Forex Flash: The Trade War of the United States VS China Has Begun

Forex Flash: The Trade War of the United States VS China Has Begun

The dynamics of trading in currencies and gold over most of last week (2-6 July) was marked by selling pressure against the US dollar, although it remained a correction to the greenback’s upward trend since mid-April.

There are at least three major issues of concern to market participants in the last week: the stability of the European Union, the minutes of the Federal Reserve’s June meeting and the global trade with its growing war potential.

On Monday (2/7), Horst Seehofer, Germany’s interior minister and leader of the German coalition partners, announced that he would step down if Angela Merkel did not negotiate with him. This came after a meeting the previous week among EU leaders on immigration. At a meeting in Brussels, Merkel agreed on measures aimed at reducing the number of migrants entering Germany.

Seehofer’s statement was a big blow to the chancellor and the euro. Lucky on Tuesday, Seehofer is pleased to accept a new proposal, so the euro also turned up against the greenback.

Forex and gold trading was lonely on Wednesday due to the US Independence Day holiday on July 4. Later in the early hours of Friday the market was driven by the publication of minutes of the Fed’s policy meeting which said the US central bank officials were worried that if the US economy goes too strong it could cause big problems if it continues to be left.

Some members of the Fed’s policy commission expressed their concern that a prolonged period in which the economy operates beyond its potential could lead to increased inflationary pressures or financial imbalances that could lead to a significant economic downturn.

As a result, almost all officials in the central bank believe they should continue raising rates on a regular basis. The decision even came amid heightened concerns that the current tensions between the US and its trading partners could hamper the economic growth seen this year.

Meanwhile on the issue of trade, there was hope that the US and China will try to rescue the current trade conflict but that hope did not materialize. Both countries began applying import tariffs earlier on Friday (6/7). It seems that the situation changed from merely a trade conflict to a trade war. Market participants also recalled that Donald Trump had promised to repay every Chinese countermeasure.

China also announced that it would respond to US rates at the same rate. The retaliation between the two largest economies in the world also hurts major commodity prices such as corn and soybeans.

Forex and gold trading last week finally closed by a set of US employment data. The greenback hit a three-week low against the euro on Friday after data showed the US economy created more jobs than expected in June but a carefully monitored inflation indicator – wage growth rates – rose less than forecast and the unemployment rate also increased.

The greenback had weakened earlier on Friday as the United States and China imposed tariffs on imports from each other but the fall was damped as traders remained waiting for the jobs report.

The latest nonfarm payrolls data is 213,000 jobs created last month, according to the US Department of Labor. Data for April and May were revised to show 37,000 more jobs than previously reported.

But the unemployment rate rose to 4.0 percent from an 18-year low of 3.8 percent in May, while average hourly wages rose 0.2 percent in June after rising 0.3 percent in May.

For next week, forex trading and gold will be decorated by a number of important agenda, namely the speech of central bank governors of Europe, Japan and Canada which will be coupled with a number of red-categorized data, namely GDP and UK manufacturing as well as US consumer inflation data.

EURUSD

WEEKLY OUTLOOK: POSITIVE NORMAL TENDER

O: 1.1681 H: 1.1767 L: 1.1590 C: 1.1742

IMPORTANCE MOVING 02/07 – 06/07: POSITIVE

RANGE OF SEPTEM: 177 PIP

Fundamentally, there was recent news about German politics, which threatened the integrity of Chancellor Angela Merkel’s government coalition. Chancellor Angela Merkel faces a new problem because German Interior Minister Horst Seehofer says it is ready to step down and get out of the stewardship of migration issues.

Seehofer, who was urged to tighten control of the country’s borders, chose to surrender and renounce his position, both as minister and as head of the Christian Social Union (CSU). CSU is a new coalition partner in Merkel’s government.

Regardless of German political developments in the last week, according to an analysis note from Bank of America Merrill Lynch, the EUR / USD is likely to fall to 1.12 in the third quarter of this year. While in the final quarter, the currency pair will reach the number 1.14. Is it true ? We see and always just watch the news and price developments that will happen.

For the next week there will be some important Fundamental to be released for EU Economic zone, including:

German ZEW Economic Sentiment Tuesday 10/07/2018 Pk 16:00 WIB
ECB Monetary Policy Meeting Accounts Thursday 12/07/2018 18:30 hrs
Technically, EURUSD pair price pairening may still continue based on candlestick weekly formation. However, there is still a need to watch out for intraday correction BEARISH which may occur on the Daily timeframe. If next week there is BEARISH breakout at the level of 1.1634, possibly the price will return to the level 1.1583 – 1.1533 – 1.1484. On the contrary if there is a break of BULLISH at the level of 1.1772, then possibly the price will resume movement PENGUATANnya to the level of 1.1822 – 1.1873 – 1.1923.

 

GBPUSD

WEEKLY OUTLOOK: POSITIVE NORMAL TENDER

O: 1.3192 H: 1.3280 L: 1.3095 C: 1.3272

IMPORTANCE MOVING 02/07 – 06/07: POSITIVE

RANGE OF SEPTEM: 154 PIP

Fundamentally, the UK Services PMI Index reportedly rose. In addition, expectations of an increase in the Rate of the Bank of England (BoE) also supported the strengthening of Poundsterling a week yesterday. The rise in the UK Services PMI Index rose to 55.1 in June, higher than expectations of a rise to 54.0.

Thus, the UK managed to fulfill the three PMI survey results consisting of the Construction, Manufacturing and Services sectors above expectations. The data contributed to the strengthening of British GDP for the second quarter. Markit / CIPS, the survey body that released the data, predicted a 0.4 percent increase in GDP in the second quarter of this year, from 0.2 percent in the previous quarter.

“Momentum continues in the UK economy, where activity activity data raised expectations of BoE rate hikes faster than expected,” said Naeem Aslam, chief strategist at ThinkMarkets UK. Market expectations for a potential 25-point BoE rate boost by the end of 2018 have been observed at 88 percent.

Meanwhile, those who predicted for a chance of rate increase in August reached 53 percent. According to James Skinner of PoundsterlingLive, the Pound’s next move will be determined by the BoE monetary policy. This is especially after Andy Haldane, one of the BoE MPC officials, revealed that the UK economy is strengthening and enabling an interest rate hike in the near future.

For the next week there will be some important Fundamental to be released for the UK Economic zone, including:

Manufacturing Production Tuesday 10/07/2018 15:30 WIB
Goods Trade Balance Tuesday 10/07/2018 15:30 WIB
BOE Credit Conditions Survey Thursday 12/07/2018 15:30 WIB
Technically, STRENGTHENING GBPUSD price pair may still be continuing based on weekly candlestick formation. However, there is still a need to watch out for intraday correction BEARISH which may occur on the Daily timeframe. If next week there is BEARISH breakout at the level of 1.3199, possibly the price will return to the level 1.3142 – 1.3081 – 1.3024. On the contrary if a breakout occurs at the level of 1.3324 BULLISH, then the possibility of the price will continue resume movement to the level of 1.IGNING area 1.3381 – 1.3443 – 1.3500.

AUDUSD

WEEKLY OUTLOOK: POSITIVE NORMAL TENDER

O: 0.7410 H: 0.7441 L: 0.7308 C: 0.7426

IMPORTANCE MOVING 02/07 – 06/07: POSITIVE

RANGE OF SEPARATION: 133 PIP

Fundamentally, interest rates are maintained at a low of 1.5 percent, marking the same decision in 23 consecutive meetings. Weak worker wages and high debt are still the main issues highlighted by the central bank.

RBA monetary policy on Tuesday last week in accordance with the expectations of economists. An increase in interest rates is not expected to be implemented this year until 2019. Although the Australian economy is considered good, especially in the job creation sector, inflation is still below target. That’s why the RBA says it will not change its rate.

In a meeting last month, the RBA issued a statement that the current interest rate is still in line with economic growth, while estimating if consumer prices will reach 2%. But in this meeting, Philip Lowe alluded to the problem of low wages and high levels of debt.

“Salary growth is still low, which seems to be continuing for some time, although a slowly growing economy can lift employee salaries,” Lowe said. The RBA governor continued with “Consistent with this, the rate of wage growth should be adjusted, especially with reports of increasingly low skills in some areas of Australia.”

For the next week there will be some important Fundamentals to be released for the Australian Economic Zone, including:

NAB Business Confidence Tuesday 10/07/2018 08:30 WIB
Technically, AUDUSD pair price pairening may still continue based on candlestick weekly formation. However, there is still a need to watch out for intraday correction BEARISH which may occur on the Daily timeframe. If next week there is BEARISH breakout at the level of 0.7446, likely the price will return to the level 0.7496 – 0.7546 – 0.7596. On the contrary if there is a breakout BULLISH at level 0.7336, then probably the price will resume movement PENGUATANnya to the level area 0.7286 – 0.7236 – 0.7186.

 

XAUUSD

WEEKLY OUTLOOK: NEUTRAL

O: 1252.80 H: 1260.85 L: 1237.75 C: 1254.80

IMPORTANCE MOVING 02/07 – 06/07: POSITIVE DOJI

SEARCH RANGE: $ 23.1 or 231 PIP

Fundamentally, the price of gold fell back, but out of its lowest position in a week as the weakening US Dollar (US) and equity increase. If on a weekly basis, precious metals recorded gains amid rising trade tensions between the United States (US) and China.

Launched Reuters page, the price of gold in the spot market fell 0.2 percent to USD 1.254,45 per ounce position. Gold prices headed for its first weekly gain in four weeks. US gold futures for August delivery rose $ 3, or 0.2 percent, to $ 1,255.80 an ounce.

“Gold requires more than a trade war to push it higher, which requires volatility in equities and weaker economic data,” said Josh at RJO Futures. The dollar fell after data showed US unemployment rates rose and wages grew less than forecast in June.

Wage increases are a closely watched sign by the US government, as it impacts the inflation rate that could drive more interest rates by the Federal Reserve. A weaker dollar tends to lift gold, as it makes it cheaper for non-US investors.

The plan to impose tariffs on US imports to China will also affect the gold market. The US plans to impose a USD 34 billion import tariff on Chinese products, effective on Friday.

As a result, China insists to retaliate by imposing a 25 percent tariff on imports worth USD 34 billion. Indeed, markets absorb the tariff policy calmly. This is seen in the stock market is actually rising. Rising stock markets are pressing gold prices as demand for precious metals is reduced.

Technically, the XAUUSD pair price pairening may still continue based on candlestick weekly formation. However, there is still a need to watch out for intraday correction BEARISH which may occur on the Daily timeframe. If next week there is BEARISH breakout at the level of 1249.70, possibly the price will return to the level 1244.15 – 1238.85 – 1233.90. On the contrary if the breakout occurs BULLISH at 1260.55, then the possibility of the price will resume movement PENGUATANnya to the area level 1267.00 – 1273.10 – 1279.15.

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