GLOBAL STOCKS JUMP BUOYED BY M&A, EARNINGS SEASON AND TRADE
The Canadian dollar jumped against the US dollar after the Bank of Canada made its interest rate decision. Shortly afterwards the US dollar took control and the pair reached the highest level since July 3. This reaction was because of the monetary policy statement from the BOC, which raised serious concerns about the ongoing trade conflict between the United States and Canada. Officials were worried that the trade conflict would affect the rate of economic growth, which will, in turn, affect the pace of normalization. For this year, officials expect the Canadian GDP to grow by 1.8%, which will be followed by a 2.0% increase in 2020 and a 1.9% increase in 2021.
Global stocks rose today, reversing a major slump that happened yesterday after the US unveiled tariffs worth more than $200 billion on Chinese imports. The markets reacted to a Trump press conference in Brussels, where he sounded confident that the ongoing trade war will likely be resolved. The markets were also pleased with the ongoing deal-making process. Last night, Broadcom announced that it would purchase CA Technologies for $18.2 billion while Comcast upped its bid for Sky’s assets to $34 billion. As the interest rates remain low, there is a likelihood that the current deal-making will continue.
Yesterday, the price of crude oil fell with the West Texas Intermediaries (WTI) falling by more than 5%. The decline came after reports that Saudi Arabia increased production in June by 500,000 barrels per day. Other OPEC countries also raised outputs. It was also attributed to a major breakthrough in Libya where a significant oil field was returned to the government by the militias.
In the US, the initial jobless claims for the week rose to 214K which was lower than the expected 221K while the continuing jobless claims disappointed. The latter rose to 1,739K which was higher than the expected 1,720K. At the same time, the consumer prices in June rose by 2.9% which was in line with expectations and higher than last month’s 2.8%.
On Friday, the USD/CAD pair started falling after Canada released better-than-expected jobs numbers. The trend continued until yesterday, when the pair reached an intraweek low of 1.3062. Today, the pair moved higher after the BOC lowered expectations for further hikes. As shown below, the current price is along an important diagonal support level and is in line with the 50-day moving average. It is also closer to the peak of the symmetrical triangle pattern. There is a likelihood that the pair could resume the downward move if it crosses the support level shown below.
Yesterday, the EUR/USD pair crossed the important support level of 1.1727 as shown below. Since then, the pair has been unable to sustain movements above this support. Today, it continued the downward momentum and is currently trading at 1.1670. The decline today was associated with a dovish statement from the ECB. The current price is in line with the 25-day moving average. Further lower movements will likely test the supports of 1.1647 and 1.1618 respectively.
Yesterday, the Dow Jones Industrial Average (DJIA) fell by triple digits as investors grew weary about the ongoing trade conflict. Today, as the fears have eased, the index is up by more than 200 points and is currently trading at $24,900 after establishing an important support at $24,000. The price today is above the 200 and 100-day moving average and is nearing the upper band of the Bollinger Bands. Today, the index could continue moving higher as traders eye corporate earnings and the trade situation.