USDHKD saw a massive sell off between the second half of June and the beginning of July on broad anti-dollar sentiment due to both record rising oil prices and deteriorating expectations of a Fed rate hike in the near term. Since then, dollar sentiment has stabilized somewhat as oil prices have come down and equity markets have yielded significant gains. With Hong Kong monetary authorities keeping HKD in a pre-degined band against its US counterpart, USDHKD has been left range-bound as traders wait to gain more clarity on the direction of the greenback.
[B]Trading Tip[/B] – The Hong Kong Monetary Authority (HKMA) explicitly intervenes in the foreign exchange market in order to stabilize the USDHKD exchange rate between a band of 7.75-7.85. As such, the HKMA may sway the pair one way, completely throwing the range off track. In addition to a stop loss, we will look to control risk further by removing any unfilled orders by the end of the week or should spot close above 7.8035 (above Fib resistance) prior to our order being filled.
[B]Event Risk for the US and Hong Kong[/B]
[B]US[/B] – Event risk for the week is minimal presenting only two potentially market-moving releases. Friday brings the US Durable Goods Orders release for June whose previous numbers printed at a pitiful 0.0%. Friday will also see the release of the New Home Sales figures which are expected to decrease for the month of June. Neither of these two events will add downward pressure to the USD as much of the news surrounding these two events is already priced. Further, as stated above in the trading tip, the HKMA would stabilize USDHKD if volatility sent the pair to the downside, propping it up.
[B]Hong Kong[/B] – The week kicks off Monday with the release of Hong Kong’s Consumer Price Index which is expected to print at 5.8% vs. 5.7% the month prior. This moderate increase will have little effect on the pair as traders are mainly concerned with the actions of the HKMA and its decisions to stabilize the exchange rate.
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