Trade War and Trump European Trip Boost US Dollar

The US dollar was higher across the board against major pairs on Friday. Trade war concerns rose heading into the weekend and the comments from US President Donald Trump during the week sparked a rally of USD buying. Trump has been outspoken on NATO, trade and the Brexit deal while economic indicators and the US Fed have been supportive of the greenback. The Trump administration has said that it would add 10 percent tariffs on additional $200 billion Chinese goods if the Asian nation retaliates. U.S. Federal Reserve Chair Jerome Powell highlights the week with his semi annual testimonies.

  • US retail sales expected to slow down
  • Fed Chair Powell to testify before congress and senate committees
  • Canadian inflation and retail sales data out on Friday

**Dollar Firmer on Trade Tensions and Fed Comments **

The EUR/USD fell 0.80 in the last five sessions. The single currency is trading at 1.1648 after the EUR lost ground int he first four days of the week, only to mount a half hearted recovery on Friday. The pair started the week trading at 1.1763 and will close at 1.1685. Hawkish Fed member rhetoric and strong inflation indicators in the US did their part on the fundamental side, but with geopolitics playing such an important part the focus of investors was on the ongoing trade war with China. The USD became a safe haven and attracted flows looking to hedge against uncertainty.



The U.S. Federal Reserve has lifted interest rates twice already in 2018 and Fed members have been out in numbers endorsing one or two more additional hikes. The tone of the testimonies from Chair Powell to the congress and senate committees will guide the currency.

European inflation data will be released on Wednesday and is expected to remain steady at 2.0 percent. US retail sales data is expected to drop to a small gain of 0.4 percent but the emphasis will be on Fed Chair Powell’s testimony alongside other member comments during the week. The G20 financial summit will be held in Buenos Aires starting on Friday, July 20 which will be interning as trade spats have escalated to tariff wars but have yet to fully impact global markets.

Yen Loses Safe Haven Appeal

The USD/JPY gained 1.83 percent during the week. The currency pair is trading at 112.47 with the yen one of the biggest losers against the USD in the past five sessions. The Japanese currency shed its safe haven status as a major source of its exports has been targeted in the trade wars (auto) and the US yield curve flattening making the greenback a more attractive destination.



Bank of Canada Hike Can’t Compete with Trade Concerns

The USD/CAD gained 0.65 percent in the last five days. The currency pair is trading at 1.3174 even after the Bank of Canada (BoC) made the benchmark interest rate 25 basis points higher on Wednesday. The official rate is now 1.50 percent, closing the gap with the Fed funds rate alongside some hawkish forecasts of the economy by Governor Poloz.


Canadian dollar weekly graph July 9, 2018

The main headwind for the loonie has been the current geopolitical climate, trade in particular. The Canadian economy is heavily dependant on its relationship with the US and the Trump administration has been pushing for a deep NAFTA renegotiation in exchange to exempt Canada form other tariffs.

The loonie got little support from oil prices with West Texas Intermediate falling since the higher than expected supplies coming online. The weekly inventories posted a large drawdown, but ends of disruption in Libya and a softer stance on Iranian oil by the US is pushing crude prices down. US officials are considering dipping into the oil receiver to prevent a sharp price increase.

Brexit Pressure and Trump Comments Take Down Pound

The GBP/USD lost 0.81 percent in the last week. The currency pair is trading at 1.3178 in the aftermath of a softer Brexit plan drafted by Prime Minister Theresa May was published. The strategy has already resulted in multiple resignations from hard line Brexiteers in May’s government but so far has been short on details. The EU withdrawal bill will be voted next week and then the UK government will sit down with the EU to keep hashing out the Brexit negotiation



UK data will be released that could end up putting the Bank of England (BoE) August rate hike out of reach. Labor data, inflation and retail sales are all due during the week. The Brexit negotiation continues to be a bumpy ride and that is only on the domestic side, EU negotiators might not agree with May’s promises back home regardless of the political cost.

Sunday, July 15
10:00pm CNY GDP q/y
Monday, July 16
8:30am USD Core Retail Sales m/m
USD Retail Sales m/m
6:45pm NZD CPI q/q
9:30pm AUD Monetary Policy Meeting Minutes
Tuesday, July 17
4:30am GBP Average Earnings Index 3m/y
4:30am GBP BOE Gov Carney Speaks
10:00am USD Fed Chair Powell Testifies
Wednesday, July 18
4:30am GBP CPI y/y
8:30am USD Building Permits
10:00am USD Fed Chair Powell Testifies
10:30am USD Crude Oil Inventories
9:30pm AUD Employment Change
Thursday, July 19
4:30am GBP Retail Sales m/m
Friday, July 20
8:30am CAD CPI m/m
8:30am CAD Core Retail Sales m/m

What sparked the dollar rally ? ( OANDA Trading Podcast on Money FM 89.3)

Stephen Innes Head of Trading Asia tells Michael Switow why the yen is weak, and stocks are rallying.

Money FM Singapore 89.3

 

 

USD/CAD – Canadian dollar dips, US consumer confidence next

The Canadian dollar has posted losses in the Friday session, erasing the gains from the Thursday session. Currently, USD/CAD is trading at 1.3197, up 0.31% on the day. There are no Canadian releases on the schedule. In the U.S, the key event is UoM Consumer Sentiment, which is expected to dip to 98.1 points.

Federal Reserve Chair Jerome Powell gave the U.S economy a solid report card on Thursday. In a radio interview, Powell said that the economy is “in a really good place”, pointing to President Trump’s massive tax cut scheme and increased spending as key factors in boosting economic growth. Powell did not address monetary policy and said he was uncertain as to the effects of the current trade disputes which has embroiled the U.S and its trading partners. The Fed will likely press the rate trigger in the second half of the year, but it is an open question as to whether we’ll see one hike over the next six months. The Fed is projecting growth of 2.8% in 2018, compared to 2.3% in 2017. Powell will be in the spotlight next week when he appears for his semi-annual testimony before Congress.

After weeks of hints, the Bank of Canada pressed the rate trigger on Wednesday. The hike of 25 basis points raised the benchmark rate to 1.50%, its highest level since December 2008. The Bank followed up with a hawkish rate statement, as policymakers noted that the economy continues to operate close to capacity. The BoC has upwardly revised its growth forecast for Q2 from 2.5% to 2.8%, and projected inflation to climb to 2.5%, before falling to 2% in the second half of 2019. As for the escalating trade war, the BoC said that U.S tariffs on steel and aluminum and retaliatory tariffs by Canada would lower economic growth. However, the effect of the tariffs would be modest, due to strong global demand and high commodity prices. Despite the rate hike and hawkish comments from the BoC, the Canadian dollar lost ground against the greenback on Wednesday.

  The sky hasn’t fallen just yet

  First signs of tariffs impact in China’s June trade numbers

Friday (July 13)

  • 8:30 US Import Prices. Estimate 0.1%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.1
  • 10:00 US Preliminary UoM Inflation Expectations
  • 11:00 US Fed Monetary Policy Report

*All release times are DST

*Key events are in bold

 

USD/CAD for Friday, July 13, 2018

USD/CAD, July 13 at 6:55 DST

Open: 1.3155 High: 1.3205 Low: 1.3152 Close: 1.3197

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2970 1.3067 1.3160 1.3292 1.3436 1.3530

In the Asian session, USD/CAD ticked lower but then recovered. The pair has edged higher in European trade

  • 1.3160 is providing support
  • 1.3292 is the next line of resistance
  • Current range: 1.3160 to 1.3292

Further levels in both directions:

  • Below: 1.3160, 1.3067, 1.2970 and 1.2831
  • Above: 1.3292, 1.3436 and 1.3530

DAX steady as investors search for cues

The DAX index is showing limited movement in the Friday session. Currently, the DAX is at 12,510, up 0.14% on the day. On the release front, there are no major German or eurozone events. The German Wholesale Price Index dipped to 0.5% in June, down from 0.8% a month earlier. This edged above the estimate of 0.4%.

European equity markets held their own this week, and the DAX and the CAC indexes have shown little movement over the week. Still, the trading tensions hovering in the air have many investors wondering if this is the calm before the storm. On Tuesday, the Trump administration said it was considering imposing tariffs on some $200 billion in Chinese goods, which would be a significant escalation in the trade war between the two economic giants. China has promised to respond with “firm and forceful measures”, but hasn’t provided any details. With neither side showing any flexibility, the markets could be heading for stormy waters if China retaliates.

At last month’s ECB policy meeting, the markets finally received some clarity with regard to the Bank’s asset-purchase program (QE). ECB President Mario Draghi said that the ECB would taper the purchases from EUR 30 billion to 15 billion in September, and terminate the program completely in December. True to form, Draghi left open the possibility of extending QE if needed. Still, with the eurozone economy generally performing well and inflation up to 1.7%, the markets are optimistic that the ECB will wind up QE on schedule. That means that attention is focusing on the timing of a rate hike. At the June meeting, the ECB said it would keep hold rates at current levels “through the summer” of 2019, but this wording is vague, leaving the precise timing open to debate. Does this phrase mean that that the ECB will wait until the October meeting, or could the ECB raise rates during the summer, if conditions warrant a hike? ECB policymakers will be carefully monitoring growth and inflation data in the eurozone, with strong numbers reinforcing the case to raise interest rates sooner rather than later.

  The sky hasn’t fallen just yet

  First signs of tariffs impact in China’s June trade numbers

Economic Calendar

Friday (July 13)

  • 2:00 German WPI. Estimate 0.4%
  • All Day – ECOFIN Meetings

*All release times are DST

*Key events are in bold

DAX, Friday, July 13 at 6:10 DST

Previous Close: 12,492 Open: 12,539 Low: 12,498 High: 12,584 Close: 12,521

EUR/USD – Euro heads downward, investors eye US consumer confidence

EUR/USD has posted losses in the Friday session. Currently, the pair is trading at 1.1615, down 0.48% on the day. In economic news, German Wholesale Price Index dipped to 0.5% in June, down from 0.8% a month earlier. Still, this beat the estimate of 0.4%. In the U.S, the key indicator is UoM Consumer Sentiment, which is expected to dip to 98.1 points.

At the ECB’s June policy meeting, Mario Draghi spelled out his plans to wind up the Bank’s asset-purchase program (QE). Draghi said that the ECB would taper the purchases from EUR 30 billion to 15 billion in September, and terminate the program completely in December. True to form, Draghi left open the possibility of extending QE if needed. Still, with the eurozone economy generally performing well and inflation up to 1.7%, the markets are optimistic that the ECB will wind up QE on schedule. That means that attention is focusing on the timing of a rate hike. At the June meeting, the ECB said it would keep hold rates at current levels “through the summer” of 2019, but this wording is vague, leaving the precise timing open to debate. Does this phrase mean that that the ECB will wait until the October meeting, or could the ECB raise rates during the summer, if conditions warrant a hike? ECB policymakers will be carefully monitoring growth and inflation data in the eurozone, with strong numbers reinforcing the case to raise interest rates sooner rather than later.

Jerome Powell spoke in a radio interview on Thursday, and gave the U.S economy as solid report card. Powell said that the economy is “in a really good place”, pointing to President Trump’s massive tax cut scheme and increased spending as key factors in boosting economic growth. Powell did not address monetary policy and said he was uncertain as to the effects of the current trade disputes which has embroiled the U.S and its trading partners. The Fed will likely press the rate trigger in the second half of the year, but it is an open question as to whether we’ll see one hike over the next six months. The Fed is projecting growth of 2.8% in 2018, compared to 2.3% in 2017. Powell will be in the spotlight next week when he appears for his semi-annual testimony before Congress.

  The sky hasn’t fallen just yet

  First signs of tariffs impact in China’s June trade numbers

EUR/USD Fundamentals

Friday (July 13)

  • 2:00 German WPI. Estimate 0.4%. Actual 0.5%
  • All Day – ECOFIN Meetings
  • 8:30 US Import Prices. Estimate 0.1%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.1
  • 10:00 US Preliminary UoM Inflation Expectations
  • 11:00 US Fed Monetary Policy Report

*All release times are DST

*Key events are in bold

EUR/USD for Friday, July 13, 2018

EUR/USD for July 13 at 4:35 DST

Open: 1.1672 High: 1.1675 Low: 1.1627 Close: 1.1615

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1312 1.1434 1.1553 1.1637 1.1728 1.1829

EUR/USD inched lower in the Asian session and has posted further losses in European trade

  • 1.1553 is providing support
  • 1.1637 is the next resistance line

Further levels in both directions:

  • Below: 1.1553, 1.1434 and 1.1312
  • Above: 1.1637, 1.1728, 1.1829 and 1.1910
  • Current range: 1.1553 to 1.1637

The sky hasn’t fallen just yet

Trade War Escalates, but the sky hasn’t fallen just yet as optimism crept back into the market on reports of fresh bilateral trade negotiations between China and the US coupled with a slightly firmer RMB scrim. “Where there is a will, there is a way”. But when it comes to backroom negotiations, one can only imagine that talk is not going to come cheap.

The broader market continues to remain in wait and see mode for further details on how China might retaliate on trade, while equity markets continue to press higher under the guise that “no escalating news is good news”. Indeed equity markets continued to retrace the sharp mid-week sell-off. But again, the US technology sector comes shining through as US internet and technology stalwarts are leading markets to a solid finish in Thursday’s New York session.

While investors could be breathing a sigh of relief, they’re probably just happy their investment portfolios are breathing and alive and kicking after the latest trade war episode. But even the most pessimistic investors must take note of just how enduringly bullish these markets are, after having everything thrown at them including the kitchen sink (Trade, Italy Germany, Long Bond Rates). It’s incredible what global bourses have withstood all this harmful noise and continue to march higher. But indeed, the solid foundation of a bull market is that it ignores the bad news and keep on grinding higher. And one can only imagine what levels the S&P would be trading if trade war fizzled out.

Equities shrug off trade tariff tensions

Speaking of bull markets, USDJPY continues to grind higher and perhaps a bit of the above is starting to factor in (i.e. ignore the bad news and keeps moving higher). The break above 111.75 was one of the most unambiguous signals in some time, and a move into the 113’s could trigger an unwind in longer-term structural risk-off (long JPY) positions which could see this current rally extend much higher.

There was little movement on Powell interview on Marketplace but here are the full transcripts.

Chairperson Powell’s Marketplace interview

And the NATO summit ended on a more cheerful note, with President Trump reaffirming his commitment to the alliance while focusing more closely on the financial obligations of the other countries. So, the market is happy to hear the NATO band marching on.

Oil market

The oil markets are trying to make some inroads after Wednesday’s spill, but are having trouble holding both tops and momentum. I think this is a one-part trade war and one-part supply coming back online. But Wednesday was one of those steep selloffs on record volumes that will give even the bravest of bull’s cause /pause for thought about holding long positions, especially into the weekend. On the supply front, the latest news from Libya is short-term bearish with the El Feel or Elephant field restarting for the first time since February, and there is some discussion suggesting the supply rebound could increase and more than offset the impacts from the Eastern port closures.

Gold market

The precious space continues to hold critical support at $1,240, but the Gold complex is still hovering in the mixed territory zone. The global equity market is bouncing higher overnight, and there are very few defensive allocations into Gold. However, with Fed Chair Powell not ringing any alarm bells for more aggressive fed tightening, gold picked up a bit of goodwill. But ultimately, the USD looks to be on solid footing while preparing to take the driver seat once again, especially on USDJPY, which should hold the gold bulls at bay.

Currency Markets

The USD is looking to get back in in the driving seat once again.

JPY: USDJPY is signalling the most significant break out in years, and the long USDJPY is a position severely under-owned which suggests the pair will explode higher on any positive news. One can only imagine where spot will trade if an intense wave of risk on kicks in or trade war fizzles out.

CNH: The Yuan remains at the centre of all the action, but with further signs of policy easing on the cards given the economic slowdown has been much deeper rooted than feared, markets will continue to buy dips until a definitively positive shift in trade war sentiment.

USDAsia
Strong demand on the platform for long USDAsia is consistent with the general market views.

Trade war escalation is a definite plus for the dollar and coupled with robust US economic data; it does support this view.

MYR: Despite some optimism creeping back in on reports of bilateral trade negotiations between China and the US, while most of $Asia pulled back from yesterday morning highs, the Ringgit continued to lag the moves.

The Ringgit continues to suffer from political risk and fiscal uncertainty. If the USD does start to reassert itself and coupled with short-term bearish signals on oil prices,  the USDMYR will likely slice through the 4.05 level like a hot knife through butter in this environment.

INR The Ruppe hit and all-time interday  low and has now plummeted over 7.6 % versus the USD will wiping out a significant portion of carry-trades in its wake. But the Rupee will continue to trade at the mercy of oil prices

KRW.After testing 1130.00, the dissenting policy vote injected some life into the Won and coupled with the firmer RMB backdrop saw the USDKRW fall below the 1124 level. The won will be the go-to trade on the escalation of trade war tensions, but in the meantime, the RMB complex will continue to dictate the pace of play

USD/CAD – Canadian dollar halts slide, U.S consumer inflation remains soft

The Canadian dollar has posted gains in the Thursday session. Currently, USD/CAD is trading at 1.3152, down 0.43% on the day. In the U.S, the focus is on inflation reports. CPI edged down to 0.1%, shy of the forecast of 0.2%. Core CPI remained steady at 0.2%, matching the forecast. Unemployment claims dropped to 214 thousand, easily beating the estimate of 226 thousand. In Canada, the New Housing Price Index remained pegged at 0.0%, short of the estimate of 0.1%. The indicator has not posted a gain since November. On Friday, the U.S releases the UoM Consumer Sentiment report.

The Bank of Canada has been hinting for weeks that a rate hike was coming, and made good on this promise on Wednesday. The Bank raised rates by a quarter-point, bringing the benchmark rate to 1.50%. This is the highest level since December 2008. The Bank followed up with a hawkish rate statement, as policymakers noted that the economy continues to operate close to capacity. The BoC has upwardly revised its growth forecast for Q2 from 2.5% to 2.8%, and projected inflation to climb to 2.5%, before falling to 2% in the second half of 2019. As for the escalating trade war, the BoC said that U.S tariffs on steel and aluminum and retaliatory tariffs by Canada would lower economic growth. However, the effect of the tariffs would be modest, due to strong global demand and high commodity prices. Despite the rate hike and hawkish comments from the BoC, the Canadian dollar lost ground against the greenback on Wednesday.

Investors continue to keep a close eye on the trade war being waged by the U.S and its major trading partners, particularly China. After the U.S and China imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps which will make it more difficult for U.S companies to do business in China. The U.S dollar has benefited from the recent trade battles, and if this trend continues, the euro could be facing some substantial headwinds.

  Equities shrug off trade tariff tensions

  US Inflation Eyed as Markets Pare Losses

Thursday (July 12)

  • 8:30 Canadian NHPI. Estimate 0.1%. Actual 0.0%
  • 8:30 US CPI. Estimate 0.2%. Actual 0.1%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
  • 8:30 US Unemployment Claims. Estimate 226K. Actual 214K
  • 10:30 US Natural Gas Storage. Estimate 55B
  • 13:01 US 30-year Bond Auction
  • 14:00 US Federal Budget Balance. Estimate -92.3B

Friday (July 13)

  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.1

*All release times are DST

*Key events are in bold

 

USD/CAD for Thursday, July 12, 2018

USD/CAD, July 12 at 8:40 DST

Open: 1.3211 High: 1.3219 Low: 1.3150 Close: 1.3152

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2831 1.2970 1.3067 1.3160 1.3292 1.3436

USD/CAD ticked lower in the Asian and has posted slight losses in European trade. The pair continues to head lower in North American trade

  • 1.3067 is providing support
  • 1.3160 has switched to a resistance role following losses by USD/CAD on Thursday. It is a weak line
  • Current range: 1.3067 to 1.3160

Further levels in both directions:

  • Below: 1.3067, 1.2970 and 1.2831
  • Above: 1.3160, 1.3292, 1.3436 and 1.3530

DAX gains ground as German CPI matches estimate

The DAX index has posted considerable gains in the Thursday session, rebounding after losses on Wednesday. Currently, the DAX is at 12,503, up 0.69% on the day. On the release front, German Final CPI slipped to 0.1% in June, down from 0.5% a month earlier. Still, the reading matched the estimate. Eurozone Industrial Production rebounded with a strong gain of 1.3%, edging above the forecast of 1.2%. The ECB released the minutes of its June policy meeting. On Friday, Germany releases the Wholesale Price Index.

Trade tensions between the U.S and its trading partners continue, keeping investors uneasy. Although the equality markets have reacted negatively to the trade tariffs, the overall impact on the markets has been muted. German markets, for example, have posted gains in July. The U.S and China imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps, such as making it more difficult for U.S companies to do business in China, or lowering the value of the Chinese yuan.

With the ECB poised to wind up its asset-purchase program in September, attention is now focusing on the timing of a rate hike by the central bank. In June, the ECB said it would keep hold rates at current levels “through the summer” of 2019, but this wording is vague, leaving the precise timing open to debate. Does this phrase mean that that the ECB will wait until the October meeting, or could the ECB raise rates during the summer, if conditions warrant a hike? It would seem unlikely that policymakers will raise rates before the asset-purchase program is terminated, but the ECB has not shut the door on such a scenario. The ECB is forecasting that inflation will reach 1.7% in 2018, which is not far from its target of just below 2 percent. If oil prices were to surge and send inflation higher, there will be more pressure on policymakers to raise interest rates.

  Equities shrug off trade tariff tensions

  US Inflation Eyed as Markets Pare Losses

Economic Calendar

Thursday (July 12)

  • 2:00 German Final CPI. Estimate 0.1%. Actual 0.1%
  • 5:00 Eurozone Industrial Production. Estimate 1.2%. Actual 1.3%
  • All Day – Eurogroup Meetings
  • 7:30 ECB Monetary Policy Meeting Accounts

Friday (July 13)

  • 2:00 German WPI. Estimate 0.4%
  • All Day – ECOFIN Meetings

*All release times are DST

*Key events are in bold

 

DAX, Thursday, July 12 at 7:25 DST

Previous Close: 12,417 Open: 12,471 Low: 12,409 High: 12,494 Close: 12,501

Equities shrug off trade tariff tensions

Is the negotiating table being dusted off?

Was it a storm in teacup? Equity markets across Asia shrugged off yesterday’s post-tariff announcement weakness and are trading in the black through the Asian session. Nikkei225 rose 0.95%, Australian stocks rose 0.68% and even China shares managed gains of 2.30%, recouping all of yesterday’s losses. What has caused this shift in sentiment? Well, China’s Vice Minister of Commerce, Wang Shouwen, urged his US counterparts to resolve the current conflict with a new round of bilateral negotiations. Early murmurings from the US administration could imply that they are amenable to a resumption of talks at a high level, Bloomberg reports.

A tenuous and unstable state of affairs

Currencies lag behind

Currency pairs have halted the risk-off trend started yesterday but have yet to reverse yesterday’s moves to any degree. USD/CNH is posting its first down day in three, but so far has only managed a slide of 0.59% while AUD/USD has recovered 0.28% on the day.

AUD/USD Daily Chart

Source: Oanda fxTrade

US inflation data in the headlights

Today’s data calendar is a mixed bag, with German CPI for June kicking off the European session followed by Euro-zone industrial production for May. Inflation is seen holding steady with the increase expected to be the same as May, up 0.1% m/m and up 2.1% y/y. Factory output is expected to rebound from April’s slump, seen rising 1.2% m/m and 2.1% y/y.

US June consumer prices are seen rising 0.2% m/m and 2.9% y/y while core prices, excluding food and energy are forecast to gain 0.2% m/m and 2.9% y/y. Given that the Fed has said recently that it will not overreact if prices stray above their medium target in the near term, it would require a number significantly different from estimate to provoke a meaningful market reaction.

You can access the full data calendar on MarketPulse at https://www.marketpulse.com/economic-events/

Bank of Canada hikes rates with hawkish outlook

Gold struggles as global trade tensions escalate

Gold has posted considerable losses in the Wednesday session. In North American trade, the spot price for one ounce of gold is $1246.24, down 0.74% on the day. On the release front, inflation reports narrowly beat their estimates. Core PPI was unchanged at 0.3%, beating the forecast of 0.2%. PPI dropped from 0.5% to 0.3%, above the estimate of 0.2%. On Thursday, the U.S releases key consumer spending reports as well as unemployment claims.

The markets remain nervous about the worsening global trade war, particularly between the United States and China. After the two economic giants imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps which will make it more difficult for U.S companies to do business in China. President Trump’s presence at the NATO summit will not bolster investor confidence, as Trump has lashed out at Germany and other NATO members for not paying their fair share in defense spending.

Gold is sensitive to interest rate moves and investors and traders continue to look for clues about the Federal Reserve’s monetary plans. The Fed is expected to continue raising rates in the second half of 2018, but it remains unclear if the Fed will raise rates once or twice. The highly-anticipated FOMC minutes did not shed any light on this question and had little effect on gold prices. Fed policymakers remain bullish over the strong U.S economy, but remain concerned about developments abroad. These include growing trade tensions with U.S trading partners, as well as political and economic developments in Europe. The markets are circling the September policy meeting for the next rate hike, with the CME Group setting the odds of a quarter-point hike at 84%.

  Investors turn risk-averse on tariff war escalation

  ( Update 1) When the going gets tough, the tough get going

XAU/USD Fundamentals

  • 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%
  • 8:30 US PPI. Estimate 0.2%. Actual 0.3%
  • 10:00 US Final Wholesale Inventories. Estimate 0.5%. Actual 0.6%
  • 10:30 US Crude Oil Inventories. Estimate -4.1M. Actual -12.6M
  • 12:30 US FOMC Member Rafael Bostic Speaks
  • 13:01 US 10-year Bond Auction
  • 16:30 US FOMC Member John Williams Speaks
  • 19:01 British RICS House Price Balance. Estimate -3%

Thursday (July 12)

  • 4:30 BoE Credit Conditions Survey
  • 8:30 US CPI. Estimate 0.2%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 226K

*All release times are DST

*Key events are in bold

 

XAU/USD for Wednesday, July 11, 2018

XAU/USD July 11 at 12:25 DST

Open: 1255.71 High: 1256.99 Low: 1246.09 Close: 1246.24

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1204 1220 1236 1260 1285 1307

XAU/USD edged lower in the Asian session. The pair showed little movement in European trade and has posted losses in North American trade

  • 1236 is providing support
  • 1260 is the next resistance line
  • Current range: 1236 to 1260

Further levels in both directions:

  • Below: 1236, 1220, 1204
  • Above: 1260, 1285, 1307 and 1322