The initial cheer brought about by the trade truce between Washington and China during the G20 summit was short lived. Equities gave back the gains while gold managed to reverse the temporary losses. The Washington administration shifted focus to the EU, threatening with tariffs in retaliation for the subsidies given to Airbus.
EU officials, however, confirmed that they are holding talks with their US counterparts. Meanwhile, IMF chief, Christine Lagarde’s name was proposed as one of the candidates for the ECB post. The current ECB President Mario Draghi’s tenure ends this October.
The euro traded a bit volatile but closed the day flat. This came after the markets digested the fresh tariff threats from Washington against the EU. The US was reportedly building a list of products to hike tariffs on, in retaliation for the EU subsidies given to Airbus, the European planemaker. On the economic front, Germany’s retail sales fell 0.6%.
EURUSD Could Fall to 1.1250
The currency pair managed to rebound off the initial lows formed at 1.1282. However, this rebound led to a lower high forming. Currently, we see the minor support forming at 1.1282. A break down below this level will push the EURUSD down to test the 1.1250 level of support. Overall, the EURUSD is back trading within the range of 1.1400 and 1.1200.
UK Construction PMI Falls Sharply in June
The monthly construction PMI survey from IHS Markit saw construction activity falling sharply. Data showed that construction activity slipped to 43.1 in June from 49.4 in May. The data follows weak results in manufacturing which fell to 48.0 in June. The Bank of England Governor, Mark Carney cautioned of the downside risks to the sterling due to Brexit and the global trade wars.
GBPUSD Forming Inverse Head & Shoulders?
The currency pair has established a strong resistance level at 1.2739. Failing to breakout from this level after multiple tests, the GBPUSD has extended declines. If the current declines form a modestly higher low, then this would validate the inverse head and shoulders pattern. A breakout from the neckline resistance of 1.2739 could potentially open the way for some gains in the GBPUSD currency pair.
Gold Pares Losses on EU Tariff Threats
Gold prices pared losses from earlier this week as the precious metal reversed to close bullish on Tuesday. This sent gold prices briefly higher to test the six year high established few days ago. The reversal in gold prices comes amid renewed threats on trade against the EU. This curbed investor sentiment earlier this week when the US and China called for a truce to trade wars.
Will Gold Breakout Higher?
The current reversal in gold prices means that we see a consolidation taking place. Unless the precious metal breaks out higher above 1431, we could see some pullback. The lower support is formed at the reversal area of 1385. This support could potentially stall the declines in the short term.