Trading plan for 02/08/2018
Trade tension is the main topic in the first hours of Thursday’s trade. In the currency market, this means a strengthening of the USD, although it also initiates the realization of profits from recent increases in USD / JPY. The stock market in China drops almost -3.0%. Demand for gold is small, while oil is stable.
During the night, the US administration took a step towards tightening the restrictions on trade with China, proposing a 25-percent. instead of 10-percent duty rates on goods worth USD 200 billion. The fears strengthened the role of the USD as a “safe haven”, but also spoiled the sentiment in the stock market. USD mainly gains to AUD and NZD but loses in relation to JPY as a result of profits from recent increases and a drop in Nikkei225 by 1.1%.
On Thursday the 2nd of August, the main event of the day is the Bank of England interest rate decision that will be issued at 12:00 pm GMT, together with MPC Official Bank Rate Votes, Inflation Report, Monetary Policy Summary and Asset Purchase Facility data. The BoE Governor Mark Carney will give a speech at 12:30 pm GMT. The other important data to be released today are Construction PMI from the UK and Unemployment Claims from the US.
AUD/USD analysis for 02/08/2018:
Trade balance of Australia after June amounted to AUD 1.87 billion against expected 0.9 billion due to weaker import dynamics.
A country’s trade balance reflects the difference between exports and imports of goods and services. The trade balance is one of the biggest components of the Balance of Payment, giving valuable insight into pressures on the country’s currency. A positive Trade Balance (surplus) indicates that exports are greater than imports. When imports exceed exports, the country experiences a trade deficit. Because foreign goods are usually purchased using foreign currency, trade deficits usually reflect currency leaking out of the country. Such currency outflows may lead to a natural depreciation unless countered by comparable capital inflows (inflows in the form of investments, FDI – where foreigners investing in local equity, bond or real estates markets). At a bare minimum, deficits fundamentally weigh down the value of the currency.
Let’s now take a look at the AUD/USD technical picture at the H4 time frame. The Aussie did not move much after the data, but tensions between the US and China supply arguments and during the session they pulled the rate to 0.7380. Currently, the market trades in the middle of the range as it bounces from the internal trend line support at the level of 0.7380. The nearest technical support is seen at the level of 0.7359 and the nearest technical resistance is seen at the level of 0.7440. The market conditions remain s neutral with a slight bias to the downside.