Last Friday, the import duties of Donald Trump’s administration to Canada, Mexico and EU countries came into effect, as he expressed "The necessity of duties is conditioned by the threat to US national security." The Prime Minister of Canada, Justin Trudeau, reacted quite negatively to this statement, having replied to the American president that such statements are rather insulting and unacceptable. This week we are waiting for the reaction from the European Union. Yes, the most important driver on this week will be precisely the "trade war"- to what extent will it worsen? After all, all its participants are ready to respond with counter restrictions and duties.
That is why the US dollar, showing excellent statistics, did not continue the bearish rally on last Friday, but just "strolled" and by the end of trading the pair returned to the trading corridor 1,172-1,165 which we have already mentioned. There is a consolidation in the specified range this morning.
Although this week is not so rich in strong economic news, nevertheless it is worth paying attention to the business activity of the Eurozone on Tuesday. There will be the final release of statistics on the EU's GDP on Thursday. In relation to the growing intensity in the market (as discussed above), Mario Draghi's speech (the head of ECB) will be very interesting. He should comment on American restrictions (duties and Iranian sanctions).
The most volatile releases from the United States will be business activity and open vacancies in the labor market on Tuesday. Under the conditions of the "trade war", import/export on Wednesday will be important indicators as well.
It is quite difficult to predict further movement under such conditions. Technically, there is a hint of a turn in the pair, but for its confirmation, it is necessary to gain a foothold above the resistance of 1,172. Given the strong US statistics and stronger chances of raising the interest rate by the FRS in June, it can be admitted that sales in the pair are still relevant; on the other hand, the radical mood of the administration of the American president pushes away.
AUD / USD
This week it is worth paying attention to the Australian dollar, and not only because of fullness with strong economic releases of this week, but also because the Australian dollar had been strengthening at the beginning of the summer season over the past two years.
The Australian reports during the Asian trading session, the time difference with the American namesake gives a small head start for trading between the rivals' releases. In the Monday morning, the gross profit of the companies and the volume of retail sales have already taken place, significantly exceeding forecasts.
On the night of Monday to Tuesday, the Central Bank of Australia will announce a decision on the interest rate, no changes are expected. Also, the balance of the current account for the first quarter will be made public. Wednesday will tell us about the growth (according to forecasts) of the country's GDP in the first quarter, and Thursday will tell us about the trade balance for April.
It is also worth noting that "trade friction" with the US can force China to abandon the import of agricultural products from Australia. Currently, the PRC is one of the main markets for the Green Continent. Such a scenario will hit hard on the economy of the country, which will have to look for another partner. This a very sad option is possible, but still, it has not been confirmed yet; therefore the Australian is very interested for buying this week both in short and long positions by the end of July.
It seems we have a week of "dollars", now let’s take into consideration the Canadian dollar. This week the Canadian dollar will be held under the slogan "labor market". Tuesday - labor productivity in the first quarter, Wednesday - business activity in May, and on Friday there will be releases of the unemployment rate and employment change in May. In general, as we have said earlier, Stephen Poloz, who will speak on Thursday evening, previously has relied on the labor market. And now it's time to pick the fruits of our labor.
Yes, far from the last factor will be "trade disagreements" with the American neighbor (which was already written in the EUR / USD pair). According to Donald Trump, Canada restricts the supply of American agricultural products to its country, thereby it threatens the national security of the USA. It's not for us to judge the correctness of such conclusions, there are political scientists and other specialists for this purpose.
Against the background of the general negative, which may further worsen, thereby it can upset and alienate the US currency. That will play in favor of its competitors, the Canadian dollar, including. Since Tuesday, it is worth paying attention to this pair, especially because of the response of the EU to the United States on this day, which will bring at least some clarity in the trade tension.
Our trading plans for last week were successful, light oil finished trading below 66.00. Monday morning was marked by consolidation after the test of 65.50, which stopped the price reduction. This week for black gold will be very interesting and not because of the releases on Wednesday and Friday, which we are working out every week.
Yes, as we have said in today's currency pairs reviews, the main drivers of this week will be the talks of the leaders of the countries participating in American duties, which took effect last Friday. This fact can have a very negative impact on US products and raw materials, including, as a consequence, the US economy. Considering the next increase in the number of drilling rigs last Friday, now the US has 861 out of production, the production capacity is growing, but will it be able to cope with the sale this week? It is doubtful. And yes, the US benefits from shale oil that is cheaper than its North Sea brother Brent.
Such a turn of events and a technical picture say that the descending short-tail is not finished. The upper limit of the bearish movement is not broken, even the test has not been conducted. So after fixing profits on Monday, it's worth thinking about entry points on Tuesday-Wednesday. By this time, at least some clarity at the beginning of the "Trade War" between the world's strongest economies will be introduced.