EU, US near trade deal

The USD edged higher as the week began with traders being encouraged by news that the EU and the US have neared a trade deal. As per reports, the two sides have announced over the weekend that a framework for a possible deal has been agreed, with EU products suffering a 15% tariff upon entering US soil, while the EU is committing to an investment of $600 billion in the US. The framework resembles largely the blueprint adopted for a US-Japanese trade deal and may be repeated with other countries, practically lower tariffs in return for a substantial amount of investment in the US. It should be noted that the tariff rate announced is only half of what US President Trump had planned, thus the blow on the EU economy seems to soften. The news could provide more confidence for the ECB to remain on hold as the need for further easing of its monetary policy may ease, however that remains to be seen. Yet for the time being and during today Asian session the EUR has been losing ground against the USD, JPY and GBP in a sign that traders may consider even the 15% tariff rate as too high, if compared with hopes for a zero-tariff trade deal. It’s characteristic that EUR/USD got some support upon today’s open yet lost ground afterwards, being now in the reds. European equities also opened with a jump higher yet are correcting lower, signaling market worries for the deal.

EUR/USD appears to be continuing its sideways movement, revolving around the 1.1690 (S1) support line. Hence we maintain our bias for a sideways motion and note that the RSI indicator has neared the reading of 50 implying a relative indecisiveness of the market for the pair’s direction. For a bullish outlook we would require the pair to break the 1.1905 (R1) resistance line and thus pave the way for the 1.2115 (R2) resistance level. On the flip side for a bearish outlook we would require a clear break below the 1.1690 (S1) support level with the next possible target for the bears being the 1.1450 (S2) support line.

Also Gold’s price edged lower on Friday breaking below the 3365 (R1) support line, now turned to resistance and tended to stabilise in today’s Asian session. Given the relatively narrow Bollinger bands, the RSI indicator which has landed on the reading of 50 and the precious metal’s sideways motion over the past one and a half months we tend to maintain a bias for the sideways movement to continue. Should the bulls take over, we may see gold’s price breaking the 3365 (R1) resistance line and start aiming for the 3500 (R2) resistance level, which is an All Time High for gold’s price. Should the bears take over, we may see the pair breaking the 3245 (S1) support line thus opening the gates for the 3120 (S2) support level.

Other highlights for the day:

Today we get UK’s CBI distributive trades and the US Dallas Fed manufacturing business index, both for July.

As for the rest of the week:

On Tuesday we get Sweden’s preliminary GDP rate for Q2 and the US consumer confidence indicator for July. On Wednesday we note the release of Australia’s CPI rates for July and Q2, France’s, Germany’s, the Euro Zone as a whole and the US preliminary GDP rates for Q2 as well as Switzerland’s KOF indicator for July, while on a monetary level, we note the interest rate decision of BoC from Canada and we highlight in the US the release of the Fed’s interest rate decision. On a packed Thursday we get Japan’s preliminary industrial output for June, China’s NBS PMI figures for July, Australia’s building approvals and retail sales, both for June, France’s and Germany’s preliminary HICP rates for July, the US consumption rate for June, the US PCE rates for June, the weekly US initial jobless claims figure and finally Canada’s GDP rate for May. On Friday we get China’s Caixin manufacturing PMI figure, UK’s nationwide house prices for July, Euro Zone’s preliminary HICP rates for July, the US ISM manufacturing PMI figure, the final US UoM consumer sentiment reading and we highlight the release of the US employment report for July.

EUR/USD Daily Chart

• Support: 1.1690 (S1), 1.1450 (S2), 1.1210 (S3)
• Resistance: 1.1905 (R1), 1.2115 (R2), 1.2165 (R3)

XAU/USD Daily Chart

• Support: 3245 (S1), 3120 (S2), 2955 (S3)
• Resistance: 3365 (R1), 3500 (R2), 3650 (R3)

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Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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