It has been a busy week for news, looking forward to seeing much volatility this week according to the consequences of the releases last week and the upcoming week’s data
News Commentary
USD
Tensions between the U.S. and China continue, as the two largest economies in the world faced a tit-for-tat over trade tariffs. Earlier this week, U.S. President Donald Trump threatened to impose tariffs on another $200 billion of Chinese goods. China could strike back at blue-chip firms including Caterpillar and Boeing who rely on China for revenue.
The dollar also eased following the release of soft U.S. manufacturing data which came in at 19.9, lower than the expected 28.9.
But demand for the dollar continued to be boosted after Federal Reserve Chairman Jerome Powell reiterated on Wednesday that the case for gradual rate hikes remains strong.
All eyes will be on Tuesday’s CB consumer confidence which is expected to reach 127.6, and Core Durable Goods Orders on Wednesday which is expected to reach 0.5%, and most importantly, the final GDP on Thursday with a forecast of 2.2%, same as the last one.
EUR
The European Union imposed tariffs on about $3.4 billion of U.S. imports on Friday, including motorcycles, orange juice and cranberry sauce. The tariffs have added to tensions as investors fear an outright global trade war between the U.S.and other major countries.
On the other hand, French and German business activity in June came in higher than expected, easing concerns of a slowdown in the Eurozone.
Good news for Greece is that the Eurozone creditors finally agreed a debt relief deal that will help Greece exit its bailout program.
Following late-night talks in Luxembourg, the Eurogroup agreed to hand Greece a final loan tranche of €15 billion.
GBP
The Pound strengthened after the Bank of England left interest rates steady, but the vote for a rate hike by the bank’s chief economist came with a surprise that supported the probability for the next hike in the August meeting.
The MPC voted 6-3 to hold rates flat, but the fact that there were three dissenting votes cast in favour of a rate hike today was a bit more hawkish than what was expected
All eyes will be on the current account on Friday with an expectation of -18.2B
NZD
New Zealand GDP growth dropped by 0.1% compared to the previous two quarters, coming in at just 0.5%, lower than the previous reading of 0.6%.
It’s a busy week for the New Zealand dollar with ANZ business confidence, which measures economic health with the last reading of -27.2.
The big event will be the official cash rate on Wednesday with the expectation to be left steady at 1.75%.
CAD
Disappointing inflation and retail sales from Canada damaged the loonie lower across the board, sending the odds of a July BoC rate hike to 55% from 68% earlier in the week. Meanwhile the odds of an August BoE hike rise to 70%.
All eyes will be on GDP on Friday with the last reading of 0.3%.
Chart Analysis
USD INDEX
As we expected on the daily chart, the price had reached the key resistance at 95.5 and bounced back from it, powered by divergence on RSI & B wave (Elliot waves).
So, the index is supposed to get back down again to the support zone 93.2-92.6, then start its journey to the C wave.
AUD/USD
On the daily chart, the price has reached the support of 0.7325, with a pin bar candle followed by engulfing one.
The pair is supposed to find some breath powered by divergence on RSI to reach the key resistance of 0.7515, where the descending trend from the high of February is located.
USD/JPY
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.
AUD/NZD
On the daily chart, as we expected before, the price had made its way up to targets at the resistance zone of 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 shaping the Gartley harmonic pattern, the price is supposed to continue its bullish movement up to the 1.1045 level after forming hammer & engulfing candles respectively.
USD/CAD
As we expected before, the price has reached the key resistance level of 1.334
As we can see the price is located at very strong selling area according to many factors, including key resistance level, 78.6% Fibonacci, the upper level of the reversal wedge, forming the Gartley harmonic pattern, and overbought in RSI.
So, any bounce there will lead the price down to the support zone at 1.309-1.299.
NZD/USD
On the daily chart, the price has reached a combination of support levels, with a support zone of 0.682-0.6785, an ascending trend line from the low of 2007, and finally with Bat harmonic pattern.
The price is expected to get back up again to retest the resistance zone at 0.698-0.703.
AUD/JPY
As we expected before, the price has reached the support zone 81.2-80.5 as the price is moving sideways.
So, with this engulfing candle, we expect the price to retest the head of the pattern to again reach the levels 84-84.4.
