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US Session Forex Brief, Apr 9 – Safe Havens Get Another Boost on Trump’s Tariffs Threat on the EU

Today has been yet another quiet day in forex. The calendar has been petty light in the last two days and markets are trying to find a direction, but I suppose traders are waiting on the sidelines for the important fundamental events tomorrow. Tomorrow we have the the Italian and French industrial production reports, the GDP report from the UK, the meeting from the European Central Bank and the FOMC minutes as well as the inflation report from the US, so I expect markets to be treading water until then.

The Brexit circus has been entertaining us again today after rumours this morning that the German Chancellor Angela Merkel had agreed on a time limit on the Irish Border backstop for a 5-year period. GBP pairs jumped 60-70 pips higher, but those rumours were denied soon after and the GBP gave back its gains.

Safe havens have also received some decent bids once again today after US President Donald Trump tweeted a while ago, threatening more tariffs on the EU. He said in the tweet that the World Trade Organization (WTO) has found the EU subsidizing Airbus which is affecting the US, so he will slam tariffs on $11 billion of EU products. But, I suppose this is to give Boeing a lifting hand after the two crashes recently. Nonetheless, USD/JPY dived 30 pips lower on that tweet while GOLD jumped $5 higher.

European Session

  • Swiss Unemployment Rate – The unemployment rate has been pretty low in Switzerland for a long time and the trend is still in decline. At the beginning of last year, unemployment stood at 3.0% in Switzerland but it kept declining as the year progressed, until it fell to 2.4% in November last year. It has remained at this level for several months and it stayed at that level today again.
  • Italian Retail Sales – Retail sales turned negative again in December in Italy after increasing in the previous two months. In January, sales increased again by 0.5% this time which was revised to 0.6% today. Today’s report was expected to show another decline for February at -0.2%, but retail sales for that month beat expectations and grew by 0.1%, which is not much but it’s an increase nonetheless.
  • EU Preparing for Tariffs – Apparently the WTO has found that the EU subsidizes Airbus (duh), which is why Donald Trump is waiting to start another trade battlefront. So the EU is fore-running Trump saying that the EU would act tit-for-tat against the US on aircraft tariffs. EU says WTO unlikely to allow US tariffs on $11 billion of imports and it is preparing its own retaliation over Boeing aid.
  • Brexit Saga Returns AgainIreland’s Coveney: EU is ‘open’ to giving UK Brexit extension. UK should be given time and space. BBC’s Nicholas Watt citing a leading Brexiteer: Germany’s Merkel said to be willing to put five-year time limit on Irish backstop. Germany – Denies report that Merkel would accept backstop time limit. EU’s Barnier – Brexit withdrawal agreement will not be reopened. Hopes that UK cross-party talks have a positive outcome. The declaration on future ties could be improved. Could change future ties document within hours. The EU needs a roadmap for Brexit from Theresa May. UK can revoke Article 50 to prevent no-deal Brexit.

The US Session

  • US NFIB Small Business Index – This indicator has been on a declining trend in the last several months, showing that the confidence has been wearing out for US small businesses. Although, it bottomed out in January at 101.2 points and in February it moved higher to 101.7 points. Today’s report for March was expected to show another decline to 101.3 points, but it beat expectations coming at 101.8 points. Not a major increase but the decline has stopped at leas.
  • Trump and Tariffs – It seems like the US President Donald Trump will go ahead with new tariffs on the EU that has been trying to impose for quite some time. Here is the tweet: “The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!”
  • US JOLTS Jobs Openings – US JOLTS new jobs increased nicely in December and January after a few soft months in the few months previously. Today’s report which is for February was expected to show a nice growth of 7.54 million new jobs that month, but missed expectations falling to 7.09 million.
  • GDP Cuts for 2019 All Over – As rumoured in the last few days, Italy is to cut 2019 GDP forecast to 0.1% from 1.0%. he deficit forecast will also rise to 2.5% of GDP from 2.0%, so all that fuss at the end of last year between Italian politicians and EU officials was just a waste of time and nerves. The IMF also cut 2019 global growth outlook to 3.3% from 3.5%. That’s the slowest global growth forecast in a decade. The IMF also cut Eurozone growth to 1.3% from 1.6% and US GDP growth to 2.3% from 2.5%.

Short NZD/USD Again

  1. The main trend is bearish
  2. The pullback higher is complete on the H4 chart
  3. The NZD has been the weakest among major currencies lately
  4. The 100 SMA (green) has been providing resistance on the H1 chart

Buyers haven’t been able to push past the 100 SMA

We went short on NZD/USD yesterday as this pair was retracing higher. It was following other currencies higher against the USD yesterday which has carried on today, but this pair still remains the weakest among major pairs. The H1 chart is well overbought and the H4 chart has become overbought as well now. The 100 SMA (green) has been providing resistance all day today and it seems that the buyers are giving up now.

In Conclusion

The sentiment has turned negative again now after Trump’s tweet on tariffs. This looks like another warfront after the previous front in China seems to be left behind now, following the US-China meetings which will lead to an agreement at some point. If the new front comes alive, then we should expect some of what we saw last year in financial markets, so brace yourselves.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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