Trading plan for 17/09/2018
The new week starts with a discussion about the future of trade wars, where the US can still announce new import duties on Chinese goods today, and China is reluctant to return to talks. However, financial markets have not shown any major commotion yet, which can be partially explained by the holiday in Japan.
On the currency market, the overnight changes are small and USD is slightly weaker, which may be surprising, as the risk aversion around trading wars usually helped the dollar. EUR / USD bounced from 1.1610 to 1.1640, USD / JPY is bouncing down to 112. AUD / USD drifts close to 0.7150.
On the stock market, the reaction is more pronounced – Shanghai Composite falls 1.2 % and Hang Seng loses 1.6%. Nikkei225 does not work through a holiday in Japan.
On Monday, the 17th of September, the event calendar is light in important economic events, but the global investors should pay attention to Consumer Price Index data from the Eurozone, Bundesbank Monthly Report data and two speeches from ECB members: Peter Praet and Benoit Coeure. During the US session, two most important data releases are Canadian Foreign Securities Purchases and NY Fed Empire State manufacturing index from the US.
EUR/USD analysis for 17/09/2018:
The most important data today are Eurozone CPI data, scheduled for release at 09:00 am GMT. The market participants expect the CPI to remain stable at the level of 2.0%, just as the month before.
CPI is the key gauge for inflation in the Eurozone. Inflation, simply put, is a decline in the purchasing power of the Euro, where each Euro buys fewer goods and services due to higher consumer prices. The index tracks changes in the price of a basket of goods and services that a typical household might purchase. When the CPI is high, it indicates that significant inflationary pressures exist in Eurozone economies. This puts pressure on the European Central Bank to raise interest rates. When CPI comes out lower than expected, the ECB is expected to lower interest rates, or keep them lower, to encourage economic growth. As a rule, the Bank adjusts rates in order to keep Europe consumer price inflation in the 0 to 2 percent range.
Let’s now take a look at the EUR/USD technical picture at the H4 time frame. The market is still moving inside of the channel, but the price is testing the lower support levels after the rally was capped at the level of 1.1720. The next immediate support is seen at the level of 1.1617, but any breakout below this level would mean the price is out of the channel as well. Please notice, there is still the black trendline support around the level of 1.1600 which might be useful as well. The momentum remains hovering around its neutral level of fifty, but the market conditions are now overbought, which is why a pull-back is expected.