Analyst Articles – Forex News 24

Gold Prices Remain Bullish, Silver Prices May Begin to Outperform Gold
EU-Mercosur Deal Achieved After 20 Years Despite US Threats to Global Trade
US Dollar, Stocks Eye Fed’s Willians Outlook on Economy, Policy
An S&P 500 Record High Not Worth Trusting, A Dollar Recovery More Likely to Stall
Australian Dollar Whipsaws As RBA Cuts Rates For Second Straight Month
Reserve Bank of Australia (RBA) Rate Cut to Rattle AUDUSD Rebound
ASX 200 Bulls Keep Eyes on Record Peak As Momentum Holds Up
USDCHF May be the Best Dollar Bullish Option for Trade War Status Quo
EURUSD Downtrend May Hasten as USTR Proposes $4 Billion EU Tariffs
US Dollar Weakness May Fuel Gold and EURUSD Gains

Gold Prices Remain Bullish, Silver Prices May Begin to Outperform Gold

Posted: 02 Jul 2019 04:07 AM PDT

Gold & Silver Price Analysis and Talking Points:

Gold Prices Sees Modest Pullback from Overbought levels
Silver Price Outlook | Potential Outperformance on Gold/Silver Ratio Pullback

See our quarterly gold forecast to learn what will drive prices throughout Q3!

Gold Prices Sees Modest Pullback from Overbought levels

Last week, we had highlighted that there was a risk of a pullback before another leg higher in the precious metal given that the surge over the past 1-month saw gold prices at the most overbought levels in decades (full analysis). As such, with near-term resistance ($1433) holding firm a bout of profit taking had been observed following the outcome of the G20 summit, which unsurprisingly saw the US and China reach a ceasefire to restart trade talks. However, with the G20 summit now over, focus is back on economic data. So far, this week has seen soft data across the globe with the majority Asian and European PMIs in contraction territory, while there was also little to cheer about with regard to the US ISM Mfg. PMI, despite beating expectations. As such, with global growth showing evidence of moderation, the precious metal may well keep supported.

GOLD Technical Levels

Resistance 1: $1433 (August 2013 peak)

Resistance 2: $1480 (50% Fibonacci Retracement)

Resistance 3: $1500 (Psychological)

Support 1: $1377 (38.2% Fibonacci Retracement)

Support 2: $1355-60 (Trendline Support)

GOLD PRICE CHART: Daily Time-Frame (Jun 2018 -Jul 2019)

What You Need to Know About the Gold Market

Silver Price Outlook | Potential Outperformance on Gold/Silver Ratio Pullback

Over the past month, the gains in silver have been relatively modest at best when comparing against the surge in gold prices. Consequently, this has the gold/silver jump to levels not seen since the early 1990s, thus silver could be somewhat more attractive gold, given how high the ratio is at 91.5. Of note, last week, saw the the gold/silver ratio at 92.5, as such, the marginal outperformance in silver looks to have possibly started. On the downside, for silvers eyes are on the $15-15.05 support zone, while topside resistance is situated at $15.50.

Source: Thomson Reuters Datastream, DailyFX

Silver Price Chart: Daily Timeframe (Nov 2018 – Jul 2019)

GOLD TRADING RESOURCES:

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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2019-07-02 11:00:00

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EU-Mercosur Deal Achieved After 20 Years Despite US Threats to Global Trade

Posted: 02 Jul 2019 01:31 AM PDT

Talking Points:

As the US seeks to disrupt world trade the EU is ramping up its trade deals to ensure frictionless trading of its goods worldwide
After 20 years a trade deal with Latam bloc Mercosur has been achieved, the biggest of its kind in terms of population it covers
EU trade deals could pressure the US to scale back as it could face being ousted from global trade

Just as international trade seems to be at a breaking point the EU has defied the threat to global growth by stepping up the amount of trade deals it has in place with various countries around the world. Even though Donald Trump and Xi Jinping emerged from a trade meeting on Saturday at the G-20 meeting in Osaka with a plan to continue talks in the future, the fact is that high tariffs are still in place and they threaten to disrupt world trade and global economies, so the EU has decided to do something about it.

As trade tensions reached a boiling point in the second quarter of 2019 with the US increasing tariffs on Chinese and Mexican goods and threatening to do so against a host of other countries, of which the EU is included, the European bloc has stepped in to sign various trade deals with countries around the world, with the latest being with Latam bloc Mercosur after more than 20 years of negotiations.

As the EU achieved trade deals with Mexico and Canada in 2018 and has a range of deals being drafted up to be in place by year end there is the possibility that the US could face increased pressure to scale back the extent of its proposed tariffs. If the EU leads the way to achieve free movement of goods with other countries around the world, the reliance on the US for world trade could be diminished, and Donald Trump's protectionism efforts could be reduced. Regardless of the intended outcome the EU showing the US that world trade can continue to thrive despite their continued efforts to disrupt it.

EU ramps up trade deals in 2019

It started in February with Japan in a trade deal dubbed as "cars for cheese" where barriers to trade were opened and almost all tariffs were dropped between the two countries. The deal reduced nearly €1 billion of EU tariffs, mostly on European agriculture products, and a reduction of the 10% duties on Japanese car imports to 0 by 2027. The deal eased some of the downward pressure experienced worldwide on the back of continuing Chinese and US trade tensions as the US faced retaliation. The deal led to US products that were bought by Japanese or EU consumers being replaced by cheaper imports from the other country in the trade deal. This meant that EU consumers could now buy cheaper Japanese cars, possibly reducing the import of US cars to the EU, and vice versa with most agricultural products from the EU replacing US products being shipped to Japan. At the time of the deal, European Commission president Jean-Claude Juncker described the pact as "a message to the world about the future of open and fair trade" and provided some relief to markets worldwide in the midst of escalated Sino-American trade tensions.

But relief was short-lived as in mid-May escalated trade tensions between China and the US culminated in increased tariffs being implemented by both countries, which put markets in a downward spiral, and with EU facing a slowing economy and struggling to keep inflation close to its 2% target the prospects of successful alternative trade deals was not very promising.

Increasing trade with developing countries

But with the threat of US tariffs being imposed on about $11 billion of EU goods, the European Union has looked for alternative importers for its products, if only to hedge against the risk that Donald Trump may deliver on his threat. To start of the second half of the year the EU has reached a trade deal with Vietnam, the first of its kind with a developing Asian country. Although the deal still needs to be approved by the European Parliament, which could show some resistance given concerns over Vietnam's human rights and freedom restrictions, it is the largest of its kind to be signed by the EU with a developing nation. It will look at reducing 99% of tariffs on Vietnamese and European goods with the remaining 1% reduced by quotas. Vietnam agrees to eliminate 65% of duties on EU exports as soon as the agreement comes into force with the remainder being phased out over a 10-year period, and the EU will eliminate 71% of tariffs immediately and the rest will be eliminated within a 7-year period. The EU is Vietnam's second largest exporter, only behind the US, but the deal is expected to create more than just free movement of goods, as non-tariff services such as banking and public procurement will also benefit from the deal.

One of the biggest and most recent trade deals the EU has reached is with Latam bloc Mercosur, which encompasses Argentina, Brazil, Uruguay and Paraguay. The deal is considered to be one of the biggest the EU has done to date and defies the current rise in protectionism around the world. Despite talks between the two blocs being in place since 1999, Donald Trump's election in 2016 and subsequent threat to free trade ramped up negotiations, leading to an agreement which will cover 780 million consumers. The EU's commissioner of trade has stated that the deal will save European companies €4 billion in duties and will give the EU a head-start against other countries in a time when trade deals between countries other than the US will be in high demand. As a result, we saw the Brazil 60 index opening 2% higher on Monday morning, and USDBRL down 0.87%.

PRICE GHRAPH: BRAZIL 60 HOURLY TIME-FRAME (June 3 – July 1)

PRICE CHART: USDBRL 5-MINUTE TIME FRAME (June 27 – July 1)

EU-Mercosur Deal Achieved After 20 Years Despite US Threats to Global Trade

US DOLLAR FORECAST, FED MONETARY POLICY, US GROWTH OUTLOOK– TALKING POINTS

US Dollar, stocks eyeing speech by Fed's John Williams
He is expected to provide his outlook on economy, policy
How can the G20 US-China trad truce impact his tone?

See our free guide to learn how to use economic news in your trading strategy!

The US Dollar and equity markets will be closely watching a speech by FOMC Vice Chairman John C. Williams where he will speak on the topics of global growth and outlook for monetary policy. Since February, US economic data has been tending to underperform relative to economists' expectations and the recognition of the wilting US economy is being reflected in a neutral-bordering-on-dovish shift in monetary policy.

As the US-China trade war continued to ravage global markets, the negative ripple effects boomeranged back to the US economy and caused central bank officials – particularly hawks – to pivot toward a more dovish or at the least neutral policy stance. While it is not Jerome Powell who is speaking, commentary from other members can have significant market impacts much like when James Bullard cooled aggressive rate cut bets.

The US Dollar tumbled after Bullard said that a 50-bps cut in July would be "overdoing it". It is possible that if Williams expresses dovish undertones, it may marginally increase rate cut expectations despite a recent cool-off after the US and China reached a trade truce at the G20 summit Osaka, Japan. The temporary respite from this fundamental headwind sent the US Dollar higher on the basis that it may cause a delay in rate cuts.

CHART OF THE DAY: USD INDEX (DXY) RE-TESTING FORMER SUPPORT AFTER RATE CUT BETS BEGUN TO COOL

FX TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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2019-07-02 06:30:00

An S&P 500 Record High Not Worth Trusting, A Dollar Recovery More Likely to Stall

Posted: 01 Jul 2019 10:28 PM PDT

G20 Talking Points:

The G-20 Summit this past weekend ended without further escalation to the burdensome trade wars, but it also wouldn’t alleviate them
Meanwhile, broad readings of global growth would mark a definitive weakening in economic health that should worry traders
A rally in benchmark risk assets like S&P 500 and a temporarily aligned Dollar should draw skepticism – especially with liquidity

What do the DailyFX Analysts expect from the Dollar, Euro, Equities, Oil and more through the 3Q 2019? Download forecasts for these assets and more with technical and fundamental insight from the DailyFX Trading Guides page.

The G-20 Aftermath

We start this new week, month and quarter with a meaningful fundamental charge. The two-day G-20 summit wrapped on Saturday, but this past session was the first time we would actually be able to respond to its outcome – as conflicted as it was. From US President Trump’s perspective, the agreement to avoid escalation in trade war tariffs between himself and Chinese President Xi Jinping was a success. The markets may struggle to draw the same degree of optimism from this outcome. If anything, the gathering of world leaders was an armistice between the world’s two largest economies. All the onerous tariffs put into place by both sides over the past months are still dragging down economic activity. Vowing to continue negotiations is practically the lowest possible commitment that can be made by these peers without faltering to a state of escalation.

Despite the lack of resolution in risk trends from this past weekend’s meeting, there was an unmistakable jump in speculative appetite through the opening hours of Monday. The rally wasn’t a broad conviction affair. There was a notable lack of liftoff from certain asset classes including commodities – a particular market with as much association to growth as to speculative appetite – and there was an unmistakable pacing difference between even related assets. Nevertheless, the S&P 500 (one of my favorite, imperfect measures of risk trends) posted one of its biggest gaps higher on an open in some time to overtake the previously established record high. It is difficult ot find a similar situation of such a jump at this bullish extreme in recent history. That leads me to more caution than blind enthusiasm on sentiment trends.

Chart of S&P 500 and Opening Gaps (Daily)

An S&P 500 Record High Not Worth Trusting, A Dollar Recovery More Likely to Stall

Adding a further complication to this formula, the over-indulgent interpretation of progress from the hold between the US and Chinese teams has a subsequent moderating influence on Fed rate expectations. Following the groups rate decision last month, a forecast for no changes in 2019 was read as a willingness to ramp up accommodation should growth go further off the rails. The sudden intensity of rate cut expectation at the beginning of June aligned – not by consequence – to the rally in the S&P 500 and drop from the Dollar index. Yet, if trade wars are not deepening, will the US central bank really be that pressed to provide such aggressive relief? Looking to Fed Funds rate futures, the probability of three 25-basis point rate cuts has cooled after this week’s start. There is still a generous two cuts priced in fully but that third move finds the market disputing its merits.

Chart of DXY Dollar Index and Implied Fed Funds Rate through December (Daily)

An S&P 500 Record High Not Worth Trusting, A Dollar Recovery More Likely to Stall

An Appreciation of Growth and Its Definitively Slowing

Trade wars wasn’t the only fundamental tune playing to start this week. We were also taking in a troubling assessment of global growth. For a more comprehensive view of the global economy’s forecast, the Bank for International Settlements (BIS) issued its forecast for the world’s economy. There were the regular warnings for external risks but there was also a tangible reflection for the struggle in growth. For a comprehensive view, the Bank for International Settlements (BIS) annual economic outlook offered the sense of caution we have come to expect from the generally pessimistic group. However, the point that stood out distinctly in my assessment was the warning that growth could not be sustained through monetary policy support this time around.

Stimulus from Largest Central Banks Balance Sheets Over S&P 500 (Monthly)

An S&P 500 Record High Not Worth Trusting, A Dollar Recovery More Likely to Stall

The more data-driven assessment of economic health was the overview of activity reports across the globe for the month of June – the final month of the second quarter and thereby clear bait for 2Q GDP interpretations. The PMIs – principally for manufacturing – were almost universally poor. The Chinese government and private (Caixin) manufacturing reports offered a contraction (any reading below 50.0) for the important economic engine. Where the Japanese reading was a secondary update, the Australian figures were new and an unexpected drop below the 50-mark in their own right. European figures were generally ‘final’ figures, but the Italian readings were an unflattering first round and the UK manufacturing sector was facing its worst performance in six years. Through North America, the Markit’s assessment of US factory activity was a modest upgrade from the initial post but the ISM’s version indicated the weakest showing since October 2016. Even Mexico’s manufacturing update was distinctly poor with the worst showing in the series’ relatively brief history – back to 2011.

Working Around the Known Throttling of Liquidity for Trades

With trade wars and general GDP already under scrutiny to start this week, it may seem like we are in a good position to find a swell of volatility in the week ahead. Yet, the reality is that we are facing a well-known liquidity curb. We are already seeing a restriction to trends arising from a structural issue between rampant speculation disconnected from practical fundamentals. That is only compounded by the assumptions afforded to the Summer doldrums which finds July one of the more restricted months for volatility via the VIX and turnover through S&P 500 volume. Putting even finer a point of the matter, this week holds the US Independence Day holiday which is a well-known drain on not just the US markets. This is simply far too much to override through the basis of a coasting performance alone.

Seasonal-Monthly Performance for S&P 500 Returns and Volume

An S&P 500 Record High Not Worth Trusting, A Dollar Recovery More Likely to Stall

If there is an inevitable drain to occur this week, then the prospect of robust moves is severely limited – whether the outlook is bullish or bearish for risk views. For the S&P 500’s gap to a record high, it would seem that the circumstances were most suiting as low volatility seems to favor an inverse correlation to capital market performance as speculative appetite feels reassured that the foundation will not drop out. Yet, to extend a venture into record territory is not the same as a coast to recovery lost ground in a well-traversed range. Not even rest-of-world equities, which are in that sort of position, are likely to find so favorable a tail wind. If anything, panic can override greed, but the frequency of fear necessary to hit in order to start an avalanche is very difficult to reach.

Looking for markets that are in a position to simply cover a well-established range is a more reasonable pursuit given the environment, but even then we should keep a sense of practicality as to what we can expect for progress. USDJPY’s reversal to start this week in technical and fundamental terms was an outlet that I was already looking at before the move registered; but now that we are here, USDCHF may be a more interesting representative. While it still holds a risk-connection, the Swiss franc is less dependent on its pace being set by sentiment. Add to that an observation that the currency is still stretched from its run these past weeks and the news that Switzerland was losing some access to the EU markets, and there is something more profound to consider. And, then there is the Australian Dollar, which was prepared for a rate cut from the RBA Tuesday morning. While perhaps not leveraged enough to override conflicts via AUDUSD or AUDJPY, there are other crosses to consider. We discuss all of this and more in today’s Trading Video.

Chart of USDCHF and the 1-Day Rate of Change (Daily)

An S&P 500 Record High Not Worth Trusting, A Dollar Recovery More Likely to Stall

If you want to download my Manic-Crisis calendar, you can find the updated file here.

2019-07-02 05:08:00

Australian Dollar Whipsaws As RBA Cuts Rates For Second Straight Month

Posted: 01 Jul 2019 09:51 PM PDT

The Australian Dollar fell initially but bounced quickly on news that the Official Cash Rate had been cut to a new record low of 1%, following an earlier reduction in June.
2019-07-02 04:23:00

Reserve Bank of Australia (RBA) Rate Cut to Rattle AUDUSD Rebound

Posted: 01 Jul 2019 08:37 PM PDT

Trading the News: Reserve Bank of Australia (RBA) Interest Rate Decision

The Reserve Bank of Australia (RBA) interest rate decision may rattle the recent rebound in AUDUSD as the central bank is expected to reduce the official cash rate (OCR) to a fresh record-low of 1.00%.

The RBA is anticipated to lower the cash rate by another 25bp in July despite the trade truce between the US and China, Australia's largest trading partner, as Governor Philip Lowe insists that "the Board seeks to wind back spare capacity in the economy and deliver inflation outcomes in line with the medium-term target."

In turn, a reduction in the OCR along with a dovish forward guidance may curb the recent rebound in AUDUSD, with the Australian dollar at risk of facing additional headwinds over the near-term as Governor Lowe states that "the possibility of lower interest rates remains on the table."

However, a more bullish scenario may arise for the Australian dollar should the RBA keep the benchmark interest rate at 1.25%.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss key themes and potential trade setups surrounding foreign exchange markets.

Impact that the RBA interest rate decision had on AUD/USD during the last meeting

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUN

2019

06/04/2019 04:30:00 GMT

1.25%

1.50%

+18

June 2019 Reserve Bank of Australia (RBA) Interest Rate Decision

AUD/USD 5-Minute Chart

Image of audusd 5-minute chart

The Reserve Bank of Australia (RBA) cut the official cash rate (OCR) by 25bp to a fresh record of 1.25% in June, with the central bank stating that "today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy."

It seems as though the RBA will continue to change its tune over the coming months as "recent inflation outcomes have been lower than expected," but Governor Philip Lowe and Co. appear to be in no rush to reestablish a rate easing cycle as "the central scenario remains for the Australian economy to grow by around 2¾ per cent in 2019 and 2020."

The Australian dollar held its ground despite the 25bp rate cut as the RBA shows limited interest in delivering a back-to-back rate cut, with AUDUSD consolidating throughout the day to close at 0.6991. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Rate Daily Chart

Keep in mind, the AUD/USD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7100), with the exchange rate marking another failed attempt to break/close above the moving average in April.
In turn, AUD/USD remains at risk of giving back the rebound from the 2019-low (0.6745) as the wedge/triangle formation in both price and the Relative Strength Index (RSI) unravels.
However, lack of momentum to hold above the 0.7020 (50% retracement) pivot has pushed AUDUSD back towards the 0.6950 (61.8% expansion) to 0.6960 (38.2% retracement) area, with the next downside region of interest coming in around 0.6850 (78.6% expansion) to 0.6880 (23.6% retracement)

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide.

Are you looking to improve your trading approach? Review the 'Traits of a Successful Trader' series on how to effectively use leverage along with other best practices that any trader can follow.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

2019-07-02 03:30:00

ASX 200 Bulls Keep Eyes on Record Peak As Momentum Holds Up

Posted: 01 Jul 2019 07:22 PM PDT

ASX 200 Technical Analysis Talking Points:

The ASX seems to have consolidated without losing too much altitude, if any
This would seem to be a very bullish sign
However, there are also indications that the market is quite uncertain

Find out what retail foreign exchange traders make of the Australian Dollar's chances right now at the DailyFX Sentiment Page.

The ASX 200 is still testing the top of its dominant uptrend channel, but the bulls have obviously not given up hope of driving onward to the record peak, now fewer than 200 points above the market.

The fundamental story looks clear enough. The prospect of lower global interest rates (not least in Australia), has given most major stock markets a lift. Last weekend's news that China and the US have shied away from imposing further tariffs on each other's imports may not be quite the trade progress markets desperately need, but at least the two titans are still talking.

It may be that markets are overpricing the extent of likely easing. For one thing the US President has said that tariffs against Mexico are now off the table, and that prospect was a big part of the latest re-pricing of US rates. Other central bankers, notably Australia's Philip Lowe, have wondered aloud about how effective further rate cuts might be.

Still the Australian Dollar has also slipped a little against its us cousin, possibly burnishing the appeal of domestic stocks to offshore buyers.

Technically the ASX has been confined to a short term daily chart range between 6605 and 6700 since June 18.

Perhaps maddeningly this has also seen it bounce along the top of that uptrend channel without a conclusive break. Bulls may well see this as a good sign, as altitude has clearly been sustained even as momentum winds back from the overbought levels of late June.

However there have also been many recent days where the gap between the open and the close has been extremely narrow. Spells such as this can indicate heightened uncertainty in a market and the uncommitted may want to see how this one plays out.

It's hard to get too bearish about the ASX at this point, to be sure, but a clear retracement back into the upward channel could see support from mid-June in the 6570 area tested again, even if it would probably hold barring some bad fundamental news out of left-field.

If however the bulls can hold the line then they'll try to consolidate above the 6700 range top before girding themselves for another shot at the record.

ASX 200 Resources for Traders

Whether you're new to trading or an old hand DailyFX has plenty of resources to help you. There's our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There's also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they're all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

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2019-07-02 02:00:00

USDCHF May be the Best Dollar Bullish Option for Trade War Status Quo

Posted: 01 Jul 2019 06:46 PM PDT

USDCHF Talking Points:

My focus for a positive turn for trade wars after the G-20 meeting was USDJPY owing to the Dollar and risk-linked benefits
The actual outcome for trade relations following the summit was more ‘status quo’ which present serious doubt on risk trends
For a counterpart to the Greenback that aligns to a scenario of passive strength, USDCHF may offer a better overall mix

See how retail traders are positioning in USDCHF and USDJPY along with the other major Dollar-based majors using the DailyFX speculative positioning data on the sentiment page.

This week’s top scheduled event risk didn’t even take place within the 7-day time frame. Rather, the two-day G-20 summit in Osaka, Japan concluded on Saturday; so the first opportunity to respond to its outcome wasn’t until liquidity was restored on Monday. While there were a range of points under discussion, the principal concern in this meeting of leaders was the state of trade – both across the globe and specifically between the United States and China.

As with most known events with heavy potential for fundamental impact, I evaluated the various scenarios to see if there was particular opportunities that could be pursued should the market conform to the logic. For a worsening of trade wars, my focus was gold – outside of the FX space as the implications for traditional fiat stability would be far more severe than any individual opportunity or detriment amongst the majors. Alternatively, my preference for an improvement in relations between the two nations was for a USDJPY rally. The combination of an improved outlook for risk trends would favor buoyancy behind all Yen crosses while the Dollar would stand to benfeit the relief afforded to the currency at the center of all the trade war pressure.

Chart of USDJPY and Opening Gaps (Daily)

Ultimately, the latter pair responded in line with the assessment after the stakes of the meeting were tallied. Technically-speaking, USDJPY put in for a very provocative move with a gap higher on the open of the week that would clear resisance on a desending trend channel. While this is an impressive response, I am concerned with the potential of follow through. The outcome of the G20 was not in fact a true improvement for the state of trade around the world. Instead, it was an unexpected status quo – whereby the US didn’t follow through with escalations but negotiations would continue into the future – which will struggle to tap genuine conviction. That is a particularly difficult trend to sustain against the backdrop of a liquidity drain for the holiday week.

USDCHF May be the Best Dollar Bullish Option for Trade War Status Quo

A potentially better candidate for this particular middling outcome with a strong technical response for the Dollar and some motivation to see a countercurrency contribute to the mix is USDCHF. For the Swiss currency’s part, we have recent headlines that Swiss stock markets have effectively lost direct access to EU investors. While a financial cap, this will not likely upset the Swiss National Bank (SNB) which has struggled to keep the local currency capped through policy efforts in an effort to leverage growth. There is also a modest connection to risk trends with the Franc playing a different, but more appropriate haven for recent circumstances, which could benefit from a coast higher in risk that also doesn’t tie it down should it falter (both currencies are sought in safety for different reasons).

Chart of USDCHF and 1-Day Rate of Change (Daily)

USDCHF May be the Best Dollar Bullish Option for Trade War Status Quo

Ultimately, this is a Dollar-based major that aligns more naturally the technicals and fundamentals than the likes of the EURUSD, USDJPY or NZDUSD. However, USDCHF doesn’t override the practical limitations of liquidity – a factor of what I consider ‘market conditions’. If the liquidity drain between structural complacency, Summer doldrums and the week of the Independence Holiday in the US tames all markets, this pair would similarly lose traction.

If you want to download my Manic-Crisis calendar, you can find the updated file here.

2019-07-02 01:09:00

EURUSD Downtrend May Hasten as USTR Proposes $4 Billion EU Tariffs

Posted: 01 Jul 2019 04:18 PM PDT

Asia Pacific Market Open Talking Points

EURUSD may extend losses as US turns trade war front towards Europe
USD rose as US-China trade truce cooled dovish Fed monetary policy bets
AUDUSD eyeing an RBA rate cut, will the central bank signal more to come?

Not sure where the Euro is going next? We just released the third quarter EUR fundamental and technical forecast!

Another Trade War Front Looms as Trump Eyes Europe

EURUSD is aiming narrowly lower as the White House proposed pushing an additional $4b in tariffs against the European Union, shortly after the US reached a trade truce with China from this weekend's G20 Summit. According to the United States Trade Representative, the purpose of these if to "enforce US rights in the WTO against the EU" over aircraft subsidies.

The timing of the tariff threat is very interesting, just last week the EU launched INSTEX which is a vehicle for Iran to sidestep sanctions that the US imposed on them. This sent crude oil prices lower after being unable to clear a falling trend line from April as this cooled supply disruption concerns. More to the point, this may offer another reason for Trump to retaliate against the EU which may further sink the Euro.

EURUSD Technical Analysis

After the biggest loss in a single day for EURUSD since March (-0.76%), the pair could be looking at further declines to near-term support next. This is a combination of the former falling resistance channel from the beginning of this year and what could be a potential rising trend line from late May (blue line below). On the other hand, near-term resistance appears to be well solidified at 1.1403.

EURUSD Daily Chart

*Charts Created in TradingView

USD Gains as Dovish Fed Bets Cool Post G20 Summit

The US Dollar outperformed against its major counterparts, with DXY clocking in its best day since March (+0.7%). It saw initial strength at this week's market open where "risk-on" trade followed this weekend's G20 Summit in Osaka, Japan. There, the world's largest economic superpowers agreed to a trade truce, restarting talks for the time being.

While this offered a boost to equities, follow-through was notably underwhelming. The S&P 500, while gapping higher, spent most of its day trading lower and ended just 0.77% to the upside. This may have been due to ebbing dovish Fed monetary policy expectations which offered USD a boost as local 2-year government bond yields rallied. Better-than-expected ISM PMI data also didn't hurt.

Tuesday's Asia Pacific Trading Session

S&P 500 futures are now pointing deeper into negative territory and the anti-risk Japanese Yen is aiming higher against its major counterparts. More of the same appears to be ahead. Meanwhile, the pro-risk Australian Dollar is looking to an RBA rate cut that is 86% priced in by overnight index swaps. Needless to say, a rate hold will likely bolster the Aussie. But, the focus will be on whether or not the central bank could deliver another one by year-end.

I will be covering the Australian Dollar and how it responds to the RBA beginning at 4:15 GMT, come and join where I will also be taking a look at the AUDUSD outlook!

FX Trading Resources

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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2019-07-01 23:00:00

US Dollar Weakness May Fuel Gold and EURUSD Gains

Posted: 01 Jul 2019 12:35 PM PDT

US Dollar hovers near a nine-month support line. A review of the Elliott wave charts shows a break below the support line may drive gold, EURUSD, and GBPUSD higher.

The video above is a recording of a US Opening Bell webinar from July 1, 2019. We focused on the Elliott wave patterns for key markets such as gold, silver, DXY, EURUSD, GBPUSD, USDJPY, and crude oil.

US Dollar Elliott Wave Pattern Suggests a Top is in

The US Dollar has been toying with a nine-month trend line. We can count the minimum waves in place for an (A)-(B)-(C) Elliott wave zigzag pattern beginning in February 2018. This proposed zigzag has corrected a Fibonacci 61.8% of the 2017 down trend. If this is correct, then we suspect this trend line is about to break.

Should this trend line break, the next layer of support comes in near 92-94. From there, the wave counts diverge with some suggesting a run at new highs near 100 while others hint towards deeper weakness into the low 80's. We will watch the structure of any correction to tip our hands and provide clues as to which is the higher probability path.

Gold prices accelerate through resistance

Gold's break of $1365 suggests the three-year Elliott wave triangle pattern ended in May 2019. Since triangles appear in the wave prior to an ending wave, this means the current move higher is a terminal wave. Though we suspect there is more upside potential, when this uptrend exhausts, it would place the finishing touches on the entire upward correction that began December 2015.

Some initial targets of this move higher appear near $1469 and near $1600. Gold does not have to rally this far to satisfy the Elliott wave count as the current rally is considered an upward correction. However, adjacent and alternating waves tend to have Fibonacci price relationships with one another so these upward zones help keep us grounded as to the rally's potential.

EURUSD Rally Falls short of key 1.1448 level

The softness in US Dollar Index has produced strength in EURUSD. However, this strength has yet to break above the key 1.1448 level. Above 1.1448 we can eliminate an alternate count that immediately calls for another dip to new lows. Additionally, above 1.1448 builds the case that a significant low is in place for EUR/USD and that it may rally to 1.18 and possibly higher levels.

Elliott Wave Theory FAQ

How does Elliott Wave theory work?

Elliott Wave theory is a trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders analyze the waves for 5-wave moves and 3-wave corrections to determine where the market is at within the larger pattern. Additionally, the theory maintains three rules and several guidelines on the depth of the waves related to one another. Therefore, it is common to use Fibonacci with Elliott Wave analysis. We cover these topics in our beginners and advanced Elliott Wave trading guides.

After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.

—Written by Jeremy Wagner, CEWA-M

Jeremy Wagner is a Certified Elliott Wave Analyst with a Master's designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy's Elliott Wave reports via his bio page.

Join Jeremy in his live US Opening Bell webinar where these markets and more are discussed through Elliott wave theory.

Follow Jeremy on Twitter at @JWagnerFXTrader .

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2019-07-01 19:22:00