MARKETS WAIT FOR FED MINUTES AS TRADE CONFLICT ESCALATES
Asian markets are today reflecting current trade worries. The Shanghai Composite Index, Hong Kong’s Hang Seng, and Japan’s Nikkei are down by 0.51%, 0.65%, and 0.40% respectively. This comes a day after German Chancellor, Angela Merkel, sounded an early alarm over trade warning that the world could be approaching another financial crisis similar in magnitude to the 2008/9 crisis.
The focus today among traders will be on Fed minutes and jobs numbers from the United States. The minutes will give traders a deeper insight into rate hikes for the year.
Following a meeting which took place two weeks ago, Chairman of the Federal Reserve, Jerome Powell, said that Fed officials were committed to two more hikes this year. Regarding job numbers, ADP will release the number of people employed in the private sector in June. The markets expect the number to be 190,000, which will be higher than last month’s 178,000. In addition to this, traders will be looking ahead for the number of initial and continuing jobless claims and consumer confidence. Other important data from the US will be the non-manufacturing PMI from ISM.
Shifting gears to Europe, traders will focus on Germany factory orders. This data is very important today because of the ongoing trade conflict. Traders will want to know whether the rhetoric is affecting real businesses. Traders expect the orders to grow by 1.1% after last month’s slump. A speech by Bank of England’s governor Mark Carney will also be watched closely by traders, who will standby for his opinions about the economy. The Swiss Franc will also be in play today as the country will release inflation numbers. Traders expect the CPI for the month of June to rise to an annual rate of 1.1%.
The EUR/USD pair is trading at 1.1660. The pair has continued trading in the symmetrical triangular pattern initiated a few days ago. This pattern is nearing the apex, which means that the pair could break out in either direction. The current price is at the middle level of the Bollinger bands. As traders wait for the unofficial job numbers from ADP, the pair is likely to continue moving sideways. Improving job numbers coupled with a hawkish Fed statement could make the pair move lower and test the 1.16300 support.
The USD/CHF pair reached the important 1.0005 level in May. After that, the pair tested a low of 0.9787 in early June and then started moving in a sideways manner. The Swiss National Bank (SNB) has committed to keeping the franc lower because they believe it is overvalued against major currencies. Today, the pair is trading at 0.9935. As shown below, the pair has been trading in a triangular pattern. Today, the CPI from Switzerland and the US jobs numbers could move the pair. Traders should look for the resistance level of 0.9980.
Early last month, the Dow Jones Industrial Average (DJIA) started falling after reaching a high of $25,400. The index is now trading near the important support of $24,000. If the pair breaches this support, traders can expect it to continue moving lower as it searches for another support. The next support will be the $23,500 level. This is likely if the global trade climate continues to worsen because all companies in the index derive their revenues from international markets. Its RSI is currently at 42 and the 50 and 100-day moving averages are higher. There is also a likelihood that traders will shrug-off the trade rhetoric and push the index higher.