Forex Signals Brief for August 18th: Spanish Attacks Spook Markets
Rowan Crosby • 3 min read
Just when we thought that things might quieten down for a few days, more news came along and shook the markets.
Reports of a potential terror attack in Spain have sent the US equity markets crashing. A car plowed into a group of pedestrians in Barcelona killing 13, before five suspected terrorists were killed in a confrontation with police. The Islamic State claimed responsibility for the attacks.
Equity markets in the US were already weak, with more controversy from US President Donald Trump as speculation increases that his stimulus plans aren’t gaining traction. This follows last week's USD sell off due to geopolitical tensions with North Korea. Stock markets sold off sharply, with the S&P 500 down more than 1.5% and the Nasdaq down 1.9%.
However, in Asian trade, there wasn’t significant follow through and both equities and FX markets were relatively quiet. As European traders enter for the day, we will get a clearer picture of how much the tensions in Europe will affect markets.
Top Economic Events Today
EUR – German PPI
The German Producer Price Index is due out at 06:00 GMT. Analysts are predicting a slight uptick in the monthly data, to 0.1% up from 0.0%. PPI is a measure of the change in the price of goods sold. The German economy is a strong importer in Europe and a positive change is good news for the Euro.
EUR – Current Account
Current Account data is due at 08:00 GMT. The Current Account measures the value of imports and exports. A strong level of exports compared to imports can lift the EUR as foreigners must purchase Euros to buy goods. This is not expected to be a large market mover but be aware of it.
CAD – CPI
The Consumer Price Index (CPI) data is out at 13:30 GMT. This is a significant market mover for the USD/CAD as it gives us an insight into whether there is the potential for a move in interest rates. Analysts are predicting this month's CPI data to come in at 0.1%, which is the same as the prior reading.
EUR/USD – Can 1.1700 Continue to Hold Up?
Last week we saw how the USD has the potential to sell off when there are geopolitical concerns. The North Korean saga spooked traders and money flowed out of the USD and into the safe-havens.
So far in Asian trade, markets haven’t reacted in the same way just yet. However, as European traders enter for the day and absorb all the new developments things may change. We have to plan accordingly.
EUR/USD – 240-minute chart
The obvious trade to keep on eye on today is the USD/CHF. Depending on how we open, we can also look to test key support in the Swissy. The Swiss Franc is considered a safe-haven currency and in times of fear, money flows into it. There doesn’t appear to be the same worries that we had last week with North Korea, however, there is every possibility that we might test the immediate support level at 0.9600.
USD/CHF – 240-minute chart
EUR/USD – Trading Plan
The support level at 1.1700 is continuing to be tested in the EUR/USD and at some point it is going to break. That’s the level that is going to be our key focus for today. If we get USD weakness, we have the potential to rally to the top of the channel. However, for now, I’ll be looking for the 1.1700 level to first be tested and then hold up, with a rally back to the top of our channel.
Should we close strongly below that level ,then we will want to be short with an initial profit target at 1.1650.
EUR/USD – Trading Levels
When fear and sentiment are involved in the markets, moves can get exaggerated in either direction. However, if you have a solid plan, you can capitalize on these types of opportunities when they come up. Technical analysis is a powerful tool when fear takes over, so make your trading plan and stick to it.
Best of luck for the trading day!