In recent days we have seen some big moves in financial markets. Crude Oil has dipped lower and US WTI crude is now heading for the $50 level after breaking below $52 today. GOLD has climbed more than $100 since last Thursday when Donald Trump announced new tariffs on China which hurt the sentiment in financial markets and sent safe havens surging. Risk currencies such as commodity have been declining pretty fast, which picked up pace yesterday after the Reserve Bank of New Zealand cut interest rates by 50 bps.

Although, today markets have been pretty quiet as the economic calendar has been pretty light and we haven’t heard any explicit comments from politicians or central bankers which could induce volatility in markets. The European Central Bank released its monthly economic bulletin which is the first after last week’s meeting but it didn’t offer much as the comments there were pretty similar to what we heard in the press conference. Although, seeing that the ECB is now thinking seriously about starting another QE (quantitative easing) programme, the Euro will turn really bearish at some points, which will likely come when the ECB announces the new stimulus package.

The European Session

• ECB Economic Bulletin – The ECB released the monthly economic bulletin after last Thursday’s meeting. Here are some of the main comments: Prolonged uncertainty is dampening economic sentiment, notably in the manufacturing sector. The drop in Q2 global services output PMI raises risk of more broad-based deterioration in the global growth outlook. Data and survey information point to somewhat weaker Eurozone growth in the coming quarters, so the ECB is examining future policy options via reinforcing the forward guidance, rate tiering and potential restart of QE.
• China is Fighting its Battle – China’s foreign ministry spokeswoman Hua Chunying made some comments earlier today after CNBC reported that Trump is to ban government agencies from purchasing from Huawei. She said that China opposes unfair treatment of Chinese firms by the US.
• Saudis Try to Look Optimistic as Oil Dives – Reuters reported earlier, citing a Saudi Oil official, that recent concerns about oil demand growth are “overplayed”. Recent concerns reflect poor macroeconomic environment. Oil market fundamentals are good, especially on supply side due to strong commitment of OPEC+ with supply cuts. Key OPEC+ countries are committed to do whatever it takes to keep oil market balanced next year.

The US Session

• Italian PM and President Speak on the Political Situation – The political situation is a bit tense at the moment and we might see new elections take place soon but for now the government is holding on to power. The Italian premier, Giuseppe Conte, had a meeting earlier with president Sergio Mattarella and rumours point to some minister resigning.
• US Unemployment Claims – The jobless claims have been in the range of 200k to 220k in recent several weeks. They fell to 209k in the first week of July, increased to 216k in the second, fell back to 206k in the third week and in the last week they increased to 215k again. Today’s report is expected to show unemployment claims remain the same as last week at 215k.
• US Final Wholesale Inventories – The wholesale inventories were slashed in half from 0.8% in April to 0.4% in May as the final reading showed. The first reading for June which was released earlier showed than inventories were slashed in half again to just 0.2% for that month, which is expected to remain unchanged today in the final reading of this economic data.

Trades in Sight

Bearish NZD/USD

• The trend is pretty bearish and it picked pace further yesterday
• The pullback is complete on the H4 chart
• 20 SMA is catching up
• The last few candlesticks point to a bearish reversal

The downtrend will likely resume once the 20 SMA catches up

NZD/USD turned really bearish about three weeks ago together with the Aussie as the sentiment deteriorated in financial markets. This pair has lost more than 400 pips during this time and the downtrend picked further pace yesterday after the RBNZ cut interest rates by 0.50%. The RBNZ left the door open for more easing in the coming months, so fundamentals are pretty bearish for the Kiwi, as the trade war escalates further. This pair has retraced higher but the retrace seems almost complete now on the H4 chart. Buyers are not making new highs and the recent candlesticks point to a bearish reversal. We went short on this pair but the reversal will likely come when the 20 SMA (grey) catches up with the price.

In Conclusion

Markets continue to remain quiet with Gold slipping below $1,500 slowly. Although, EUR/USD has lost around 35 pips in the last couple of hours, probably due to the ECB economic bulletin. but as I mentioned above, the big decline will commence once the ECB announces a date for the start of the next stimulus package.