Market Update – 19th July 2016

Market Update – 19th July 2016

Probably the most important week after the UK referendum vote is ahead of us as the ECB (European Central Bank) is preparing to release its monetary policy two days from now and there is no secret that the Brexit vote is forcing the ECB to make some changes to its bond buying program.

 

There are many things ECB can do, starting with extending the quantitative easing period further in 2017 and ending with changes in capital key requirements, but one thing is for sure: volatility will be on the rise and Euro will travel all over the place.

 

If you look at the EURUSD you’ll see that after the Brexit vote, the pair started a three weeks long consolidation and it is no coincidence the range will most likely end with this ECB decision and press conference.

 

I am still looking at the pair with bearish eyes and not necessarily because of the fact that the Euro is bearish, but US dollar starts to look interesting here.

 

CPI (Consumer Price Index) last Friday showed no sign of picking up, but retail sales were beating expectations by a mile. This is a sign Fed will not ignore moving forward into 2016.

 

On the other hand, UK leaving the European Union means the EU GDP will be revised lower and in order to address this lower growth the bias is that the ECB will come up with some other dovish moves.

 

AUDUSD suffers after RBA (Reserve Bank of Australia) monetary policy minutes were released as now market is pricing in another rate cut in August. The pair traded with a bullish tone all last week and on Monday as well, but failed to hold on the 0.7600 as price is trading now below 0.75.

 

Moving forward, look for this to be just the beginning of a bigger trend lower that is starting on this pair.

 

The same thing can be seen on the USDCAD pair as it is trying to break out of a bullish triangle on the daily chart and by the time it will succeed, there should probably be no other resistance areas all the way into 1.3450.

 

Canadian CPI is due next Friday and on any tick lower, which should not be a surprise, look for the USDCAD pair to jump to higher levels. Oil is not looking good as well, and this should only lead to a lower CAD when compared with the US dollar.

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