Forex Market Analysis

The Trade War could benefit South American Producers


Released: 5th April 2018.

Hot Topics:

  • The trade war could benefit South American producers.
  • The unemployment rate of European Union falls to 8.5%.
  • Climatic factor impacts on March PMI Construction.
  • The Bounce of the Stock Markets Boosts the Yen’s Crosses.
  • Indices rebound driven by possible bilateral talks between the United States and China.
  • The Canadian Dollar is showing an example of the alternation rule of the Elliott Wave theory.
  • Crude Oil Production falls to its lowest level in over a year.

The Trade War Could Benefit South American Producers.

Uncertainty due to the trade war between the United States and China continues. This time China has reacted by incorporating a 25% tariff on soybeans of US origin. It should be noted that China is the primary consumer of soybeans in the world. As a result of this increase in tariffs on American soy, it is estimated that China could turn to South American producers to meet the demand for the grain. Despite this pessimism in the economic context, the Dollar Index in the hourly chart is developing an inverted Head and Shoulder pattern as a bullish continuity configuration. The next control zone is in the range of 90.20 and 90.36, in case if we do not overcome the resistance of 90.36, we could see a potential retracement to the 89.15 area.


The Unemployment Rate of European Union Falls to 8.5%

The signs of recovery in the European economy continue. The unemployment rate of the European Union has fallen to 8.5% in February, down from 8.6% in January. According to the information provided by Eurostat, the labour market in the Eurozone has reached the lowest level since December 2008. This level of optimism has not been enough to push the Euro towards new highs. The single currency is within a range between 1.225 and 1.23, from where it could create a bottom around the levels 1.2213 and 1.224. A new bullish rally could start from here.

Climatic Factor Impacts on March PMI Construction.

The PMI of the Construction sector (MoM) plummeted sharply to 47 pts, compared to the 50.9 forecast, despite the weak data. It is the lowest level since July 2016, when it reached 45.9 pts in the context of the Brexit elections (June 23, 2016). The critical factor in the decrease in activity has been the climatic factor, remember that in March the worst snowfalls in recent years were recorded. Technically the pound is developing a pattern of Head-Shoulder, which could be contained in a more extensive setup of Head-Shoulders. This could lead to sterling up to 1.3922 in the first instance, and up to 1.3737 in the second instance. All this structure could correspond to a major degree lateral structure that takes us from the 1.373 area to reach new highs around 1.45.

The Bounce of the Stock Markets Boosts the Yen’s Crosses.

Yesterday, although tensions in the dispute of tariffs between the United States and China, the Bank of Japan (BoJ) disbursed 833 billion yen (about US $ 7.8 billion) in the purchase of Exchange-Traded Funds (ETFs). This level of expenditure is the highest level since September 2017, the month in which the BoJ spent 830 billion yen. This action earned the yen to start a turn in its trend; this can be seen both in the chart of the USD-JPY and EUR-JPY which have begun to show bullish patterns. For the USD-JPY pair, the closest key resistance level is 108; in the case of the EUR-JPY cross, the control level is 131.71, a level that if exceeded could lead to the price to exceed 133.5 with a maximum extension of 134.5 in the short term.

Indices Rebound Driven by Possible Bilateral Talks Between The United States and China.

Through his Twitter account, President Trump stressed that the United States is not in a trade war with China. The Trump administration indicated that it is willing to negotiate with China on the escalation of tensions between the two countries. The most significant problem as mentioned by the American President in his account on the social network is that the deficit in the American trade balance is $500 billion, which according to his words “When you’re already $500bn DOWN, you cannot lose.” With the fears of a commercial war between the Trump administration and the administration of Jinping, the indices began to recover confidence. They realised a V-turn pattern is taking the Dow Jones to close above the 24,000 pts in a day. It started lower in the global indexes. The level of resistance to control is between 24,800 pts and 24,982 pts, an area from where in case of breaking up, could take us to levels close to 26,000 pts. The key support levels are 24,034 and 23,330 pts, which coincide with the base of a bearish channel.

The Canadian Dollar is Showing an Example of the Alternation Rule of the Elliott Wave Theory.

The Loonie has made a false rut beginning a downward cycle. It is developing a long-term bullish channel as a long-term bearish formation and is reaching a zone of 1.31 and coinciding with the upper guideline of the channel. Once started, this bearish cycle has been developing five clear movements. In this case, we will highlight the corrective formations or consolidation. According to the Elliott Wave theory, the alternating rule states that after a simple corrective structure, a complex structure should be presented and vice versa. By looking at the time chart of the USD-CAD, we can see this application. The conclusion that this case leads us to is to suspect that a recession is approaching, and that could take the price to levels around the area of the complex corrective structure and then return to develop new minimums in the long term.

Crude Oil Production Falls to Its Lowest Level in Over a Year.

The production of crude oil from the countries belonging to OPEC has fallen to the lowest level in a year and a half. This is mainly due to the problems plagued by the policy of Venezuela, where production decreased by 100,000 barrels per day since February, reaching 1.51 million barrels per day according to the survey conducted by Bloomberg News. The overall level of the output of the 14 OPEC member countries fell by 170,000 barrels to 32.04 million barrels per day in March. OPEC has helped stop production as of January 2017 with the aim of boosting the price of oil, which has been currently consolidating above $60 a barrel. Structurally in the hourly chart, we observed a Head-Shoulder formation that did not reach the technical target bouncing upwards. As long as oil does not lose levels below $60.2, the dominant trend continues to be bullish.



Leave a Reply

Your email address will not be published. Required fields are marked *