US GDP Growth Rate
The US GDP growth rate for the first quarter of 2018 was published yesterday and it fell short of market expectations. The report by the Bureau of Economic Analysis showed a 2% increase as opposed to the initial estimates of 2.2%. After multiple reviews, the BEA’s final figures reveal that the 7.6% increase in fixed investments accounted for 1.23% of the total GDP growth. Meanwhile sales for durable goods fell by over 2%. Overall the data for Q1 2018 suggests the economy’s growth is slowing down. Especially when compared to the 2.9% growth in Q2, 3.2% in Q3 and 2.9% in Q4 of 2017.
Returning Optimism
After a week long decline, the Chinese stock market managed to close the final trading day of June in the positive. The Shanghai Composite increased by 2% today, easing some of the losses this month. This final result does not reflect the early trading hours when price hit a 52 week low at 2782.77, from where it quickly turned around and shot up to 2840 before closing. The Hang Seng increased 1.5%; the Nikkei and the KOSPI both closed in the positive as well. The stock exchange wasn’t the only market to suddenly change direction on the last day. Oil broke its rising trend over the week and dropped by 0.3% back to $73.20.
NASDAQ
The US tech company based NASDAQ Composite is one of the best performing indices in the current market climate. The sector it represents has been largely unaffected by the trade war and repeated interest rate hikes, allowing the index to soar and reach new heights. Upwards is still the baseline trend, even though the past few days may suggest otherwise. On July 22 price experienced a powerful correction that pushed it down from its 7361 peak back to 6962. Looking at the big picture, this seems like a textbook example of price gathering momentum for another large wave of upwards movement.
Applying the Fibonacci Retracement tool to the highest and lowest points of the rising trend gives us an accurate picture of potential lines of support and resistance. The previously mentioned price correction wave reached the 38.2% retracement level, from where it quickly bounced back to the 25% line. The chart suggests its momentum will not stop there, partly indicated by the red trendline. The line has been forming since April and price has not managed to close below it so far. The line was also the starting point of yesterday’s upwards movement. Today’s overall optimism in the global markets could affect the NASDAQ as well, giving extra credibility to a rising trend in addition to the technical analysis. Looking at the charts we can see 7299 as a persistent line of resistance needs to be taken into account when trying to determine how we think price will move. If the upwards trend fails to breach this line, it could easily lead to the forming of a head and shoulders pattern. If that pattern were to form under these circumstances, it could signal the start of a downwards trend for the index.
EURCHF
News of political victories for the European Union has been scarce in recent months, however, yesterday members of the Union made some progress in tackling Europe’s ongoing immigration crisis. The issue itself was a cause of concern for Union bureaucrats and has created a division among member states for the past two years. The new Italian cabinet has succeeded in proposing a common EU framework help manage migrants coming through the Mediterranean Sea. The crisis has also been a threat for German Chancellor Angela Merkel, so if all Union members can get on the same page on this issue, it’ll free up attention that can be turned towards other matters. The prospect of a common immigration policy also carries the promise of forging the otherwise divided European nations into a more cohesive alliance. Traders of the euro took this news well enough for the currency to strengthen by 50 pips against the Swiss franc. The euro produced similar results against the US dollar, the Japanese yen and the British pound.
According to the charts, the euro was already showing signs of recovery before the recent summit. Between June 19 and 25 the franc made three unsuccessful attempts to break through the 1.4585 support line. As a result, investors have given up hope of seeing price increase further, this causing sellers to gain the upper hand. This started an upwards trend for the currency pair, indicated by the grey channel. In this range the euro strengthened further until peaking yesterday at the channel’s upper 1.1565 limit. Today started off with a correction that was stopped by the persistent 1.1565 former resistance line now acting as support. The line halted the euro’s attempt to retest. The subsequent candle indicates the possibility another upwards trend.
Sincerely,
Laszlo | Market Analyst
Disclaimer:
Leveraged trading is high risk and may not be suitable for everyone as your losses may exceed your investment. We advise you to consider whether trading is appropriate for you in light of your experience, objectives, financial resources, risk tolerance and other relevant circumstances. Ensure you fully understand all of the risks involved and seek independent advice if necessary. Please refer to our more detailed risk warning at earn2trade.com/disclaimer. We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. Trading through an online platform carries additional risks.