Weekly Game Plan 9 Jul 18

USD closed last week on a weak note after a retreat in wage pressures and a rise in the unemployment rate. This should set the tone for the week ahead, given that there have been no surprizes over the weekend and the Wellington open should be relatively calm.

Themes for the week ahead: 

  • Trade Wars will continue, as Trump is threatening to tax Chinese goods worth $500 bln. $34 Bln of tariffs have been in place since Friday morning so China’s retaliation (if any) is key.
  • Global equity markets continue to feel the tension as the FOMC continues to hike and other central banks (BOE and BOC first and foremost) are following suit. The fear is that CB’s are hiking into a recession, as the global recovery and bull market are quite mature. Together with trade war jitters, markets are on edge. There is much talk about the yield curve inversion, but the FOMC has clearly stated that they are not paying attention to that signal as easy policy has changed the dynamics in play. However another ominous sign comes from the value of Mergers and Aquisitions, which has reached record levels in 2018.
  • The GBP will be in the spotlight with a busy data calendar but also with participants digesting the outcome of Friday’s rebellious Brexit showdown. PM May is being forced to commit to a clean Brexit from both sides of the political spectrum, despite the warnings of mass exodus on behalf of industrial giants if EU trade ties are lost. Tough spot to be in.
  • Crude oil might come back on the radar. OPEC has agreed to ease output curbs but prices are receiving fresh impetus from Washington’s new sanctions against Tehran. Those in turn have led Iran’s Revolutionary Guards to threaten a blockade of the Strait of Hormuz, the world’s most important oil artery through which a fifth of the world’s oil consumption passes. Tensions are running high, with the U.S. Navy standing ready to ensure free navigation through the channel. (Reuters)

Data in the week ahead: 

  • In the US the June inflation report will be the highlight.
  • In China a number of key economic releases will take place. On Tuesday June inflation data is released and on Friday we receive trade data. US-China trade tensions will continue as tariff rises take effect. The real economic impact is expected to be small but there is a risk it could impact business and investor sentiment in a more meaningful way.
  • The UK has a busier week with trade, industrial production, construction output and the first monthly estimate of GDP all due.
  • Bank of Canada will meet for it’s July rates decision.

What’s on the Radar:

  • Lower wages/lower USD have propped up equities: https://www.tradingview.com/chart/NQ1!/fO2Vh2ng-Nasdaq-Biased-Long-after-NFP/
  • Copper should remain under pressure if China data disappoints: https://www.tradingview.com/chart/HG1!/q2q3T9Sc-Copper-Negative-Bias-In-Play/
  • USDCAD should remain biased short into the BOC meeting: https://www.tradingview.com/chart/USDCAD/V07zd2o8-USDCAD-Biased-Short-into-the-BOC-rates-decision/
  • GBPUSD remains another decent bet against USD despite Brexit issues: https://www.tradingview.com/chart/GBPUSD/eZHAiwab-GBPUSD-Poised-for-further-gains/

Good Luck!

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

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