Sample Category Title

GBP/USD - 1.2947

Original strategy :

Buy at 1.2920, Target: 1.3020, Stop: 1.2885

Position : - 

Target :  -

Stop : -

New strategy  :

Buy at 1.2900, Target: 1.3020, Stop: 1.2865

Position : -

Target :  -

Stop : -

As cable has retreated after faltering below last week’s high of 1.3030, suggesting consolidation below this level would be seen, hence weakness to 1.2916 support cannot be ruled out, however, reckon downside would be limited to 1.2900 and bring another upmove later, above said resistance at 1.3030 would signal recent upmove is still in progress and may extend further gain towards recent high 1.3048 but loss of near term upward momentum should prevent sharp move beyond 1.3075-80 today and reckon 1.3100 would hold on first testing. 

In view of this, would not chase this rise here and we are looking to buy cable again on pullback as 1.2900 should limit downside and bring another rally. Below 1.2870-75 would defer and risk test of previous resistance at 1.2861, break there would suggest a temporary top is formed instead, risk weakness to 1.2830-35 but support at 1.2794 should remain intact.

The CAC index has moved higher in the Monday session. The index is currently trading at 5172.80 and is up 1.02% on the day. On the release front, French Final Manufacturing PMI climbed to 54.8, which was within expectations. The reading improved from the May reading of 53.8. As well, Eurozone Manufacturing PMI climbed to 57.4, beating the forecast of 57.3.

President Emmanuel Macron's election win has galvanized the French public, and there is renewed optimism for real change in the country. The French consumer is feeling more confident about the economy and is also spending more. French consumer spending climbed 1.0% in June, easily beating the estimate of 0.5%. This marked the indicator's strongest gain since January 2015. The solid manufacturing data points to stronger optimism in the business sector. The economy appears to be improving – a recent INSEE report revised upwards its estimate for France's GDP for the first quarter to 0.5%, up from 0.4% earlier in June. Still, inflation levels remain stubbornly low, as underscored by French Preliminary CPI, which dropped to a flat 0.0%.

ECB President Mario Draghi surely got more than he bargained for, after speaking at the ECB forum in Portugal. The markets responded to his comments, as EUR/USD jumped 2.0%. Draghi restated the obvious when he gave an upbeat assessment of the eurozone economy,but his positive remarks about inflation shook the markets, as investors snapped up euros last week. Draghi said that "deflationary forces have been replaced by reflationary ones" and added that the ECB's stimulus program was needed for now, but would be gradually withdrawn once inflation moved higher. One could make the argument that Draghi was not saying anything new, but the markets seized on Draghi's remarks as a declaration that the ECB was planning to tighten policy. After the euro jumped, the ECB tried to backtrack, with ECB sources saying that the markets had "misinterpreted" Draghi's remarks. However, the markets shrugged this off, and if there are any indications that the ECB plans to tighten policy, the stock markets could respond with gains.

EUR/USD - 1.1370

Original strategy  :

Buy at 1.1330, Target: 1.1440, Stop: 1.1295

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1330, Target: 1.1440, Stop: 1.1295

Position : -

Target :  -

Stop : -

As the single currency met resistance at 1.1446 late last week and has eased, suggesting consolidation below this level would be seen and pullback to 1.1350 cannot be ruled out, however, reckon 1.1325-30 (38.2% Fibonacci retracement of 1.1139-1.1446) would limit downside and bring another rise later, above said resistance at 1.1446 would extend recent rise to 1.1455-60 (61.8% projection of 1.1119-1.1389 measuring from 1.1292), then 1.1480 but overbought condition should prevent sharp move beyond 1.1500, risk from there has increased for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy euro on pullback as 1.1325-30 should limit upside. Below 1.1292 (previous support as well as 50% Fibonacci retracement of 1.1139-1.1446) would abort and signal a temporary top is formed, bring correction to 1.1255-60 later.

USD/JPY - 113.02

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

As the greenback has surged again after finding renewed buying interest just below 112.00, dampening our near term bearishness and near term upside risk remains for recent upmove to extend gain to 113.20, then towards 113.40-50, however, near term overbought condition should prevent sharp move beyond later level and reckon 113.75-80 would hold from here, bring retreat later.

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below the Kijun-Sen (now at 112.51) would bring test of the lower Kumo (now at 112.17) but break of 111.90-95 is needed to signal an intra-day top is formed, bring test of 111.73 support first.

The dollar index accelerated higher on Monday, rallying from $95.21 low, where previous week's steep fall from $97.14 bottomed. Daily candles are forming reversal signal, with daily RSI turning north and slow stochastic reversing deeply in oversold territory. Scenario is also supported by daily MACD bullish divergence. Recovery rally approached pivotal barrier at $95.94 (Fibo 38.2% of $97.14/$95.21 downleg) close above which is needed to confirm and open way for stronger correction. However, overall bearish structure sees limited correction before broader bears resume lower. Extended upticks are expected to remain below strong $96.33/44 resistance zone, consisting of daily Tenkan-sen/Fibo 61.8% of $97.14/$95.21 downleg / Daily Kijun-sen, to keep larger bears intact. Upper breakpoints lay at $98.50 (lower platform, reinforced by weekly Tenkan-sen) and $97.80 (falling daily cloud base).

Res: 95.94; 96.33; 96.44; 96.70
Sup: 95.41; 95.21; 94.66; 94.43

The DAX index has posted gains in the Monday session, gaining 0.56%. Currently, the DAX is at 12,397.58. On the release front, German Final Manufacturing PMI improved to 59.6, above the estimate of 59.3. As well, Eurozone Manufacturing PMI improved to 57.4, beating the forecast of 57.3. The Eurozone unemployment rate was unchanged at 9.3%, matching the forecast.

German consumer data beat expectations last week, reflecting a robust German economy. Preliminary CPI posted a gain of 0.2% in June, beating the estimate of 0.0%. This reading was an improvement from May, which showed a decline of 0.2%. On Friday, Retail Sales followed suit, as the gain of 0.5% was the strongest since March. However, Unemployment Change was unexpectedly soft, breaking a streak of 8 straight declines. The unemployment rate remained unchanged at 5.7%.

Is the ECB planning to taper its stimulus program? The markets appeared to think so, based on the euro's impressive rally last week, as EUR/USD jumped 2.0%. The currency was boosted by comments from ECB Governor Mario Draghi at the ECB forum in Portugal. Draghi restated the obvious when he gave an upbeat assessment of the eurozone economy, but the markets jumped on his comments about inflation. Draghi said that "deflationary forces have been replaced by reflationary ones" and added that the ECB's stimulus program was needed for now, but would be gradually withdrawn once inflation moved higher. One could make the argument that Draghi was not saying anything new, but the markets seized on Draghi's remarks as a declaration that the ECB was planning to tighten policy. After the euro jumped, the ECB tried to backtrack, with ECB sources saying that the markets had "misinterpreted" Draghi's remarks. However, the markets shrugged this off, and if there are any indications that the ECB plans to tighten policy, the stock markets could respond with gains.

The US economy softened in the first quarter, but there was some positive news on Thursday, as the revised GDP reading was raised to 1.4%, better than the initial estimate of 1.2% in May. The improvement was attributed to stronger consumer spending and an increase in exports. Earlier in the year, the markets were braced for a very poor first quarter, with the first estimate in April projecting a gain of only 0.7%. Inflation remains stubbornly low, and consumer spending is also soft, despite high consumer confidence levels. In May, Personal Spending softened to 0.1%, down from 0.4% a month earlier. If inflation levels don't show some improvement, the Federal Reserve may have second thoughts about a December rate hike.

It's quite interesting how Sterling remains resilient despite being constantly bombarded by political risk and economic woes over the past year. Last week's awe-inspiring rebound, which was trigged by BoE Governor Mark Carney's hawkish remarks, is a testament to this, as the GBPUSD concluded Q2 above 1.3000. While the Pound could find itself supported in the short-term as speculation heightens over a potential UK interest rate increase, gains are likely to remain limited as investors slowly come to grips with the reality of Brexit. With the UK economic outlook uncertain and political risk weighing on sentiment, an interest rate increase which may put pressure on growth and business confidence could easily add to the UK's woes.

Focusing on the macro-fundamentals, Sterling found itself vulnerable to losses during Monday's trading session after weaker-than-expected data from Britain's manufacturing sector forced investors to re-evaluate the possibility of an interest rate increase in 2017. The UK's manufacturing sector activity reading fell to 54.3 in June, marking its slowest pace of growth in three months. This disappointing report has dealt another blow to sentiment and is likely to add to the horrible cocktail of soft economic releases which is slowly illustrating the impact of Brexit.

On the political sphere, the Brexit rumble is heating up abroad as British officials have dropped the “have cake and eat it” approach towards negotiations. With British officials accepting that there will have to be a trade-off between access to the Single Market and political control when the UK departs from the EU, the possibility of a ‘softer' Brexit comes in mind. While Sterling could receive some minor support by Theresa May changing her hard Brexit stance, I feel the growing uncertainty over the UK's future relationship with the EU post-Brexit is likely to create serious headwinds for bulls.

From a technical standpoint, although bulls remain in control on the daily charts the GBPUSD has found strong resistance at 1.3030. There is a threat of bears making an appearance if the GBPUSD breaks back below 1.2850.

Greenback stabilizes on Monday

The Greenback clawed back some of its losses during Monday's trading session; this has nothing to do with a change of bias, but instead has more to do with profit taking. With increasingly hawkish comments from central banks outside of the US diminishing the Greenback's attraction and markets questioning Donald Trump's ability to move forward with his pro-growth policies, the Dollar Index could be in store for further punishment. Much attention will be directed towards the FOMC meeting minutes on Wednesday, which will be scrutinized for further clues on rate hike timings later this year. If the minutes strike a different tone from the FOMC meeting in June, then the Dollar could turn volatile. Technically, the Dollar Index remains under pressure on the daily charts with bears eyeing the 96.50 dynamic resistance to attack once again.

Commodity spotlight – Gold

Gold bulls tasted defeat on Monday as prices tumbled to a near seven-week low at $1235 on the back of a stabilizing US dollar. The downside pressure was complimented by prospects of tighter global monetary policy which simply uncaged the dormant sellers. Although the ongoing uncertainty from Brexit and political risk in the US has the ability to support Gold in the longer term, short-term bears remain in control. From a technical standpoint, the breakdown below $1240 should encourage a further decline towards $1220.

Spot Gold broke below strong supports at $1236/35 (26 June low / 200SMA) of strong bearish acceleration on Monday, signaling bearish continuation. Fresh bears cracked next support at $1233 (Fibo 76.4% of $1214/$1298 rally) and may travel to $1230 (16 May low) and $1225 (lower 20-d Bollinger band) in extension. Close below 200SMA is needed to confirm bearish scenario and turn focus towards key short-term support at $1214 (09 May low). Former low at $1240 now acts as initial resistance, followed by session high at $1242 and daily Tenkan-sen/cloud base at $1246.

Res: 1240, 1242, 1246, 1249
Sup: 1230, 1225, 1217, 1214

Notes/Observations

UK Manufacturing drops to 3 month low, on uncertainty following the election with Factory orders slumping to 11 month lows.

European Manufacturing PMI generally stronger with notable readings from Switzerland, Norway and the Netherlands.

Equities trade higher across the board following the end of quarter sell off seen last week.

Overnight

Asia:

Incumbent Yuriko Koike won a landslide victory in the Tokyo Gov election with her Tokyo Residents First Party securing 49 out of the 127 seats, and will hold a majority 79 along with its allies including the Komeito party

BOJ outlook report expected on July 20th: inflation forecasts could be revised down to around 1% for FY17 from 1.4% in the April report, while FY18 could be lowered to ~1.5% from 1.7% -Japan PM Abe may reshuffle cabinet as early as August

China Jun Caixin manufacturing PMI recorded 3 month high

Australia Manufacturing PMI recorded 9th month of expansion

Casino names all lower after June Macau gaming rev was lower than expected, attributed to China President Xi's visit to Hong Kong the last week of the month

Europe:

UK Manufacturing PMI drops to the lowest in 3 months, with new orders dropping sharply to a a 5 month low

European Manufacturing PMIs generally positive, Swiss PMI hits 6 year high

ECB's Weidmann commented over the weekend noting ECB policymakers agree some degree of monetary stimulus is still required, but degree needed is being discussed

Reportedly there is a distinct possibility UK PM May could walk away out of Brexit talks over the 'Divorce Bill'

UK Brexit Minister to hold conference with UK business leaders on Friday as part of a government drive to give them a bigger say in the process

EU's Barnier noted Brexit time is not 'indefinate'

Americas:

New York Fed Nowcast: maintains Q2 GDP forecast at 1.9%, unchanged from 6/23; raises Q3 GDP forecast to 1.6% from 1.5% on 6/23

China President Xi spoke with President Trump: Agree that Korea peninsula needs to be denuclearized

Oil:

Libyaoil production estimated at 1.01M bpd

Opec Crude Output rose 210K b/d in June to 32.55M b/d

Economic Data

(UK) JUN MANUFACTURING PMI: 54.3 V 56.3E (11th month of expansion, 3-month low)

(DE) GERMANY JUN FINAL MANUFACTURING PMI: 59.6 V 59.3E (31th month of expansion)

(ES) SPAIN JUN MANUFACTURING PMI: 54.7 V 55.6E (44TH MONTH OF EXPANSION)

(IT) ITALY JUN MANUFACTURING PMI: 55.2 V 55.3E (10TH MONTH OF EXPANSION)

(CH) Swiss Jun Manufacturing PMI: 60.1 v 56.3%e (Highest since April 2011)

(IT) ITALY MAY PRELIMINARY UNEMPLOYMENT RATE: 11.3% V 11.2%E

(EU) EURO ZONE MAY UNEMPLOYMENT RATE: 9.3% V 9.3%E

(FR) FRANCE JUN FINAL MANUFACTURING PMI: 54.8 V 55.0E (CONFIRMS 9TH MONTH OF EXPANSION)

(EU) EURO ZONE JUN FINAL MANUFACTURING PMI: 57.4 V 57.3E (CONFIRMS 47TH STRAIGHT MONTH OF GROWTH)

(SE) SWEDEN JUN MANUFACTURING PMI: 62.4 V 60.0E

(IE) IRELAND JUN MANUFACTURING PMI: 56.0 V 55.9 PRIOR (49 straight month of expansion)

(NO) Norway Jun Manufacturing PMI: 55.1% v 54.5%e (5 year high)

(TR) TURKEY JUN CPI M/M: -0.3% V 0.1%E; Y/Y: % V 11.2%E; CPI CORE INDEX Y/Y: 10.9% V 9.5%E

Fixed Income Issuance:

Non seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +1.0% at 3,473, FTSE +0.4% at 7,346, DAX +0.6% at 12,406, CAC-40 +1.1% at 5,176, IBEX-35 +1.0% at 10,552, FTSE MIB +1.6% at 20,916, SMI +0.8% at 8,974, S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European stocks opened higher following mixed results in Asia; trading muted ahead of upcoming US holiday; equities in general supported by positive PMI data (with the exception of the UK); extension of oil rally supports energy stocks; materials supported on better data from China; financial also outperforming; US session closing early due to holiday

Equities

Consumer discretionary [Havas HAV.FR +0.4% (Offer from Vivendi), Lufthansa LHA.DE +3.1% (analyst action), Air France-KLM AF.FR +2.6% (analyst action)]

Energy [Saipem SPM.IT +2.3% (contract extension), Premier Oil PMO.UK +3.5% (acquisition)]

Financials [Bollore BOL.FR +1.4% (sells stake in Havas)]

Industrials [Thyssenkrupp TKA.DE +2.6% (potential asset sale)]

Technology [Gemalto GTO.NL +4.9% (merger talks progressing)]

Speakers

Non seen

Currencies

EUR/USD drifts lower this morning trading below 1.14 with USD strength across the board, dealers note support at 1.1375. USDYEN trades at new 6 week highs, whilst Cable drops below 1.30 after weaker Manufacturing PMI data. Activity is expected to die down heading into the US July 4th Holiday.

Fixed Income

Bund futures trade higher back above 162 recovering from lows seen on Friday with left over Month end buying said to be helping the bid tone. The bid in Bunds is also helping Treasuries after selling off in the Asia session.

Monday's liquidity reportshowed Friday's excess liquidity fell to €1.600T a fall of €12B from €1.612T prior. Use of the marginal lending facility rose to €302M from €126M prior.

Corporate issuance saw $82.9B issued for the month of June via 126 tranches. For the year issuance stands at $718.7B. In Europe €39.4B was issued last week led mainly by SSAs with Spain's €8B 10 year bond accounting for 20% of the weeks issuance.

Looking Ahead

07:25 (BR) Brazil Central Bank Weekly Economists Survey

07:30 (CL) Chile Central Bank (BCCh) Jun Minutes

08:00 (CZ) Czech Jun Budget Balance (CZK): No est v -18.7B prior

08:00 (BR) Brazil Jun PMI Manufacturing: No est v 52.0 prior

08:15 (UK) Baltic Dry Bulk Index

09:00 (SG) Singapore Jun Purchasing Managers Index: No est v 50.8 prior, Electronics Sector Index: No est v 52.4 prior

09:00 (CL) Chile May Retail Sales Y/Y: No est v -0.4% prior; Commercial Activity Y/Y: No est v -0.5% prior

09:45 (US) Jun Final Markit Manufacturing PMI 52.1e v 52.7 prior

10:00 (US) Jun ISM Manufacturing: 55.1 v 54.9 prior; Prices Paid: 60.1e v 60.5 prior

10:00 (US) May Construction Spending M/M: 0.2%e v -1.4% prior

10:00 (MX) Mexico May Total Remittances: No est v $2.3B prior

10:00 (BR) Brazil May CNI Capacity Utilization: No est v 76.7% prior

10:00 (MX) Mexico Central Bank Economist Survey

10:30 (MX) Mexico Jun PMI Manufacturing: No est v 51.2 prior

12:00 (IT) Italy Jun New Car Registrations Y/Y: No est v 8.2% prior

13:00 (MX) Mexico Jun IMEF Manufacturing Index: No est v 47.6 prior; Non-Manufacturing Index: No est v 52.3 prior

16:00 (US) Weekly Crop Progress Report

The euro has started the week with slight losses. Currently, the pair is trading slightly below the 1.14 level. On the release front, German Manufacturing PMI edged up to 59.6, beating the estimate of 59.3. The Eurozone Manufacturing PMI improved to 57.4, beating the forecast of 57.3. In the US, today's highlight is the ISM Manufacturing PMI, which is expected to edge up to 55.0.

It was a banner week for the euro, as EUR/USD jumped 2.0%. The currency was boosted by comments from ECB Governor Mario Draghi at the ECB forum in Portugal. Draghi restated the obvious when he gave an upbeat assessment of the eurozone economy, but the markets jumped on his comments about inflation. Draghi said that “deflationary forces have been replaced by reflationary ones” and added that the ECB's stimulus program was needed for now, but would be gradually withdrawn once inflation moved higher. One could make the argument that Draghi was not breaking any new ground, but the markets seized on Draghi's remarks as a declaration that the ECB was planning to tighten policy. After the euro jumped, the ECB tried to backtrack, with ECB sources saying that the markets had “misinterpreted” Draghi's remarks. However, the markets shrugged this off, and positive sentiment could mean that the euro rally will continue this week.

There was no getting around the fact that the US economy slowed down in the first quarter, but there was some good news, as the revised GDP reading was raised to 1.4%, better than the initial estimate of 1.2% in May. The improvement was attributed to stronger consumer spending and an increase in exports. Earlier in the year, the markets were braced for a very poor quarter, with the first estimate in April projecting a gain of only 0.7%. Inflation remains stubbornly low, and consumer spending is also soft, despite high consumer confidence levels. In May, Personal Spending softened to 0.1%, down from 0.4% a month earlier. If inflation levels don't show some improvement, the Federal Reserve may have second thoughts about a December rate hike.