European and American futures rose after Trump signaled that he was open to the idea of doing an interim trade deal with China. In a statement to reporters, the President said that while he wanted to do a full trade deal with China, he was open to an interim deal that includes solving the easy issues first. This came a few weeks before the planned meeting between Chinese and American officials who are expected to meet in October to try and solve the key issues. It also came a day after Trump said he will hold off on more tariffs on goods worth $250 billion until October 15 instead of October 1. He called this a gesture of good will because the Chinese are celebrating their 70th anniversary.
The euro rose in the American session as investors continued to react to the decision by the ECB. Yesterday, the ECB slashed interest rates by 10 basis points and announced that it will restart quantitative easing in November. The easing will involve buying bonds worth €20 billion every month. Furthermore, the bank eased lending terms for banks in the eurozone and offered them tiered interest rates in a bid to ease the pressure on their lending margins. As expected, Donald Trump reacted to the news by putting increased pressure on the Fed to have more rate cuts. Further, Mario Draghi asked the European governments to enact more tax cuts to help stabilize the economy. Later today, the market will receive the wholesale prices from Germany, Spain CPI, and EU trade balance.
Later today, the market will receive key retail data from the United States. In August, investors expect the core retail sales to have risen by 0.1%, which will be a lower growth rate than the previous 1.0%. The export price index is expected to have declined by -0.2% after rising by 0.2% in July. Headline retail sales are expected to have eased to 0.2% after rising by 0.7% in July. Meanwhile, the retail control is expected to have eased to 0.3% after rising to 1.0%. Investors will be paying attention to these numbers to check the reaction of consumers on the tariffs.
EUR/USD
Before the ECB decision, the EUR/USD pair was trading in a channel ranging from 1.1015 and 1.1067. Immediately after the ECB decision, the pair rose sharply to the upper level of the channel. It then declined sharply to a low of 1.0925. During the ECB press conference and in the American session, the pair rose sharply to 1.1086. It is now trading at 1.1070, which is a few pips from the previous resistance. This price is also along the 61.8% Fibonacci Retracement level and above the 14-day and 28-day moving averages. The pair will likely continue moving higher to possibly test the 1.11100 level.
USD/JPY
The USD/JPY pair rose to a high of 108.26, which was the highest level since August 2. On the four-hour chart, the pair is trading above all the short and medium-term moving averages. The ADX indicator has eased slightly to 42 while the Bulls Power has remained relatively stable. The pair will likely continue moving up to possibly test the important resistance level of 108.50.
EUR/GBP
Yesterday, the EUR/GBP pair reached a low of 0.8885, which was the lowest level since July 2. The pair then formed a bullish engulfing pattern as shown on the four-hour chart below. A bullish engulfing pattern is usually a sign that the pair will start moving in an upward trend. This could happen especially after the statement by the ECB yesterday. If it does, it will likely start by testing the important resistance level of 0.9000, which is slightly above the 23.6% Fibonacci Retracement level.
