MARKETS BRACE FOR A TOUGH WEEK AS TRADE WAR INTENSIFIES
Asian stocks fell today after the Wall Street Journal reported that Trump was preparing to announce tariffs on Chinese goods worth more than $200 billion. The news came despite last week’s hopes that the US and China would restart talks aimed at ironing out key issues ahead of US midterm elections. The markets also took a hit following Typhoon Mangkhut which swept through Hong Kong and Macau causing millions of people to be evacuated.
The euro fell against the dollar as prepare for EU inflation data, which will be released at 9:00 AM (GMT). Traders expect that the data will show that the headline CPI grew at an annualized rate of 2.0% in August, which will be unchanged from the growth in July. On a month-on-month basis, traders expect the headline CPI to have risen by 0.2% after the minus 0.3% fall in July. The core CPI, which excludes the prices of food and energy products is expected to remain unchanged at 1.0%. Traders will also receive the German Buba Monthly Report and listen to ECB’s Peter Praet.
The US dollar started the week by gaining against its peer currencies. This happened as the US battled the effects of Hurricane Florence. The most affected states were North and South Carolina, which suffered extreme floods. Experts expect the floods to last for days. However, the destruction of the hurricane was not as much as expected after it was lowered to Category One. Studies show that hurricanes tend to slow down businesses and destroy wealth. The local economy then starts to grow as people and businesses begin the reconstruction process.
On Friday, the EUR/USD pair reached a high of 1.1720. This was an important resistance level for the pair as shown below. Today, the pair fell in the Asian session. It reached an intraday low of 1.1618, which is slightly above the important support shown below. It is now trading at 1.1634, which is along the middle Bollinger Band and along the 14 and 21-day EMA. The pair could continue to fall ahead of the EU CPI data. If it does, it will test the 1.1565 support as shown below.
On Friday, the USD/CHF pair fell below the important support of 0.9650. Today, the dollar strength led the pair to move past the 0.9650 level. The price is along the 28 and 14-day EMA. It is between the middle and upper Bollinger Band as shown below. This pair could continue the previous support and resistance pattern and if it does, it will move to the 0.9757 resistance level. However, there is also a likelihood that it will continue the downward momentum.
On Friday, the XAU/USD pair dropped sharply from a high of 1208 to a low of 1192. In the Asian session today, the pair attempted to move up but remained at these lows. In recent weeks, the pair has traded within the narrow channel of 1187 and 1213. If the pair crosses the support of 1187, there is a likelihood that it will continue to fall, potentially to the 1150 support.