones and DAX drop

Dow Jones
Dow Jones

The US dollar index (DXY) is in an upward trend today ahead of July nonfarm payroll numbers. Analysts polled by Reuters expect that the U.S. economy added more than 1.6 million jobs in July while the unemployment rate fell to 10.5%.

The currency is also reacting to the rising tensions between the US and China. In a statement yesterday, Donald Trump asked American companies to end any dealings they have with Tik Tok, the popular Chinese social media platform. The administration is also considering delisting most of the Chinese companies listed in the US.

When tensions rise, investors tend to move to the safety of the US dollar. Indeed, the EURUSD pair is down by 0.30% while the GBPUSD is down by 0.15%. The USDCAD is up by 0.35%.

The daily chart below shows that the US dollar index has been in a sharp downward trend. This week, it reached a low of 92.50 and it seems as if it has found a strong support at this level.

US dollar index technical outlook


DAX index and FTSE 100 futures rise ahead of key earnings

Futures tied to the DAX index and FTSE 100 are in the red today mostly because of the rising tensions between the US and China. Further, the indices are also falling in reaction to Donald Trump’s decision to impose new tariffs on Canadian aluminium. Analysts believe that the president could also shift his ire towards Europe.

Meanwhile, investors are reacting to key earnings from Europe. Yesterday, among the notable companies that released their earnings were Adidas, Henkel, Glencore, UniCredit, and Aviva. Today, the number of European firms that will release their earnings will be a bit limited. They will include companies like Hargreaves Lansdown, Standard Life Aberdeen, Rightmove, Relx.

The chart below shows that the DAX index has been moving in a sideways direction this week.  Still, the trend remains bullish so long as the price is above the ascending trend line shown in blue.

DAX index technical outlook

Dow Jones futures fall but deal-making provides support

Futures tied to the Dow Jones and Nasdaq 100 are down slightly today in reaction to the US-China tensions. If the Dow Jones ends in the red today, it will be the first time it has done that in the past four days.

There is some good news today in deal-making. In a statement yesterday, ICE, the company that owns the New York Exchange said it would acquire Ellie Mae, a leading player in the mortgage industry. The announcement came a day after Teladoc announced its plan to acquire Livongo Health in a deal valued at more than $18.5 billion.

Early this week, Seven & I announced that it would acquire Speedway petrol stations in a deal valued at $21 billion. Even with the decline today, the Dow Jones is in an upward trend.

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