Weekly USDOLLAR Chart Analysis (End of Downtrend)
FXCM's USDOLLAR has risen over the last four weeks, since reaching an intermediate low on 14 July of 12,626. This recent appreciation has breached the 12,934 level, which was the last lower peak. I.e., the latest higher peak (HP) has effectively ended USDOLLAR's downtrend. An uptrend is yet to start; however, the dollar has started the week on a solid footing. Moreover, the weekly RSI has popped above 50 (blue rectangle). This is the bullish side of the indicator. The longer it maintains on this side, the greater the bullish momentum support for the greenback.
USDOLLAR and Real Yield Correlation (Robust Correlation)
The 10-year real rate has been rising since 20 July (black dashed vertical) and has risen close to 40 basis point. Since then, the correlation coefficient between the 10-year real yield and FXCM's USDOLLAR has increased to a robust 87%, as the USDOLLAR has followed suit and moved upwards.
China Property Sector (The Dollar As a Safehaven)
Events in China are also pushing money into the greenback as a safe haven. There is a distinct nervousness as Chinese property developer Country Garden Holdings overnight suspended trading in 11 company and subsidiary onshore notes. Resumption of the bond's trading will be determined at a later stage, according to the company.
Last week Tuesday, Country Garden made it known that it had refrained from fulfilling its obligation to pay two coupons worth a combined $22.5 million for its dollar-denominated bonds, both of which were due on the 6th of August. This revelation validated the prevailing concerns within the market.
With its outstanding liabilities standing at roughly $194 billion at the conclusion of the previous year, the developer cautioned the public last Thursday that it might be facing a potential loss of up to $7.6 billion for the initial six months of the ongoing year.
While once regarded as one of the developers holding a relatively strong financial position, Country Garden's present struggles could have a pervasive impact on both prospective homebuyers and financial institutions. This scenario would amplify the pressure on a sector that has already been grappling with a steep decline in property sales, a restricted access to liquid assets, and a sequence of defaults by developers, beginning from the latter part of 2021.
In response to the current challenges, the organisation has established a specialised task force, overseen by its chairman. This move was indicated in the company's official filings on Saturday.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.