Sample Category Title

EUR/USD has posted slight losses in the Wednesday session, continuing the downward trend seen on Tuesday. Currently, the pair is trading at 1.1569, down 0.17% on the day. On the release front, German PPI remained steady at 0.5%, edging above the estimate of 0.4%. The ECB Forum continues on Wednesday, with ECB head Mario Draghi and Fed chair and Jerome Powell joining a panel discussion. The U.S will release Existing Home Sales, which is expected to rise to 5.52 million. On Thursday, the eurozone releases consumer confidence, and the U.S publishes manufacturing and employment reports.

Patience, patience. That was the message from on Tuesday from Mario Draghi with regard to interest rate policy. Last week, the ECB announced that it was winding up its asset-purchase plan by the end of the year, but added that it would not raise interest rates before next summer. This dovish message sent the euro sharply lower. Draghi said that the ECB will be 'patient in determining the timing of the first rate rise'. Draghi also made reference to inflation, saying that 'inflation expectations remain well anchored'. However, analysts were quick to note that eurozone inflation has fallen short of the bank’s target of just below 2 percent for five years. Draghi acknowledged that there were external factors which could weigh on inflation, including the threat of global protectionism and higher oil prices. There is also the vexing problem that higher wages have failed to translate into increased inflation. Draghi would like to get through the European Forum without shaking up the euro, and so far he has succeeded.

Are we heading for a global trade war? Investors are nervous, and this sentiment has boosted the U.S dollar this weak. The euro is having a rough week and is currently trading at its lowest level since early November. The most recent round of the trade spat between China and the U.S started on Friday, when the U.S announced a 25 percent tariff on $50 billion in Chinese goods. After China responded with an identical move on U.S. imports, President Trump has now threatened to impose 10 percent tariffs on some $200 billion in Chinese goods. Not surprisingly, China has threatened to retaliate against this latest move. Trump has vowed to take action on the $375 billion trade deficit that the U.S has with China, claiming that the latter is guilty of unfair trade practices. With the first of the U.S tariffs scheduled to take effect on July 6 and no signs that either side will blink first, the euro could face some significant headwinds.

The Bank of England will be completing its meeting on monetary policy on Thursday, with its rate decision and meeting minutes scheduled for release at 1100 GMT. In the meantime, Brexit is again in the spotlight, having policy implications and thus the capacity to move the British currency.

The BoE is widely anticipated to hold its policy rate unchanged at 0.5% upon conclusion of this week’s meeting on monetary policy. The upcoming meeting does not feature a press conference by Governor Carney or updated growth and inflation forecasts. Thus, the Monetary Policy Committee (MPC) members’ language in the meeting’s minutes accompanying the rate decision is expected to drive positioning on sterling pairs.

Market expectations are for two out of nine MPC members – Ian McCafferty and Michael Saunders – the “usual suspects” – to vote in support of a hike during Thursday’s meeting, with the remaining voting for rates to be kept unchanged. The question is what to expect from the August meeting? Market participants are assigning a 37% probability for a 25bps interest rate rise during that meeting according to UK overnight index swaps. The odds for such an outcome though, will be highly dependent on signaling by BoE policymakers as reflected in the upcoming meeting’s minutes.

Should policymakers appear confident about the economy, indicating an August rate increase, then a stronger British pound relative to other currencies is likely to emerge. Focusing on GBPUSD, an appreciating pair could meet resistance around the 1.32 and 1.33 round figures. Conversely, a cautious BoE that pushes rate normalization projections further away into the future, is expected to exert selling pressure in the pound/dollar pair. Initial support to declines might come around the 1.31 handle which constituted an area of congestion in late 2017. Steeper losses would shift the focus to 1.3037, this being an eight-and-a-half-month low recorded in early November.

Overall, the risk may be tilted to the downside for the pound, as the recent largely soft patch of data may cause MPC members to strike a cautious tone in their assessment of the economy. Indicatively, last week’s industrial production data showed output contracting by 0.8% on a monthly basis in April, this constituting the largest fall since December and coming in far worse than analysts had forecast. A bright spot were May’s retail sales, but the boost in sales is likely to prove transitory, as it is seen as partially coming on the back of the “wedding effect” – a spending spree fueled by Prince Harry’s wedding to Meghan Markle.

On top of the aforementioned, uncertainty over Brexit and the government’s future is further complicating the situation for the BoE and perhaps lends credence to a cautious stance. In this respect, a crucial vote will take place in the House of Commons later on Wednesday that has the potential to derail PM Theresa May’s Brexit plans and cast fresh doubts on her leadership, adding an additional layer of uncertainty over the UK’s outlook. Market anxiety is perhaps also evidenced by sterling’s recent losses, with GBPUSD touching a seven-month low of 1.3246 earlier on Wednesday.

Still, even if the BoE indeed appears on the cautious side of the spectrum, it may also opt to keep its options open as regards a hike in August. If this turns out to be the case, then such an action may prove as damage control of some sorts for sterling.

Meanwhile, UK Finance Minister Philip Hammond and Governor Carney will be making their Mansion House speeches on Thursday. It is worth noting that the former noted in early June that “there is clearly scope for the Bank of England gradually and carefully to normalize interest rates over time”. His comments were pound-positive (see GBPUSD chart).

The EURUSD pair has found some stability after the ECB meeting last week which sent the price tumbling from 1.18500 to 1.15500. Resistance is now coming in at 1.15925 ahead of 1.16000. Above this level is the high for this week at 1.16443 and then the 1.16600 level and the falling 50 period MA. The 100 period MA is moving down through 1.17000 with resistance beyond at 1.17152.

The 1.17631 level was the location of a break in the moving averages on the ECB selloff where the 50 and the 100 MA’s were very close together at the time and gave traders an opportunity to engage with the market and limit risk. The 200 MA is found at 1.17868 ahead of 1.18000 where sellers have been entering short positions. The high of 1.18510 would need to be taken for higher levels to be targeted.

Support can be seen at 1.15500 as mentioned above with the 1.15000 level supported by 1.15100. A break under this area targets lower levels at 1.14579 followed by 1.14000. The swing low comes in at 1.13122 with light support down to the 1.12000 area.

The precious metal has finally broken under 1285.00 and left the 1300.00 zone behind. The FOMC and ECB meetings last week provided the catalyst for the breakout. Volatility diminished to for a Bearish Pennant Pattern in the lead into the meetings but FOMC pushed price out the top of the pattern before the reaction to the ECB resulted in a selloff from 1309.00. Technical’s are always reduced in importance around big central bank meetings and become secondary indicators until price settles down. The supporting blue trend line managed to arrest the decline last week but this is being tested today and yesterday. A drop to 1250.00 or even 1240.00 remains on the cards with support at 1265.25 on the way.

Resistance can be seen at 1277.00 initially, with 1285.00 above followed by the 1289.50 level. From there the moving averages come into play on the 4 hour chart with the 50 period at 1287.75 and the 100 period at 1292.55. The red trend line is located at 1294.50 above which the 1300.00 and the 200 period MA dominate the chart. Buyers are waiting for a discount on prices around 1250.00 and they will want to drive price back to 1365.00 from that area. The 1240.00 area is the target from the double top at 1365.00.

Cryptocurrency market seems returned to growth after a prolong depression. To last week lows, the crypto market cap has added 10% to $290 bln. Bitcoin trading near $6,700. The altcoins fully replicate this growth. If this rebound continues, Bitcoin could rebound above $7,000 mark.

Some experts noticed that optimism has come due to SEC’s official’s announcements that Bitcoin won’t be considered as securities. The current technical situation is on the buyers’ side and technical indicator RSI points to at least short-term rebound.

On the contrary, Western Union’s refusing to work with cryptocurrencies was negative surprise for the community as were sure that testing the Ripple’s technology would lead to partnership and implementation blockchain to the most of its processes.

In general, return BTC to $20,000 mark is possible only if governments demonstrate positive attitude to the whole industry. It’s worth mentioning, that even if such scenario is possible, it could be realized only in the distant future in case or broader BTC adaptation in developed economies. At the moment BTC faces with investor’s interest slump, low prices and higher than ever mining difficulty.

Markets are taking a breath right now and retracing some of the moves over the past number of sessions. Whether this turns into a broader rally or the selloff is resumed remains to be seen. Stock markets are higher after support was found in the European session yesterday and US and Asian traders built on the foundations of that support.

Asian stock markets (ex Japan) experienced big declines on trade worries on Tuesday losing 2.1%. Shanghai Composite Index plummeted by 3.8%. Today Chinese stock tries to find support in 10-months lows area.

USDJPY is back above 110.000 while AUDUSD is trading around the 0.74000 level from its lows of 0.73470. Fundamentally very little has changed but the economic calendar is light. OPEC technical group meetings yesterday failed to reach agreements on production levels ahead of higher level OPEC meeting tomorrow. US WTI Oil has moved back above $65.00.

US Housing Starts (MoM) (May) were 1.350M against an expected 1.317M from a previous number of 1.287M which was revised down slightly to 1.286M. Building Permits (MoM) (May) were 1.301M against an expected 1.350M with the prior reading of 1.352M which was revised up to 1.364M. The data was mixed with housing starts beating expectations and building permits failing to meet them. These data points have been recovering since hitting lows in 2009 after the financial crisis of 0.46M and 0.49M respectively. The readings in February were the highest since those lows in both cases and these levels have yet to be matched or surpassed. GBPUSD moved higher from 1.31589 to 1.31795 following this data release.

New Zealand Westpac Consumer Survey (Q2) was released and came in at 108.6 with a prior number of 111.2 recorded. While the data missed expectations there is a range between 106.0 and 113.4 that these reading are falling within. NZDUSD fell from 0.68999 to 0.68879 after this data release.

EURUSD is down -0.10% overnight, trading around 1.15762.
USDJPY is up 0.13% in the early session, trading at around 109.197
GBPUSD is down -0.04% this morning trading around 1.31679
Gold is unchanged in early morning trading at around $1,274.47
WTI is up 0.42% this morning, trading around $65.18

At 08:00 GMT, ECB’s Lautensclager is due to speak today. EUR crosses can be impacted by any comments made.

At 09:30 GMT, ECB’s Coeure is due to chair a discussion on the Macroeconomics of price and wage setting. EUR crosses can be moved by any comments made in relation to ECB policy.

At 13:00 GMT, SNB Quarterly Bulletin is due to be released. This includes the Monetary Policy Report, the Exchange rate survey and a report on Business cycle trends. CHF crosses can be impacted by this publication.

At 13:30 GMT, ECB President Draghi, Fed Chair Powell, BOJ Governor Kuroda, and RBA Governor Lowe are due to take part in a panel discussion on the Macroeconomics of price and wage setting at the ECB Forum on Central Banking in Portugal. EUR, AUD, JPY and USD crosses may be moved by any comments made in relation to Central Bank policy.

At 14:00 GMT, US Existing Home Sales (MoM) (May) is expected to be 5.52M against 5.46M previously. After reaching a seven year high in November at 5.81M, this data point is ranging around 5.50M. The last reading missed expectations but the data shows that the market is still healthy. USD crosses can be moved by this data as analysts try to understand the impact on the economy.

At 23:45 GMT, New Zealand Gross Domestic Product (Q1) will be released with an expectation for 0.5% (QoQ) and 2.7% (YoY) against a prior number of 0.6% (QoQ) and 2.9% (YoY). GDP has come in around 0.6% for two quarters in a row and it is expected to slip slightly today. NZD crosses can be affected by this data release.

EURJPY pared some of Tuesday's losses and re-challenged the 23.6% Fibonacci retracement level of the downleg from 137.50 to 124.60, around 127.65. The momentum indicators are supportive of the short-term bullish correction, with the RSI flattening into negative, the MACD oscillator approaching the trigger line, while stochastic is moving higher.

If the price successfully surpasses the aforementioned strong obstacle and jumps above the 20-simple moving average in the 4-hour chart, it could hit the 128.50 resistance level. However, should prices climb higher again, above the 40-SMA, the next resistance would likely come from 130.30, as identified by the high on June 14.

In case of a continuation of the downward movement, price action would likely meet support at the three-week low of 126.60. Slightly below this level, the 126.30 acts as major support. A break below this hurdle as well would drive the pair until the next support of 124.60, taken from the low on May 29.

In the medium term, the bearish outlook remains intact, with the moving averages all pointing downwards in the daily chart and the price holding below the descending trend line since February 1.

Canada legalises cannabis

Canada has become the first developed nation to legalize Cannabis! On Tuesday the Canadian Senate passed Bill C-45, the Cannabis Act, which was already approved by the House of Common and so will become law. Canadians will be able to purchase and use cannabis legally as early as September 2018. While valuation in cannabis companies are elevated, forward earnings make current prices undervalued. In 2015 alone, Canadians spend USD 4.5 billion on recreational Cannabis usage. See Swissquote's Cannabis Active Certificate (WEEDLQ) for details.

The national scale of the Cannabis Act is significant to the USA, which has fragmented legislation. The USA is likely to follow Canada's lead, as nine states already legalized marijuana for recreational use and 29 states allow it for medical purposes. Canada's law, plus its rejection of international drug treaties on cannabis regulation, will shape marijuana policy globally. Unlike the US, Canada's new law legalizes cannabis possession, homes cultivation and sales to adults. Licensing of producers and criminal sanctions such as selling to minors will continued to be controlled by the federal government. Provincial governments will control sales, distribution and taxation.

The legislation was part of the government's platform. “We will legalize, regulate, and restrict access to marijuana,” the Liberal Party stated on its campaign website. “Canada's current system of marijuana prohibition does not work. It does not prevent young people from using marijuana and too many Canadians end up with criminal records for possessing small amounts of the drug.” Canada expects that legalization will eliminate the black market for cannabis, provide regulated outlets for adults and generate tax revenues.

The People's Bank of China wants to be reassuring

As commercial tensions between US and China continue to strengthen due to additional USD 200 billion tariffs (total stated: USD 450 billion), worries from investors in Asian equities have led the Asian market into turmoil.

Indeed, the Shanghai Composite Index fell by -3.78%, the Hong Kong Hang Seng by -2.78% and the Nikkei 225 by -1.77% while EU Euro Stoxx 50 and US S&P500 indexes decreased to a lesser extent by -0.90% and -0.40% respectively.

In a more reassuring tone in order to relieve investor's fears, the People's Bank of China (PBOC) Governor, Yi Gang, confirmed in a statement that investor's sentiment remains largely sentiment-oriented and should remain “calm and rational”. The central banker confirmed that the PBOC monitors market movements and that the room for maneuver remains largely under control, adding also that it is planning to use monetary policy tools, in order to ensure stable liquidity and, to a larger extent, durable economic growth.

As the situation is calming down, we expect current downfall to stop and a recovery phase to start. The USD/CNY upward trend amid market selloff and trade war tensions temporarily stops. The pair is currently trading at 6.4746, heading along the 6.4570 range in the short-term.

EUR/USD

Current level - 1.1575

The outlook is bearish below 1.1600 intraday resistance, for a break through 1.1510 lows, towards 1.1300 area.

USD/JPY

Current level - 110.18

The violation of 109.90 low signals, that the whole upmove since 108.10 is over and the third leg of the prolonged consolidation below 111.40 is underway. My outlook is bearish below 109.90, for a slide towards 109.20, en route to 107.90.

GBP/USD

Current level - 1.3166

The downtrend is intact below 1.3200 resistance, for a slide towards 1.3040 zone. Crucial on the upside is 1.3300 area.