The markets were seen trading in a modest risk off mode on Wednesday. This came after the U.S. administration threatened China with a fresh set of tariffs. The ongoing NATO summit in Brussels was also another cause for concern with President Trump accusing Germany being complicit with Russia over the gas pipeline proposal.
On the economic front, the data from the U.S. showed that producer prices index rose to a fresh six year high. On a month over month basis, headline PPI increased 0.3% while core PPI which excludes food and energy prices gained 0.2%.
Driving PPI higher was another month of strong gains from the energy prices.
The Bank of Canada held its monetary policy meeting where it raised rates by 25 basis points to bring Canada’s interest rates to 1.50%. The BoC also signaled that there was room for further rate hikes.
The European trading session today will kick off with the release of the German and French final inflation figures. According to the preliminary inflation reports headline CPI is expected to rise 0.1% respectively.
Later in the day, the ECB will be releasing its monetary policy meeting minutes. The minutes cover the June ECB meeting where policy makers announced a taper to the QE program and an exit from QE by December 2018.
The U.S. trading session will see the release of the monthly consumer price index data. Economists forecast that headline CPI is expected to rise 0.2% on the month while core CPI is expected to rise 0.2% on the month as well.
EUR/USD intra-day analysis
EUR/USD (1.1674): The EUR/USD currency pair was seen posting declines yesterday. Price action fell to a four day low following a reversal off the resistance level. On the 4-hour chart, the close below the previously established support level indicates further declines might be in store. However, the Stochastics oscillator is currently in the oversold level and indicating a hidden bearish divergence. A reversal near the current levels could push the EUR/USD back toward testing the next resistance level at 1.1846 - 1.1824.
USD/JPY intra-day analysis
USD/JPY (112.28): The USD/JPY currency pair was seen maintaining the bullish trend as price action is currently testing the highs near 112.00. The breakout comes as the USD/JPY managed to close above a multi-year falling trend line. Price action at the current levels coincides with a minor resistance level that is being tested. A reversal off this level could keep USD/JPY within the range of the trend line and the horizontal resistance level.
XAU/USD intra-day analysis
XAU/USD (1242.25): Gold prices posted strong declines on the day on Wednesday. Price action was seen falling to the lows of 1242 level of support. However, the rebound off this level is expected as price action touches the previously established lows. The decline to the support level also coincides with a retest of the falling trend line as well. A daily close above 1247 could potentially trigger an upside rally in prices. The longer term resistance level is seen at 1282 which could be tested in the medium term.