The focus so far this week has been on the EU again.  Mr Trump has made some agreements on tariffs, which includes benefits to the US to enable zero rates to both countries on non-auto goods. The question of auto tariffs is a big one for the EU and is not under this umbrella and rumours still abound that they will be imposed later this year. Just to be clear, they have agreed to a truce on auto tariffs but it is only on hold. Plenty to still speculate about and rock the boat in the EZ.

Today we have to wait again for Mr Draghi to step forward. Talk about tightening is what the market is listening for and any further clues since the last meeting when December 2019 was the goal for ending QE. A lot now rides now for the EUR on the tone and words of the chairmen and we could have some volatility.

Equities are again split…and consider also the longer-term effects on different sectors as tariffs globally take effect. That is not a subject for today but these divergences are likely to become much more common. For now, the US indexes are stronger across the board…also energy stocks were higher. I am still showing this on the weekly chart:

Asian markets are still weak:

 

And here is the Nikkei. after more talk from the BOJ about the benefits of higher long term yields.

 

 

The market movements have been much more about results with the technology stocks benefiting the most although Facebook disappointed yesterday.

That brings us to data. EZ PMIs improved on the manufacturing front and slipped on services..the opposite of last time and overall supportive of the EUR. Ths is not as important as the ECB today and any speculation around policy can move the EUR either way so wait for the news.

One other piece of data caught my news and it was more lacklustre numbers on US existing home sales and another slight miss. More on that at the weekend as we consider the picture for the USDX:

The Watchlist

I have been challenged by internet issues this week…but for long-term traders like myself, the movements have been narrow. My focus is still on equities and I am still holding the FTSE short. This is an attempt to position for longer-term movements to the downside:

EUR trades are waiting for Draghi: This is in a triangle

 

I prefer the EURJPY, fundamentally and I am looking to short it on any apparent softness in policy from Draghi:

The USDJPY is in the middle of nowhere and I prefer the lower break if risk-off conditions take control.

The yield had a surge following the BOJ rhetoric but has settled and still needs to be assessed for this trade..prefer the short side and the bigger levels:

The short on this worked well off the level given last week…now we wait as it is not far from another support level.

The risk environment is mixed and lacking clarity. The AUDJPY is also under watch but it too is in the middle of a balance and one to wait for the bigger level…I prefer the break lower:

Gold is on the list watching both the risk environment and the USD for weakness and the goal is to wait and get the timing right

The forex markets are quiet as we wait for the ECB and watch unfolding politics. Remember it is summer and liquidity is dropping so we need the best catalysts and one is just ahead with the ECB.

I shall be looking for any risk-off conditions which is one of my big themes. The other you know is equity markets and avoid the US indexes for now. The divergence means we have to know where to focus our attention. It also warns that there are bigger problems ahead. As if we didn’t know!

Judith Waker