Good morning traders. Website updates all done so back to normal.
First thing to say is that the trade war seems to be getting more fractious as we move further away from any agreement. Yesterdays (unverified) ´source´ comments that China will suspend business with all suppliers who agree to halt supplying Huawei and a similar source comment noting that China have halted discussions with the US got traders a little edgy.
The first casualties were equities with futures in the US dropping during the morning session and gapping down on the open. However, they bounced back a little overnight (as Trump offered a 90 day license relief on trading with Huawei) and it seems to me that this latest twist in the US China plot is not phasing bulls that much. I get the feeling that new highs may be on the cards rather than a correction as nothing seems to be able to quell the thirst for higher equity markets.
The eurusd was relatively calm and didn’t seem to be affected by the rising tension – at least not yet. As we have said in the past the outcome of these talks on the USD is not fully clear and could go either way. All we need to do is to keep abreast of the situation and apprised of the options. Yours truly will attempt to keep you up to speed with both :).
The other issue we need to be mindful of is the european elections later this week. I have no idea of the outcome but there is a strong feeling that the various populist movements in different EU member states are looking to score points.
If this is the case then the politics of the EU will have to accomodate a much stronger anti federalist block and if the populist newcomers take a similar view to Italy then member states budgeting and fiscal policies will probably move to the forefront.
Where this might lead is anyone’s guess but if this were to happen then it cant make the financial management of the EU any easier.
I guess Draghi will be pretty sanguine on this as it wont be his baby pretty soon, but it will start to effect the euro currency at some point should the new block make a concerted effort to do so. Its a case of ´watch this space´ at the moment but it could turn out to be pivotal for all aspects of the EU agenda and have a significant impact of the strength of the euro going forward.
On the Brexit front Boris Johnson has stolen the headlines as he seems to be the front runner for the next Tory leaders job once PM May steps down (imminently it seems). The Gbpusd has not taken too kindly to the latest machinations on this front as having BoJo as leader increases the chances of a no deal solution. Consequently such an outcome wouldn’t be positive for the eurusd. Stay tuned as they say.
The eurusd traded in a very tight range yesterday. Its almost at the point where the levels can be set at the start of the month and left on the chart while the pair just picks them off and trades zone to zone going nowhere fast. Not that this bothers us much – we´ll just trade it.
However it has been difficult from a model strategy pov as its been tough to set S & R for a set and forget strategy.
Nothing on the data slate for today of any note.
The Daily chart
We continue to point to the downside and the lows look likely to be taken opening up test down to 1.10 and maybe to 1.0850 as mentioned yesterday.
The Hour chart
Levels as per.
The best scenario for us would be a quick trip back up the chart early in the London session to test R1 at 1.1180 and then a sell off down to S1. If we don’t test S1 and only take out the wick lows at around the 1.1130s and make a swift move back up take care fading R1 as there is the possibility of a sustained move higher to catch out any unwary traders trapped short.
As ever keep a close eye on the lower time frame charts and if you can, scalp at will:).
Have a good one!