Currencies

Effects of trade war on Dollar

The trade war has begun. Starting this Friday, the US has imposed tariffs on Chinese goods worth $34B, with Beijing reacting imposing an equal measure, with tariffs of 25% on a $34 billion list of US goods that includes soybeans, pork and electric vehicles.

China accused the US of triggering the “largest-scale trade war,” while Trump upped the bet, menacing to target the total amount of US imports from China last year. The US Nonfarm Payroll report disappointed, as despite the US created in June 213,000 new jobs, beating forecasts of a 195,000 increase, the unemployment rate unexpectedly increased to 4.0%, while wages' growth was overly soft: average hourly earnings rose by 0.2% during the month, missing expectations of a 0.3% rise while annual earnings growth at 2.7%, missing expectations of 2.8%. Also this week, the FOMC released the Minutes of their latest meeting, which were less hawkish than expected, although far from dovish. Policymakers reaffirmed their commitment to raise rates gradually.

Bear Crab Harmonic Pattern

The Bear Crab Pattern is a reversal pattern composed of four legs, marked X-A, A-B, B-C and C-D. It is a reversal pattern that allows you to enter the market at extreme highs and lows. It helps you identify when a current price move is likely approaching its end. This means you can enter the market as the price reverses direction. Using Fibonacci levels applied from point X back to point A, the price is expected to reverse from 0.886 of XA or 1.618/2.618 from BC. To find B, the Fibonacci levels from X to A are inserted and B is formed at 0.382/0.50. To find point C, the Fibonacci levels from point A to point B are inserted and point C will be formed between 0.382 or 0.886 Fibonacci ratio of the AB leg. Once point C is formed, D is approximate 1.618/2.618 of BC or it can be 0.886 of XA. As the pattern is completed at point D or the zone in which reversal may occur, one can start taking the position as the trend is set to change.

Equities

Deal positive for Boeing

Boeing and Embraer have signed a preliminary agreement to form a joint venture consisting of the latter's commercial aircraft and services business and the U.S. plane maker’s commercial development, production, marketing and lifecycle services operations. The deal values Embraer's commercial aircraft operations at $4.75B, while Boeing's 80% ownership stake in the JV will be valued at $3.8B. It's also expected to be accretive to Boeing's earnings per share beginning in 2020 and to generate estimated annual pre-tax cost synergies of approximately $150M by year three. The transaction will have no impact on financial guidance for 2018.

Coalition government reached agreement

Interior Minister Horst Seehofer, leader of the Bavaria's Christian Social Union (CSU), triggered the crisis when he threatened to defy Merkel and turn back at the German border the small number of asylum seekers - a maximum of five people a day - who turn up after registering in other EU states. But crises was averted since The parties in Germany's ruling coalition agreed on a package of measures to deal with asylum-seekers who have already registered in other European Union states and vowed to push ahead with an immigration law by the year's end. The two-page agreement, reached after a short meeting at the Reichstag building, ends a dispute that had threatened to bring down Chancellor Angela Merkel's "grand coalition" just months after it took power and left the four-term leader politically weakened.

Metals

Medium term support trend line held

Gold prices fell Friday, but remained on track to snap a three week losing streak amid dollar weakness, which also drew a strong rebound in the price of other metals. The dollar was set for a weekly slump as a mixed U.S. jobs report dampened investor expectations for a faster pace of rate hikes. The U.S. economy added 213,000 jobs in June, above forecasts for 200,000 new jobs, while the unemployment rate unexpectedly rose to 4%, and Average hourly earnings grew 0.2%, undershooting economists forecast for a 0.3% increase. Technically, prices found support at the medium term support trend line constructed the joining the lows of November 2015 ($1046.20) and December 2016 ($1123.90). In addition prices managed to protect the important swing low of $1236.50 formed in December 2017. We are witnessing hidden divergence in RSI (14) indicator on the weekly chart. Going forward, a move above $1262 would push the prices higher towards $1280 - $1295 level, whereas on downside $1235 is likely to act as important support.

Hammer candlestick of weekly chart

Platinum, price hit the lowest level of $800.70 but quickly managed to recover as the dollar weakened over the week. Platinum currently trading both below gold and palladium makes it attractive from a pure price standpoint, as historically platinum has traded at a premium to both. Technically, on weekly chart prices have a formed a ‘Hammer’ candlestick pattern which is bullish reversal formation, but requires confirmation in form of a close above this week’s high of $857.50. On weekly basis prices managed to hold on to the swing low of January 2016. The important thing here is the RSI (14) indicator, which has not entered the oversold zone on the weekly chart despite the continuous sell off from the peak of $1033.30 at the start of 2018. Going forward as long as prices stay above $800, we are likely to see a relief rally $885 - $905 levels.

Energies

Spinning Top at the top of channel pattern

WTI crude oil prices settled higher on Friday, despite data showing a ramp up in the number of U.S. oil rigs, signaling a potential expansion in domestic crude output. Oilfield services firm Baker Hughes reported on Friday that the number of U.S. oil drilling rigs in operation rose by 5 to 863 in the week to June 29. That comes on the back of two-straight weeks of falling rig counts. Crude oil prices were supported, however, by ongoing bets on a shortage in global crude supplies amid rising oil demand, the potential for a larger drop in Iranian crude exports, amid looming U.S. sanctions and ongoing challenges in Venezuela's energy industry. Technically, on weekly chart prices have been in a rising channel pattern and have formed a ‘spinning top’ candlestick pattern at the top end of the channel. The mentioned pattern is a neutral formation indicating indecision among market participants. Going forward prices are likely to face resistance at $75.50 - $76.20, whereas on downside $72.20 is likely to act as important short term support.

Short term bottom

Wheat price continued to rise this week. This is on the back of severe drought and lower yields in some of the main growing regions. The USDA (United States Department of Agriculture) stocks and acreage reports show that stocks of old crop wheat are down 7%. The wheat harvest has begun in Russia and the Ukraine. Early reports are variable, but yields are not expected to break any records. Some reports from Russia state that the harvest is seven-to-13 days earlier than last year. The same reports are estimating yields to be back 25% or to be similar to last year. Technically, on daily chart prices have formed a short term bottom near $480 level over the past 3 weeks. During, Friday’s session prices broke out of its short term trading range of $510 - $480, with 50% of the body of candle above the breakout point, making a case for a strong move ahead. In the short term prices are likely to head higher towards $545 level, whereas on the downside the $490 - $480 zone is likely to act as floor for the prices.

 

Source: Matrix PR