July 26, 2018

IronFX UK, ECB Interest Rate Decision & NAFTA negotiations to begin again

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This article is originally referred from IronFX News.

ECB Interest Rate Decision

The ECB is to announce its interest rate decision today (11:45 GMT) and is widely expected to remain on hold, as currently EUROIS imply a probability for the bank to remain on hold at 97.61%.

ECB at its last meeting also stated that there should be no rate hike “through summer 2019”.

On the financials, a comment about inflation could be expected, as it is at the bank’s target of 2%, however core inflation dropped somewhat.

Also some comments about trade uncertainty and the unwinding of its QE program would not be a surprise.

Should there be a more dovish tone in the accompanying statement we could see EUR weakening.

EUR/USD rose yesterday aiming for the 1.1745 (R1) resistance level, after news that US President Trump and EU Commission president Juncker reached a preliminary agreement to start negotiations.

In order for our sideways direction bias to be lifted we would require the pair to clearly break the 1.1745 (R1) resistance level, signaling a possible start of an upward trend.

On the other hand, the pair could experience some bearish tendencies should the ECB interest rate decision contain dovish elements.

Should the pair come under selling interest we could see it breaking the 1.1640 (S1) support line, opening the way for the 1.1580(S2) support barrier.

On the other hand, should it find extensive buying orders along its path we could see it breaking the 1.1745 (S1) support line and aim for the 1.1830 (R2) resistance level.

NAFTA negotiations to begin again

As per media yesterday, high level negotiations pick up again about NAFTA between the US, Canada and Mexico.

US president Trump said on Monday, that he talked with Mexico about doing something “very dramatic, very positive” to reach a trade deal.

Most sticking points continue to include car content rules, the expiration clause and Trump’s threats of tariffs on foreign cars.

It should be noted that Canada and Mexico remain optimistic about reaching a deal, though an August deadline may seem too soon.

Under certain circumstances, further headlines about further progress in the NAFTA negotiations could support CAD and MXN.

USD/CAD dropped yesterday, breaking consecutively the 1.3120 (R2) and the 1.3050 (R1) support lines (now turned to resistance), reflecting the strengthening of the Looney and the weakening of the USD.

We could see the pair stabilizing today maybe even correcting a bit, however the pair may prove sensitive to any further headlines regarding NAFTA as well as today’s US financial releases.

Should the bears be in the driver’s seat, we could see the pair breaking the 1.2985 (S1) support line, while if the bulls take over the market we could see the pair breaking the 1.3050 (R1) resistance line and aim for the 1.3120 (R2) resistance hurdle.

In today’s other economic highlights:

In the European session we get Germany’s GfK Consumer Sentiment indicator for August and in the American session we get the US Durable Goods orders growth rates for June, as well as the US trade balance figure for June.

Also bear in mind, that an OPEC meeting will take place today and could create volatility for oil prices.

Please note that Bitcoin corrected somewhat yesterday after its recent rally and seems to be stabilizing somewhat.

For a more extensive coverage of the crypto market, please refer to our crypto weekly outlook later today.

Original Source: IronFX News

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