Forex Market Analysis

Weekly Market Update: ECB Left Interest Rate, US-China Trade War, Great Britain Official Bank Rate

We had a busy last week with announcements from central banks (FED & ECB), also there was the conflict at the G7 summit, the consequences of Singapore summit.

So, we will discuss the upcoming results from all this data, along with the most important releases of the next week.



News Commentary




The FED delivered the widely expected rate hike overnight, with a hawkish statement and economic projections. FOMC raised the Fed funds to 2.00%.

The Trump administration has slapped a 25% tariff on 818 Chinese goods, with a total value of up to $50B.

This action comes on top of the recent decision to impose steel and aluminium tariffs on many US allies, including Canada, Mexico and the European Union. Predictably, those countries countered with $20B in tariffs on US goods.

U.S. President Donald Trump and North Korean leader Kim Jong Un signed a ‘comprehensive’ deal at a historic summit aimed at the denuclearisation of the Korean peninsula.

Trump said the meeting in Singapore had gone “better than anybody could have expected” and he anticipated that the denuclearisation process would start “very, very quickly”, adding he had formed a “special bond” with Kim and the relationship with North Korea would be very different.



The regulator plans to complete the quantitative easing program in December 2018. The Central Bank left interest rates unchanged and said that it is not going to raise them until mid-2019. The speech by Mario Draghi, President of the European Central Bank, also hit the euro. The official said that the slowdown in the economic recovery in the Eurozone was not temporary, but also reached a global level. The ECB lowered the forecast for economic growth in the Eurozone from 2.4% to 2.1% this year.



Positive data came from Great Britain to enhance the sterling, with the retail sales reading 1.3%, higher than the expected 0.5%.

On Thursday the Bank of England is expected to leave all monetary policy levers untouched and the market will then look for clues on future moves from the MPC voting pattern and the subsequent press release. Governor Carney may also give his thoughts on UK Q2 GDP after this week’s data looks likely to weigh on second-quarter growth.



The Australian Dollar was trading as the weakest currency last week as it is pressured by its own data miss as well as weaker than expected China data. Australia employment rose 12k seasonally adjusted in May, below the consensus of 19.2k. The unemployment rate dropped to 5.4%, as participation rate also dropped to 65.5%.

All eyes will on the monetary policy meeting on Tuesday 1:30 GMT



Chart Analysis




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, 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 110.05 to reach the next support 108.15 to 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 is expected to be on its way.



On the daily chart, the price eventually broke the resistance zone 1.309-1.299 followed by break the ascending tend line from the high of 2016, with an engulfing candle.

But also we can see that it touches the top of the “horn” & “wedge” patterns.

So, we only need another confirmation bullish candle to assure the long bias to reach 1.334.



As we expected, the price will have a strong bearish rally to the support 0.7155. 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

so, the C wave is on its way



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 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, forming continuous ‘flag’ patterns, bouncing from the moving average 200, and ABC Elliot waves

So, the price is expected to head for 76.25.



On the daily chart, as we expected before, the price had made its way up to targets at the resistance zone 1.0815-1.0865, boosted by a BAT harmonic pattern.

The price has already made its retracement as we expected it to.

Reaching the support zone and forming the Gartley harmonic pattern, the price is supposed to continue its bullish movement up to the 1.1045 level after any possible price action from these levels.



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