IMF LOWERS GLOBAL ECONOMIC FORECAST FOR 2018
The International Monetary Fund (IMF) lowered the global economic forecast to 3.7% from the previous 3.9%. The organization said that the current trade rhetoric coupled with the disruption of capital flows to the emerging markets will curtail growth. In recent months, the United States and China have engaged in a prolonged trade war with retaliatory tariffs. Recent reports suggest that Chinese companies have found thousands of loopholes allowing them to evade such tariffs.
After falling initially, US stocks ended the day a bit higher yesterday. News of the Google+ service being hacked circulated with reports claiming that Google failed to notify the markets about the hack fearing it would trigger a large-scale investigation. Later in the day, it was announced that Google had dropped out of bidding for a $10 billion Pentagon data deal. Today, in Europe, the DAX is likely to see some weakness. Yesterday, Daimler, one of its biggest constituents reported that sales had dropped sharply because of the new emissions standards. The same will likely happen for other auto manufacturers like BMW and VW. Yesterday, the DAX declined by 165 points.
The New Zealand dollar was lower than the USD even after positive confidence numbers. The numbers from the National Australian Bank (NAB) showed that confidence rose to 6, which was higher than the 5 that traders were expecting. This ended a slide that started a few months ago after the confidence number reached 13. This is probably a reflection of the fact that executives are more optimistic that the trade war issue will be resolved.
The EUR/USD pair is trading at 1.1490, which is slightly higher than yesterday’s low of 1.1460. This pair is clearly in a downtrend and currently finding support at these levels. Most indicators show that the pair will likely continue to move downward. The Ichimoku Kinko Hyo indicator points to lower movements. This is confirmed with the volumes indicators like the Money Flow Index (MFI) and oscillators like the Bears Power.
Yesterday, the DAX ended the day at £11,969. This was slightly higher than the intraday low of £11,890 but lower than the open. Today, with the growth problems among German companies, there is a likelihood that the index will continue to fall. On the hourly chart, the index is now trading below the 50 and 100-day EMA as shown below. It is in line with the middle band of the Bollinger Bands. If the index drops today, traders should watch out for the £11,856 level, which will also mark the end of the inverted cup pattern as shown below.
The NZD/USD pair remained at low levels after positive confidence numbers from New Zealand. The pair is trading at the 0.6448 level which is slightly higher than yesterday’s close of 0.6426. The RSI has moved from the oversold level of 17 and is currently at 32. Since this happened amidst low volume, this could be a false breakout. Traders should continue to monitor the pair before initiating any trades.