The economic calendar has been very light during the European session. Nonetheless, there has been plenty of price action in the forex market and in other markets so far today. The situation is pretty clear though – the escalating trade war between US and the rest of the world has dented the market sentiment.
So, the risk-off sentiment has set across all markets today. Chinese officials said earlier that they don’t like the US opening trade wars and messing things up, but they are not afraid of it and will fight back, so there you have it. The safe haven currencies are benefiting considerably from all this. USD/JPY has tanked 100 pips lower while EUR/CHF is still sliding.
The European Session
Eurozone Trade Balance – The trade balance of the Eurozone was expected at around 30 billion Euros. It came lower at 28.4 billion, down from around 32 billion last month. Yesterday, the Italian trade balance shrank as well, so this is not a good sign.
No Consensus for OPEC – The OPEC countries want to increase the Oil production output, hence the bearish crude Oil. But today, Iran, Venezuela and Algeria said that they are against it since it would hurt Oil prices. Venezuela is under sanctions so it can’t sell more even if it increased production and Iran seems to be going that way too after Trump ripped the Iran nuclear deal earlier this year.
China Can Stand Up to Trump – China urged the US today to “stop deeds that will hurt the US and others”. The Chinese foreign minister also said that the US should go back to rationality. But, China is not afraid of a trade war. These were the comments which deteriorated the market sentiment further today.
EU’s Barnier Is Not Backing off – The EU Brexit negotiator said earlier that the UK needs more realism on Brexit and that the EU will not fall into the Brexit blame-game. Well, he is right. The UK is trying to get whatever it can from the EU and it has been blaming the EU for whatever is wrong in the country – dovish comments for the GBP.
The US Session
US Building Permits – US building permits posted a decline this month from 1.36 billion previously to 1.30 billion. The last two months came at 1.35-36 billion, but this month the permits have declined.
US Housing Starts – Unlike the building permits, the housing starts jumped higher this month. Expectations were for 1.29 billion new homes but the number came at 1.35 billion. This is the highest number so far this year, so perhaps next month the building permits will increase as well.
GDT Price Index – The global dairy trade auction will be held today, although as with all auctions you don’t know when it will end. This event is important for the NZD since New Zealand is a major exporter of dairy products. The last time, prices fell by 1.3%. We’ll see how it goes this time. The Kiwi is already pretty bearish so another negative number will make the situation worse for the NZD.
Trades in Sight
- The bearish trend has accelerated
- The sentiment has worsened
- The retrace up is complete
- The 200 SMA is ready to provide resistance
Stochastic shows that the pullback is over
We opened a sell forex signal in USD/JPY a while ago. This pair accelerated the decline this morning but it started retracing higher during the European session. Although, the retrace seems complete now. Stochastic is overbought and the price is making some pins and doji candlesticks. The 200 stands just above here so it should provide resistance if the buyers decide to push higher.
The sentiment continues to be negative in financial markets today and we are playing along with it. We had two winning signals earlier today and we just opened another one going long on the JPY, which means going short on USD/JPY.