- US Trade Balance deficit reaches the highest level since December 2008.
- PMI Markit Composite of the Eurozone shows signs of a slowdown.
- PMI UK Services falls to the lowest value since 2016.
- Yen fails in its attempt to approach the 108.
- Aussie developing the second leg.
- Loonie moves sideways while waiting for the employment data.
- Dow Jones closes bearish on new tariffs to China.
- Crude Oil performs a pullback towards the $64 level.
US Trade Balance deficit reaches the highest level since December 2008.
February 2018 Trade Balance, has reached its highest level since December 2008, as indicated by the Department of Commerce. The deficit in goods and services for the year to date has increased by 22.7% ($ 21.1 billion) compared to the same period of 2017. Exports, meanwhile, have increased 5.9% ($ 22.4 billion) and imports have risen 9.1% ($ 43.6 billion).
On the technical side, the Dollar Index has reached the control area we mentioned in the last Daily Update. Now we have to wait for a confirmation of the reversal zone to look for continuity in the bearish positions against the dollar.
PMI Markit Composite of the Eurozone shows signs of a slowdown.
The Purchasing Managers’ Index (PMI) published by the agency Markit Economics, has reported a sharp fall in March, reaching 55.2 points, below February’s 57.1 pts. This lower PMI Index level is a sign of deceleration in new orders growth. This situation may be the result of a combination between the consequences of inclement weather in some regions of northern Europe and a limitation in the capacities of the supply-chain to meet the number of orders that have been accomplished in previous periods. Despite these pessimistic signals, as reported by the latest Daily Update, the Euro has drilled 1.2240 control support, at which we began to assess potential purchases that could take us to levels close to 1.235.
PMI UK Services falls to the lowest value since 2016.
The Service Purchasing Managers’ Index has sunk to its lowest registered value since 2016, reaching 51.7 pts compared to the 54.5 pts reported in March. This index value is worse than its quarterly moving average of 53.07 pts. As a result of this data, the cable has perforated the psychological support of 1.40, reaching 1.3965. This break-down has activated a Head-Shoulders pattern, which level of invalidation is above the 1.42 level. However, our long-term vision is in favour of long positions of the pound due to the weakness expected in the Dollar Index.
Yen fails in its attempt to approach the 108.
The weakness of the dollar has caused the yen to fail in its attempt for the USD-JPY to reach 108. In the midst of trade tension between the United States and China over tariffs, the yen exceeded 107, the key resistance that we were reporting in the last Daily Update reaching 107.44. The Japanese currency is developing a bearish leg to 107.01, a level that could act as support in the future. In today’s session, in where the US employment levels will be announced, we expect it to build enough volatility to validate if the pair manages to overcome the long-term resistance at 108.
Aussie developing the second leg.
The oceanic currency is developing a corrective structure that began at the 1.8135 high level, starting in January. The price is currently approaching a long-term bullish trend-line, and the bearish guidelines of the current formation give us a potential reversal zone between 0.7620 and 0.7573, the invalidation level is below 0.7501.
Loonie lateralizes while waiting for the employment data.
The Canadian dollar is consolidating in the range of 1.2745 – 1.28 pending the employment data from the United States and Canada that will be announced in the last trading session of the week. Our view is that the USD-CAD could make a limited bearish movement until 1.2715 to begin a bullish move as a potential second shoulder. Our long-term outlook for the pair continues to be bearish due to the inverse correlation with crude oil.
Dow Jones closes bearish for new tariffs to China.
The escalation of volatility due to tariffs between the United States and China continues. During this Thursday, President Trump has instructed the Trade Representative to consider the application of $100 billion in additional tariffs against China. In a statement, Trump said: “In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and if so, to identify the products upon which to impose such tariffs.” Once this statement was published, the Dow Jones index that started the bullish session collapsed more than 400 points testing 24,037 points. Our vision is a scenario in which the Dow Jones could perform a corrective process in the form of A-B-C, as long as the price does not close below 23,330 pts, we will maintain the view of bullish positions.
Crude Oil performs a pullback towards the $64.
Crude oil has retreated to the neckline of the Head-Shoulder pattern at $64.1 that has been activated with a profit target at $61.8. The falls could reach even $61.44, a level that could coincide with the base of the long-term uptrend line. The invalidation level of the long-term bullish scenario is $60.2.