Colors: Orange Color

Trade concerns between the world’s largest two economies returned to haunt markets on Thursday after President Trump ordered his administration to consider more than doubling previously proposed tariffs on $200 billion worth of Chinese goods. The new proposed tariffs of 25% dragged Asian equities heavily during morning trade, sending the Hang Seng Index to its lowest level since September 2017. China’s CSI 300 and Shanghai Composite both fell more than 2.5%, while the Yuan continued to trade near its one-year low. 

Just ahead of the US jobs data on Friday, the People's Bank of China hiked reserve requirements on CNY forwards (for onshore institutions) a move clearly aimed at stemming the one-way CNY depreciation ahead of the 7.00 level in USDCNY and as the CFETS-defined RMB basket reached the bottom of its range from a year ago.


Support at 50% Fib retracement

July’s annual Eurozone inflation rate flash has shown a rise from 2% to 2.1%, moving above the ECB target. If inflation is seen as in tact, the thinking is that the ECB could wind back policy faster than is priced into the Euro. That would mean last week's post-ECB drop was overcooked and would be erased. Technically, prices on the daily chart are forming a base in the zone of 1.1520 – 1.1450 which is near to 50% Fibonacci retracement of the rise from the low of 1.0355 to peak of 1.2560. The mentioned zone is also the breakout zone of July 2017, hence this zone will act as a demand zone. In addition, we are witnessing a slowdown in the selling as indicated by MACD histogram on the weekly chart. The RSI (14) on the 240 minute chart has entered the oversold zone and probability of a bounce back is high.

Never mind Turkey, here’s India

The decision I made to not go on vacation this summer is finally paying off. Who would have guessed, after all, that the last week of July and the first week of August would be two of the most interesting market weeks seen in a long while? After years of close to zero volatility, finally it is time to take the guns out and “get to the chopper”.

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