Highlights for this week:
- The result of conservative party’s election of UK parliament will have been announced by Tuesday night. Boris Johnson is expected to be the new PM.
- The European central bank meeting on Thursday. The interest rate is expected to maintain at zero percent but, probable dovish tone of Mario Draghi may put pressure on EURO. Analysts expect ECB to change its guidance in July, lowering deposit rate in September.
- Flash PMIs will be announcing on Wednesday from 12:00am GMT to 3:00pmGMT.
- US new home sales on Wednesday and Durable goods on Thursday.
Britain is scheduled to leave the Europe by the end of the October. The new prime minister, which will have determined by Tuesday night, only have three months to reach a satisfying deal with EU and try to convince the parliament to vote in favor his deal.
It is believed that the next UK prime minister will be Boris Johnson.
“It’s a very fluid situation, said Nick Wright, an expert on EU politics at University College London. “Literally, anything could happen.” We expect Boris Johnson to renegotiate with EU in order to buy more time to solve the Brexit issues. Another option would be a second referendum, political crisis or a hard Brexit. In our thoughts, The Pound sterling may not find any demand and the weakness of the US dollar index was the reason of recent recoveries in GBP/USD.
Mario Draghi, the chairman of the European central bank, in the previous meeting of ECB (6Jun) revealed that the new round of QE (quantitative easing) is about to come to combat with low inflation rate and to encourage the economy to grow.
Since 6 Jun, the market heard mix news from the EU. PMIs and unemployment rate were satisfying but, although the inflation rate of June was released above the expectations, still it is disappointing because it is a long way to achieve the target of the ECB.
Germany manufacturing PMI rose above the expectations in June to 45.4
French manufacturing PMI rose above the expectations in June to 52.00
EURO unemployment rate is satisfying and keeps its down trend.
But, the serious problem of the ECB is about the inflation rate.
Although the Inflation rate of June was released above the expectations, it is still fluctuating below the target of the ECB (the inflation target of the ECB is 2.00%) and the EURO inflation rate is descending from 2018.
The upcoming FED(31July) and ECB(25July) meeting will determine the next move of this pair.
It is believed that the ECB will not decrease the EU deposit rate in the meeting ahead, but the ECB will do that in the next meeting which will be held on September and rush doesn’t needed but, Mr. Mario Draghi will talk about bond buying plan and details of Tltro (The targeted longer-term refinancing operations). In the previous meeting they clarified that this quantitative easing program (TLTRO III) will start in September 2019 and end at the end of 2021. Every change in the projection will surprise the market.
There is another probability which is said that ECB may change the target projection and push it lower than 2.00%. if ECB decrease its target projection and push it below 2.00%, EURUSD will lose its demand and fall.
After all, we have to wait and see how aggregate they will be on 25th of July.
US manufacturing PMI: second-lowest figure since September 2009. It is expected to rise to 50.9 in July.
US new home sales is expected to rise to 659K in June. It will be released on Wednesday
The major trend in h4 time frame is up. 97.6 would be the next target.
Eurusd h4 time frame: We are waiting for the fifth wave.
Gbpusd h4 time frame: Resistance levels: 1.250, 1.2560. Support level: 1.245
Usdjpy h1: The major trend in h1 is down. We expect this pair to fall to 107.00
Xauusd: 1460 is a probable target.
DJI h4: 27300 is very important resistance level. In our opinion, this level will prevent the market from moving higher
US 10YR bond yield - UK 10YR bond yield - Japan 10YR bond yield - German 10YR bond yield: Are still under the pressure by investors, because they still prefer to buy safe assets instead of risky assets. It is a bad news for stocks and commodities and it is a good news for Gold, JPY, CHF.