THE EURO PAUSES AS TRADERS WAIT FOR ECB DECISION
The world markets fell today as traders started worrying about the trade. Yesterday, the Trump administration announced that it was preparing a $32 billion rescue for the farmers who have been affected by the ongoing trade escalation. This led to the interpretation that the US President was in the ‘tariff mood’ for the long term. Earlier in the day, he had sent a tweet calling tariffs ‘the greatest’. This week, he will hold a discussion with the EU Commission president, Jean Claude Juncker to find a way forward. This is as the EU readies tariffs worth $20 billion if the US imposes tariffs on European vehicles.
The Aussie dropped sharply today after the country’s statistics office released lower than expected inflation numbers for the second quarter. The data showed that the CPI for the quarter grew by a quarterly rate of 0.4%. This was lower than the 0.5% traders were expecting and equal to the CPI for the first quarter. On an annualized basis, the CPI rose by 2.1%, which was lower than the expected 2.2%. This was higher than the 1.9% growth in the first quarter. In the past RBA meeting, officials said that they were concerned about the ongoing trade escalation and the falling house prices in Sydney and Melbourne. Its neighbor New Zealand released trade data that disappointed. In June, the total imports increased by $5.2 billion, which was higher than the expected $4.09 billion. At the same time, exports declined to $4.9 billion, which was lower than the expected $5.06 billion.
In Germany, if released the business climate index numbers that beat the analysts’ forecasts. The numbers showed that the business climate increased to 101.7, which was higher than the expected 101.6. This number came just a day after the country released positive PMI numbers, an indication that executives are becoming more optimistic about the economy. The current assessment, which measures the current business conditions without considering future expectations rose to 105.3, which was higher than the expected 104.8.
Wall Street will open lower today after mixed earnings from some of the biggest companies in the country. General Motor stock tanked after reducing its yearly guidance. It attributed this to increased costs of production. Boeing announced better than expected results but reduced the guidance for the year. Later today, traders will focus on the earnings of companies like Facebook and PayPal.
The EUR/USD pair was little moved today as traders waited for the outcome of the US-EU meeting and the decision by the ECB, which is expected tomorrow. The pair is now trading at 1.1692. It has formed a symmetrical triangle as traders wait for a breakout. After the ECB decision, if the pair jumps, it will likely jump to the important resistance level of 1.1750. If the ECB delivers dovish statements, it will likely test the 1.1640 level, which is also the 38.2% Fibonacci Retracement level.
Last week, the AUD/USD pair fell after the dovish statement from the RBA. Since then, the pair has traded in a sideways direction as shown below. It is now trading at 0.7408, even after the negative CPI numbers. The pair will likely remain in this range as it tries to find direction. Therefore, traders should watch out for the important support and resistance levels of 0.7310 and 0.7485.
The kiwi was little moved today against the dollar and is now trading at 0.6800. In the four-hour chart shown below, the pair is trading in line with the 100-day moving average and lower than the 200-day moving average. The price is also between the 23.6% and 38.2% Fibonacci Retracement levels. Traders should watch out for the 0.6875 level, which is also the 50% Fibonacci level. The pair could also drop, and if it does, it will likely test the 0.6715 support.