Global financial markets have quieted overnight after President Trump’s tweets had produced a significant jump in volatility and worries over global growth on Monday. The risk still remains heavily to the downside with the fresh update on the trade discussions. The vacant Chinese delegation will still go to Washington this week despite additional statements from the US side that they plan to grow tariffs on Friday.
Stock markets remained under pressure for most of the day although US indices did rally later in the session on that news that talks will still continue, the Dow closing down just 0.25% with the S&P negative 0.45% and the Nasdaq 0.5% in the red.
AUD/USD – Reserve Bank of Australia Plays
Reserve Bank left interest rates on hold, but chances of rate cut remain high. Despite a notable level of expectation the Reserve Bank would lower interest rates this month, it has held them steady for the 30th consecutive meeting.
Investors are pricing in a greater-than-70% chance of rates falling by the August meeting.
The RBA is looking for more declines in unemployment or underemployment to boost inflation, elsewhere, it may cut rates.
RBA has kept the cash rate on record low level of 1.5% since the last move in August 2016, although money market traders do not expect it to stay there much longer.
On the technical front, the AUD/USD pair heads into the European session struggling to stay below 0.7050 resistance area. So far, the Aussie has a bullish crossover on 50 periods EMA, which is suggesting a strong bullish bias of traders.
Technical indicators in the mentioned chart have recorded a bullish engulfing candle on the 4-hour chart, which once again is supporting bullish bias of traders.
With that being said, AUD/USD is likely to face resistance around 0.7055 and 0.7080. On the lower side, support prevails at 0.69800.
Key Trading Level: 0.7012
AUD/USD Trade Idea
Consider staying bearish below 0.7055 and bullish above 0.7010 today.
EUR/USD – Double Top Keeping It Lower
The EUR/USD consolidates below double top level despite weakness in the US dollar. From a technical viewpoint, the EUR/USD failure to mount on its strength back above the 1.1200 resistance clearly implies that the current pullback from a short-term descending trend-line resistance might still be far from over.
In the same chart, the pair is above a 20 SMA which converges with a Fibonacci level at 1.1190, the immediate support, while the 100 and 200 SMA stretched their slumps above the current level, symbolizing that buyers are still hesitant to add. The pair would need to violate the 1.1280 level to make sellers worry about the trend. On the upper side, the EUR/USD can hit 1.1260 marks on the violation of 1.1200. While support stays around 1.1120 today.
Key Trading Level: 1.1181
EUR/USD Trade Idea
Traders, keep an eye on 1.1180 to stay bullish above and bearish below this level. On both sides, the take profit should be around 40 pips today. All the best!