Investors are reacting negatively to the escalating trade war between China and the US, and if the tit-for-tat tariffs continue, the euro could continue to head south. The US announced a 25 per cent tariff on $50 billion of Chinese goods on Friday. After China responded with an identical move on US imports, President Trump has now threatened to impose 10 per cent tariffs on some $200 billion in Chinese goods. Not surprisingly, China has threatened to retaliate to this latest move. Trump has vowed to take action on the $375 billion trade deficit that the US has with China, claiming that the latter is guilty of unfair trade practices. With the first of the US tariffs scheduled to take effect on July 6 and no signs that any side will blink first, the markets should be preparing for stormy weather ahead.
After the speech from ECB President Mario Draghi, in the eurozone, the current account surplus narrowed for a third straight month, dropping to EUR 28.4 billion. This fell short of the estimate of EUR 30.3 billion.
The US building permits have released with a decrease of 1.3M, lower than expectation 1.35M
As expected, After breaking the reversal pattern ‘wedge’, the price met the broken ascending trend from the high of 2017, meeting the broken ascending channel, heading the B level of the ABC Elliot waves. Divergence on RSI followed by breaking the upper line as shown.
According to Elliot, we can see a spike from that level to 97.9.
On the daily chart, as we expected the pair had broken the ascending channel followed by bouncing from the descending trend from the high of 2017 and the key resistance of 111.1.
The price also broke the support of 110.05 to reach the next support 108.15, to then get back up again from this level to retest the level at 110.05.
As you can see on the chart, the price is moving according to Elliot waves. By forming the A & B waves, we are waiting for the next move down to hit the C level which is located at the support of 106 and also to meet the ascending trend from the low of 2016.
So, a bounce has started and on its way.
On the daily chart, the price eventually broke the resistance zone of 1.309-1.299, followed by a break of the ascending trend line from the high of 2016, with an engulfing candle.
As we expected that, we need another confirmation bullish candle to assure the long bias, the price is expected to reach 1.34.
As we expected, the pair had formed a wedge which had been broken to reach the support zone 81.2-80.5, to make the price ranges in sideways between 80.5 & 84.4.
The price is about to have a bearish bias according to:
bouncing from the resistance zone 84.4-93.9, breaking continuous ‘flag’ patterns, bouncing from the moving average 200, and ABC Elliot waves
So, the price is expected to head for 76.25.
As we expected, the price will have a strong bearish rally to the support of 0.7155 and this has been prepared according to five causes;-
the descending trend line from the high of February, breaking of the flag, the resistance zone, and eventually the B level of the ABC Elliott waves, and most importantly the break beneath the key support 0.7415.
So, the C wave is on its way after a possible retracement to the 0.7155 level