Trading plan for 13/07/2018
Friday starts with a calm, sleepy trade on the financial markets because fears about trade wars are still present, but the lack of escalation inhibits possible panic. GBP / USD reaches 1.3170 after the Sun article, according to which President Trump believes that Prime Minister May have ignored his advice and is moving towards a soft Brexit, which, however, reduces the chances of lucrative trade deals with the US. The rest of the FX was relatively calm. EUR / USD drifts close to 1.1660. USD / JPY managed to reach 112.75. The strongest is AUD, where recovery is fueled by the lack of signs of the escalation of the trade conflict between the US and China. AUD / USD is already over 0.7410.
The Chinese foreign trade data showed strong surplus growth in June to USD 41.6 billion (exp. 27.7 billion; 24.2 billion prior) with a clear slowdown in imports (14.1% YoY, vs. 26%). Exports improved better: 11.2%, prog. 9.5%.On the stock market, the Japanese Nikkei225 followed the rise on Wall Street on Thursday and today gains 2.1%, but the Shanghai stock exchange cannot get rid of fears about the effects of trade wars and Shanghai Composite loses 0.4%.
On Friday the 13th of July, the event calendar is light in important data releases, but the global investors should keep an eye on the German Wholesale Price Index data, Swiss Producer & Import Prices data and UoM Consumer Sentiment and UoM Inflation Expectations. There are two speeches scheduled for today: first from BOE Deputy Governor for Financial Stability Jon Cunliffe and second from FOMC Member Raphael W. Bostic.
USD/CAD analysis for 13/07/2018:
The Bank of Canada gave us a 25bp rate hike yesterday, a constructive statement, but at the conference President Poloz hit the doves, underlining concerns about the impact of trade tensions. We got an explosive mixture that brought a swing in CAD charts. It may take some time before investors lick out the wounds, but at the end, it is important that BoC remains in the group of those central banks that continue to tighten their policies. When the dust settles after the trade wars and we return to the valuation of foundations, CAD should gain.
Let’s now take a look at the USD/CAD technical picture at the H4 time frame after the interest rate hike decision was made. The bulls did not manage to break out above the 50% Fibo and the price slowly reversed after hitting the level of 1.3220. The first technical support at the level of 1.3174 was broken and currently, the price is trading around the level of 1.3160. The next technical support is seen at the level of 1.3111, which is just above the swing low at 1.3066. Please notice the market conditions are overbought and the momentum is barely positive, so the chances for deeper pull-back towards the support level are increasing.