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Wednesday, July 11th
The EUR/USD pair recovered part of it yesterday’s losses and now is consolidating its positions within the range of 1.1725-45. Today the underlying theme across the market remains escalation of the US-China trade conflict, as the US threatened to impose an extra $200 billion tariffs on Chinese products, thereby significantly improving the demand for safety and offering some support to the common currency. Moreover, the US-China trade war also affected the US dollar positions, which stalled its yesterday’s recovery, limiting chances of the pair on any retreat. Meanwhile, now market’s attention remains focused on the ECB's statistics conference, where key ECB bankers are due to speak, including ECB President M. Draghi, however, the US PPI report will also be able to offer some fresh trading opportunities this Wednesday.
The GBP/USD pair remains directionless in the middle of this week, having been locked in its tight range of 1.3250-80. The pound continues to remain under pressure of the latest developments on the political field of the UK. Recall, earlier this week UK PM T. May offered third option on how to resolve the uncertainty surrounding Brexit. The parliament negatively reacted on the PM’s proposal and five key members of the Brexit team resigned from their posts, saying that it is a betrayal of the original Brexit referendum results. On the other hand, the US dollar stalled its recent upside trend, offering major currencies a chance to recover some ground in the middle of this week. As for economic events, today investors will look forward to the US PPI report and another speech by BoE Governor M. Carney for any direction.
The USD/CAD pair extends its recovery from monthly lows, marked on the level of 1.3066 earlier this week, keeping its positions above the level of 1.3100. Recent gains of the pair can be mainly explained by renewed buying interest around the US dollar. However, further upside trend of the pair looks fragile, as the greenback lost its bullish momentum in the middle of this week amid escalation of the US-Chinese trade conflict. Moreover, increased cautiousness ahead of the BoC interest rate decision also limits pair’s further actions. Today the Canadian regulator is expected to increase its interest rate by 25 bps, as, according to the Bank’s guidance, policy tightening path should be gradual and guided by incoming data. Besides the BoC meeting, investors will also pay attention to the US PPI report, which is also scheduled for the NA session.
The USD/JPY pair remains pressured this Wednesday, having again slipped below the level of 111.00. Today the market is broadly driven by reemerged risk aversion, as Trump administration is planning to impose additional tariffs on Chinese imports. This news has significantly increased the demand for safety, including the yen. On the other hand, persisting divergence between the Fed and BoJ remains one of the key drivers for the pair, thus limiting its further retreat. In the day ahead, the US will release the PPI data, while any further escalation of tension between the US and China will be able to bring a significant impact on the pair.
Major events of the day:
ECB President M.Draghi’s Speech – 10.00 (GMT +3)
US PPI – 15.30 (GMT +3)
BoC Interest Rate Decision – 17.00 (GMT +3)
BOC Press Conference – 18.15 (GMT +3)
BoE Governor M. Carney’s Speech – 18.35 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1656 R. 1.1814
USDJPY S. 110.52 R. 111.62
GBPUSD S. 1.3171 R. 1.3379
USDCHF S. 0.9872 R. 0.9986
AUDUSD S. 0.7404 R. 0.7512
NZDUSD S. 0.6781 R. 0.6885
USDCAD S. 1.3072 R. 1.3166
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