News & Analysis

U.S bank Holiday – Europe mixed; Yen – Gold increase as Tariff deadline looms;

Jul 5, 2018 | Market Updates

Upcoming high impact news:

20:00 GBP BOE Gov Carney Speaks

Quiet session for U.S stocks as traders observed Independence Day celebrations. Attention turned to Europe, major indexes closed lower for the session dragged by trade deadline worries and losses in the tech sectors which has trade war exposure. The Euro Stoxx 50 added 5.33 – The FTSE lost 20.20 and the DAX dropped 31.53. Trade volume was lower due to U.S bank holiday.

Technology stocks led the losses, losing more than 1% after a slide in U.S. chip makers overnight. U.S. peer Micron was banned from selling chips in China late Tuesday.

Britain’s dominant services industry gained momentum last month, ramping up expectations that the country’s central bank could soon raise interest rates. The IHS Markit services Purchasing Managers’ Index (PMI) rose to an eight-month high of 55.1 in June, further supporting recent signs of the U.K.’s tentative economic recovery. – CNBC Germany also recorded robust growth in its services sector. Markit’s final services PMI rose to 54.1 in June, climbing to its highest level in four months. –CNBC

Tariffs continue as the main focus, both countries have set new tariffs to come into effect on the 6th of July. The Trump administration has levied a 25% tariff on $34 billion in Chinese goods, while the Chinese government has retaliated by announcing tariffs on the same value of U.S. goods. “Uncertainty over the tariffs’ impact on trade led to a subdued mood in risk assets, although sentiment has stabilized with the RMB staging gains over the last two days,” Weiliang Chang, a foreign exchange strategist at Mizuho Bank, said in a note.

Asian markets have been mixed today with the ASX200 trading higher, key Asian indexes are trading in the red. The Nikkei down close to 1%, the Hang Seng .84% lower. Uncertainty continues for Asian traders with the looming tariff deadline approaching.

Risk major’s ended basically flat overnight and continue to trade flat in today’s session. The GBP picked up to the USD and JPY after the services PMI beat expectations. The other majors edged lower to the Yen as traders hedged bets to the safe haven currency.  Dollar wise the week picks up with FOMC meeting minutes and U.S employment data to finish the week.

The Yuan fetched 6.6350 per dollar, moving from Tuesday’s 11-month low of 6.7344, following reassuring remarks from Yi Gang, governor of the People’s Bank of China.

“Chinese authorities had initially appeared to approve fall in the yuan to support the economy ahead of a possible start of U.S. tariffs,” Minori Uchida, chief currency strategist at MUFG Bank.

Oil parred loses last night to close slightly higher, this morning sellers have taken price 57 cents lower after President Donald Trump urged OPEC to reduce prices. OPEC together with a group of non-OPEC producers started to withhold output in 2017 to prop up prices. Newly imposed sanctions on Iran could have been artificially holding oil higher. Technically 73.60 and 73.10 continue as resistance.

Gold held gains adding $5 uncertainty a key price supporter. So far today trade has been flat with traders sitting on the lines in wait of tomorrow’s tariff deadline. Bitcoin added 124 overnight but failed to beat 6760. This level is becoming key resistance traders. So far today we’ve seen a test higher and lower, price sitting flat around 6615.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

* The information provided here has been prepared by EightCap’s team of analysts. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and do not reflect the opinions of EightCap.

In addition to the disclaimer on our website, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. EightCap accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.

Please note that past performance is not a guarantee of or prediction of future performance. This communication must not be reproduced or further distributed without prior permission.