Trade wars continue to haunt the markets

• As Washington’s deadline to impose tariffs on China draws near (as per media), markets seem to be in an unease state.
• China’s finance minister stated that Beijing will “absolutely not” be the one instigating a trade war and levy tariffs.
• On the European side, the German Chancellor Merkel raised the specter of trade wars as she stated that an US tariff on cars could be even more serious than on steel and aluminium.
• Should there be further headlines on the issue we could see volatility rising according to FX pair.

EUR/USD continued its sideways movement yesterday testing the 1.1640 (S1) support line.

We see the case for the pair to continue to have a sideways movement without excluding the possibility of some bearish tendencies as the pair may prove sensitive primarily to any headlines regarding trade wars as well as the release of the FOMC meeting minutes late in the American session.

Should the bulls take over we could see the pair breaking the 1.1715 (R1) resistance line aiming, for the 1.1820 (R2) resistance hurdle.

Should on the other hand, the bears take over we could see the pair breaking the 1.1640 (S1) support line and aim if not breach the 1.1550 (S2) support barrier.

UK services PMI, increases BoE rate hike probabilities

• The release of a higher than anticipated UK services PMI yesterday, signaled a positive outlook for the UK economy.
• The smaller manufacturing and construction PMI’s also had beaten their estimates earlier this week.
• Analysts see the case for the GDP growth rate to be of +0.4%yoy for Q2, double the size of Q1.
• Overall, the positive economic releases, increased the possibility for a rate hike by the bank of England in August to 57% (currently) according to GBP OIS .
• However analysts consider the support for the pound to be capped by the uncertainty of the Brexit negotiations.
• Should there be further positive headlines, we could see the pound getting some support.

Cable traded in a sideways manner yesterday with some bullish tones, as per yesterday’s analysis, breaking the 1.3215 (S1) resistance line (now turned to support).

We see the case for the pair to continue to have a sideways movement today, however some bearish tendencies may exist as the pair could prove sensitive to any Brexit news as well as the release of the FOMC meeting minutes late in the American session today.

Should the pair be under intense selling interest we could see it breaking the 1.3215 (S1) support line and aim the 1.3125 (S2) support area.

Should it find extensive buying orders along its path, we could see the pair aiming the 1.3330 (R1) resistance line.

In today’s other economic highlights:

In today’s European session, we get Germany’s Industrial Orders growth rate for May and Switzerland’s CPI rate for June.

In the American session, we get from the US the ADP national employment figure for June, the initial jobless claims figure, the ISM non manufacturing PMI for June and last but not least the minutes of the last FOMC meeting will be released.

As for speakers, ECB’s Peter Praet and Yves Mersch, as well as BoE governor Mark Carney speak.

Please be advised that the EIA crude oil inventories will be released today and a substantial draw-down is forecasted.

If the market interprets the possible draw-down as a sign of a tightening oil market, we could see oil prices getting some support.