The EU Reached a Deal with the US: The FOMC Meeting in Focus
The European Union has concluded a deal with the United States, which means that the trade wars between the two parties are over. At least now. According to the deal, 15% tariffs will be imposed on all goods coming from the European Union to the United States. Previously, the head of the White House announced 30% tariffs on EU goods if the deal wasn’t reached.
The next important event this week is the FOMC meeting. Market participants do not expect the Fed to take any steps. Therefore, they are going to focus on the post-meeting press conference to see some clues that will help them understand when the Federal Reserve is likely to cut rates in 2025.
It was expected that Jerome Powell and Co. were going to make the first cut in September. However, recent US economic data leaves more room for the Fed to stick to the wait-and-see approach.
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EUR/USD: The Deal Pressures on the Euro
The reaction of the currency pair to the deal between the US and EU was not expected, as market participants considered the agreement as another supportive point for the Euro that would help the currency pair move higher.
However, the conditions of the deal are far from being ideal for the Eurozone. 15% tariffs will hit the European manufacturing sector, which is unlikely to be as competitive as previously in the US market. Moreover, no retaliatory measures will be taken by the European Union, and US goods will have more access to local markets.
The deal is widely criticized by European leaders who name it a “submission”. Both Paris and Berlin warned about the substantial damage that it may cause to the European economy.
From the technical analysis standpoint, EUR/USD stays below the SMA50, which means that the sellers dominate the market. The RSI indicator is leaving the oversold area, which means that the upside correction is in place. Traders can sell below 1.1530, targeting 1.1450-1.1460. When it comes to the upside, if the currency pair breaks above 1.1600, you can target 1.1680-1.1700
GBP/USD: The Greenback is Outperforming the Pound
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JoinLatest news on the trade deal between the US and EU supports the greenback, which outperforms its major peers, including the British Pound. Moreover, GBP is under pressure due to a cooling labor market and inflationary pressure, which makes it harder for the Bank of England to find a solution. The central bank’s officials are likely to perform a balancing act next week during the announcement of their monetary policy.
Rising inflationary pressure has already affected household buying power. If the situation continues to develop in this direction, the BoE is likely to cut rates again this year, which puts pressure on the Pound right now. Moreover, the US dollar is supported by the current Fed policy and expectations that the central bank will stick to its tight policy for longer.
The currency pair is trading below the SMA50, confirming the bearish pressure. RSI has just left the oversold area, which means that the upside correction is almost over. Traders can sell the currency pair below 1.3320, targeting 1.3250-1.3230. On the upside, buyers can open trades at 1.3360 targeting 1.3430-1.3450.
XAU/USD: Gold Remains Under Pressure Amid Declining Trade Tensions
Being a safe-haven asset, gold is not in demand at the moment as the deal between the US and the EU was reached, and the negotiations between the US and China will continue on Tuesday. The US dollar made a significant upside movement against its major peers on Monday and Tuesday. Moreover, market participants are now focusing on the upcoming Fed meeting, where the central bankers are likely to make no moves again.
Moreover, market participants have decreased their expectations about the rate cut in September that was widely anticipated previously. The latest US data shows that the US economy is in good shape, offering the Fed more room and allowing the central bank to stick to its wait-and-see approach, even despite the pressure from the White House administration and the Secretary of Treasury of the United States pushing Jerome Powell to cut rates as soon as possible.
From the technical analysis standpoint, Gold is trading below the SMA50, which means that sellers are dominating the market. Short positions will be preferable from 3,300 targeting 3.260-3,240. On the upside, long positions can be opened from 3,330 targeting 3,380-3,400.
WTI: Crude Oil Is Supported by Trade Deals
Crude Oil managed to rise this week, supported by the successful trade deal between the US and the EU and the ongoing negotiations between the US and China. However, the upcoming FOMC meeting puts pressure on quotes, preventing the black gold from moving higher.
The Fed is widely expected to keep the benchmark rate between 4.25%-4.50%. Market participants will wait for the FOMC members to provide any cues about the possibility of the rate cut in September; however, currently the expectations are only 50%.
WTI crude oil is trading above the SMA50, confirming bullish dominance in the market. Buyers can engage above 67.00, targeting 67.70-67.80. On the downside, sellers can engage below 66.20, targeting 65.50-65.30.
