Trading plan for 11/08/2017:
The risk-off sentiment prevails on financial markets as the session on Wall Street ended with a large sell-off. The Nasdaq 100 plunged -2.22%, the SP500 slid -1.45% and the Dow Jones decreased -0.93%. The Asian stock market took over a negative sentiment: Hang Seng lost -2.1%, Shanghai Composite lost -1.5%. Risk-off is also visible in the currency market, where the flight to safety continues: CHF gains 0.22% and JPY gains 0.21%, while risk currencies are AUD (-0.32%) and NOK (- 0.21%).
On Friday 11th of August, the event calendar will be busy with important economic releases. During the London session, the CPI data will be released from Germany, France, Spain, and Italy. During the US session, the CPI and Core CPI data will be released from the US. Later during the session, two FOMC members will give a speech: Neel Kashkari and Robert Kaplan.
EUR/USD analysis for 11/08/2017:
The CPI data from across the Eurozone is scheduled for release during the early London session. The German CPI data were in line with the expectations as the monthly CPI was released at the level of 0.4% and the yearly CPI was released at the level of 1.7%. Global investors needed this kind of data to keep the positive and optimistic sentiment towards the German economy as the last set of data from the last week wasn't that good. Germany's trade surplus increased to EUR 21.2bn after June 2017, against expectations of EUR 21bn and EUR 21.3bn a month ago. However, the monthly growth rate of exports and imports was disappointing. Exports fell by 2.8% and imports by 4.5% on the monthly basis, while the expectations of economists indicated levels - respectively -0.1% and 0.2%. The industrial output fell in June by 1.1% and this was the first decline this year, which - again - has disappointed market participants who expected a 0.2% increase. On the other hand, PMI or Ifo Index (business mood indicator) rose this year to levels not available for years. The Ifo reading for July was the highest since the early 1990s. When it comes to moods, the global investors often overreact, therefore market expectations should be gradually corrected down. The question remains whether the hard data in form of the CPI readings with help of the sentiment indicators reassure the European Central Bank to consider to start tightening the monetary policy in form of a small interest rate hike or reducing the balance sheet, just as announced by Federal Reserve Bank in the US. The recent rally in the EUR/USD is the result of global investors elevated expectations regarding that kind of ECB decision.
Let's now take a look at the EUR/USD technical picture at the H4 timeframe. The good data from the Germany did not help the bulls to violate the next technical resistance at the level of 1.1822 and now the price is sliding down in oversold market conditions. The next support is seen at the level of 1.1728 and 1.1686. The inability of momentum indicator to move above its fifty level supports the bearish bias.
Market Snapshot: Crude Oil breaks out of consolidation
After a failure at the level of $50.29, the price reversed sharply and broke below the technical support at the level of $48.39. The negative sentiment after yesterday's worse than expected data might cause a further sell-off towards the next technical support at the level of $47.53.
Market Snapshot: German DAX30 below 12000 points
The failure to break out above the golden trend line around the level of 12,302 resulted in another leg down, this time below the 12,000 points. The bears have managed to break out below the technical support at the level of 12,093 and now are heading towards the next important technical support at the level of 11,886. Breakout below this support will indicate a trend change as the first lower low would be in place below 11,886.
