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Daily Pivots: (S1) 1.0876; (P) 1.0893; (R1) 1.0925; More....

Intraday bias in EUR/USD remains on the upside at this point. Decisive break of 1.0915 resistance will resume whole rise from 1.0601 to 100% projection of 1.0601 to 1.0915 from 1.0665 at 1.0979. On the downside, below 1.0859 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern, possibly a triangle, that's still be in progress. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). This will now remain the favored case as long as 1.0601 support holds.

Donald Trump got this close to being assassinated this weekend while he was giving a speech in an election rally. He was lucky that the bullet only grazed his ear, but he showed his resilience by demonstrating strength and defiance just minutes after being shot. The image of strong and heroic Trump with blood on his face, fist up in the air and with an American flag waving behind him as security guards were taking him away from the scene marked the weekend – and came as a perfect contrast to old and weakened Biden since the TV debate. Cherry top, Trump said that he would attend the Republican National Convention next week. All in all, even though the assassination incident on Trump was shocking – and spurred the worries of a deeply divided America where political violence is taking over – it boosted the chances that Trump will win the presidential election in November from 61% before the shooting to 67% after, according to PredictIt. And if history is any indication, such events have been a boon for a candidate in past elections.

Bitcoin – which has been struggling since the beginning of June – jumped past the $62K after the incident on flight to safety and because Trump backs the asset, the US dollar opened the week slightly higher and gold remains surprisingly unreactive to the news. US futures, on the other hand, are in the positive this morning as the S&P500 performed well under Trump and increased odds for Trump victory are also perceived as good news for the market. Happy Monday!

Other than that

It feels like ages ago but another set of good news for the market came last week, remember, when Federal Reserve (Fed) President Jerome Powell said that the only risk to the US economy is no longer inflation but also the cooling jobs market – a speech that sent the probability of a September rate hike to above 90% although Powell didn’t want to give any hint regarding the timing of the first rate cut. The latest set of CPI figures came in softer-than-expected and investors greatly overlooked the stronger-than-expected PPI figures released Friday.

It’s worth noting that producer prices in the US unexpectedly jumped last month, PPI rose from 2.4% to 2.6% while core PPI jumped from 2.6% to 3%. It’s soothing that the Fed is no longer only focused on inflation but it does not mean that they will completely disregard the inflation numbers. They still matter.

But anyway, the markets didn’t panic much on PPI but decided to focus on soft Michigan index that revealed softer inflation expectations and murkier sentiment. As such, the US 2-year yield dived to 2.45% and the 10-year closed last week below 4.20% mark. The S&P500 hit a fresh record, Nasdaq gained, but the real winner of the week was the small caps. The Russell 200 jumped more than 6% in just three sessions and traded at the highest levels since January 2022 on hope that the Fed rate cuts would benefit more to the small caps than to Big Tech.

Data and earnings

Inflation data came in slightly higher than expected in France and in Spain, and cemented the idea that the European Central Bank (ECB) will stay pat when it meets this Thursday. Traders will be looking for hints of another cut in September. The EURUSD is slightly lower this morning on the back of a broadly stronger US dollar on Trump assassination attempt, but the rising odds of September cut from the Fed remain supportive of a further rise and we can see the EURUSD settle within the 1.10/1.12 range between now and September.

Across the Channel, Brits will reveal their latest CPI numbers on Wednesday and according to some predictions, headline CPI may have eased below the 2% mark in June – which could spur the Bank of England (BoE) cut expectations for the August meeting and bring in the topsellers near the 1.30 psychological mark against the US dollar.

On the earnings front, the first big US bank earnings were mixed on Friday. JP Morgan fell 1.21% despite reporting a record profit after a surge in dealmaking boosted investment fees by 50%. Yet expenses exceeded expectations and net interest income came below estimates. Citigroup fell 1.81%. As JPM, Citi benefit from increased investment banking revenue – that jumped 60% at Citi – but expenses didn’t please investors. While Wells Fargo tanked 6% despite better-than-expected earnings and revenue because net interest income, there, fell 9% as customers preferred higher yielding products.

Today, Goldman Sachs and Balckrock are due to report earnings, tomorrow: Morgan Stanley, Thursday: Netflix and TSM and on Friday: American Express.

All I know is that earnings, especially the Big Tech earnings, would better meet and beat expectations for the rally in major US indices to continue. Otherwise, even the Fed cut bets may not prevent a meaningful downside correction.

China announces disappointing GDP as communist party kicks off important meeting

In China, the week starts with bad news. The Q2 GDP growth dived below 5% to 4.7% level, retail sales grew slower than expected and the slump in house prices accelerated. The communist party will hold a once-in-five-years meeting to address the issues and could come with some measures to help give investors some hope – especially measures to stop bleeding in the crumbling property market and measures to further boost production to make up for the feeble consumer spending,. It’s certainly why the CSI 300 is better bid this morning, while US crude opens the week under pressure, as copper futures hardly find buyers to test the 50-DMA to the upside on fear that the sluggish Chinese growth will keep the global demand prospects under a certain downside pressure.

Daily Pivots: (S1) 1.2930; (P) 1.2960; (R1) 1.3019; More...

Intraday bias in GBP/USD remains on the upside despite current retreat. Rise fro 1.2298 is in progress for 100% projection of 1.2298 to 1.2859 from 1.2612 at 1.3173, which is slightly above 1.3141 key medium term resistance. On the downside, below 1.2898 minor support will turn bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, corrective pattern from 1.3141 medium term top (2023 high) could have completed with three waves to 1.2298 already. This will now remain the favored case as long as 1.2612 support holds. Firm break of 1.3141 will target 61.8% projection of 1.0351 (2022 low) to 1.3141 from 1.2298 at 1.4022.

Asian markets began the week with a cautious tone, as weaker-than-expected GDP growth from China dampened investor sentiment, even though the selloff in stocks has been limited. Today's set of data, coupled with recent weak PMI readings, points to broader deceleration in China's recovery momentum, as both consumer and business sentiment are struggling. Markets are now keenly awaiting the Third Plenum in Beijing this week, hoping for new measures to stimulate the economy.

In the currency markets, Dollar is attempting to recover from last week's losses, although there hasn't been a clear follow-through in buying yet. Yen remains firm, also lacking strong follow-through buying, while Sterling ranks as the third strongest currency of the day at this point. Conversely, New Zealand Dollar continues to decline, driven lower by disappointing services data that strengthen the case for an earlier RBNZ rate cut. Canadian and Australian Dollars are also softer, while Euro and Swiss Franc are trading in the middle.

Technically, AUD/CAD's uptrend from 0.8562 is still in progress. Near term outlook will remain bullish as long as 0.9172 support holds. Next target is 100% projection of 0.8562 to 0.9063 from 0.8779 at 0.9280. Decisive break there could prompt further upside acceleration to 161.8% projection at 0.9590. The next move would hinge on this week's CPI from Canada and employment data from Australia.

In Asia, Japan is on holiday. Hong Kong HSI is down -1.27%. China Shanghai SSE is up 0.01. Singapore Strait Times is up 0.02%.

NZ BNZ services falls to 40.2, weakness accelerating

New Zealand BusinessNZ Performance of Services Index fell from 42.6 to 40.2 in June, marking the lowest level for the sector outside a COVID lockdown month since the survey began in 2007.

BusinessNZ chief executive Kirk Hope noted that after a poor May result, June's figures "simply got worse". Activity/Sales dropped to 35.6 and New Orders/Business fell to 38.3, both hitting record lows for non-lockdown months. Employment decreased to 45.6, the lowest since February 2022, while Supplier Deliveries declined to 41.6, the lowest since March 2022.

Negative comments rose to 67.0% in June, up from 65.4% in May and 66.3% in April, with respondents citing recessionary pressures.

BNZ Senior Economist Doug Steel observed, "The Performance of Services Index has been well below average for more than a year. Moreover, the weakness appears to be accelerating."

China's Q2 GDP growth slows to 4.7% amid weak domestic demand

China's GDP grew 4.7% yoy in Q2, down from 5.3% in Q1 and missing expectations of 5.1%. For the first half of the year, GDP growth stood at 5% year-on-year.

The National Bureau of Statistics noted, "The current external environment is complicated, while domestic demand remains insufficient. We still need to consolidate the foundation for economic recovery."

June's industrial production increased by 5.3% yoy, exceeding expectations of 5.0% yoy. However, retail sales grew only 2.0% yoy, well below the forecasted 3.3% yoy.

Fixed asset investment in the first six months rose by 3.9% ytd yoy, meeting expectations. Property investment saw a -10.1% yoy decline, consistent with May's fall. Additionally, home sales by floor area dropped by -19.0% yoy.

BoE's Dhingra advocates for rate normalization now

In a podcast today, BoE MPC member Swati Dhingra emphasized that "now is the time" to start normalizing interest rates and to "stop squeezing living standards" as the central bank has been doing to curb inflation.

Dhingra pointed out that demand in the UK is too weak for inflation to surge again, noting that inflation returned to 2% in May. She stated, "I don't see some kind of consumption boom and if we're going to start moderating from the very high level of interest rate that we are at now... it is going to take some time for that to happen, for us to moderate it as well as for that to then feed into the real economy."

Known as a dove within the MPC, Dhingra has consistently voted since February to cut the Bank Rate from its 16-year high of 5.25%.

ECB to hold and more global inflation data awaited

This week, financial markets are set to focus on ECB's monetary policy decision and a wave of crucial global inflation reports.

ECB is widely expected to keep its deposit rate at 3.75% and its main refinancing rate at 4.25%. President Christine Lagarde is anticipated to maintain the central bank's data-dependent, meeting-by-meeting approach. While she is likely to assure that further policy easing is underway, the central bank wouldn't commit to any forward guidance.

A Reuters poll conducted between July 4-11 indicated that 69 out of 85 economists predict ECB will cut the deposit rate twice more this year, in September and December, bringing it down to 3.25% by the end of the year. Additionally, nearly two-thirds of respondents believe the end-2024 deposit rate is more likely to be higher than their current expectations, suggesting that there is risk that ECB might opt for fewer cuts.

Global inflation data will also dominate the headlines this week, with CPI reports due from Canada, New Zealand, the UK, and Japan.

In Canada, BoC the chance of another rate cut by BoC on July 14 increased following weaker-than-expected June job data, which showed unemployment rising by 0.2% to 6.4%. Any downside surprises in the June CPI data could solidify this dovish case.

RBNZ left rates unchanged last week but surprisingly indicated that policy restriction "will be tempered" as inflation declines. Sharper-than-expected slowdown in Q2 CPI could bring forward the anticipated timing of the first rate cut from February next year to this November.

In the UK, hopes for an August BoE rate cut were dashed by hawkish comments from Chief Economist Huw Pill. Nonetheless, the decision will still hinge on the inflation outlook. Known hawk Catherine Mann cautioned that May's CPI hitting 2% was just a "touch and go". But this view will need backup from the upcoming June CPI release.

Meanwhile, in Japan, BoJ is expected to outline plans to taper its bond purchases at its late July meeting, though opinions vary on the extent of the reduction. Governor Kazuo Ueda has indicated that a rate hike is possible, but the recent strong rebound in Yen, allegedly due to intervention, adds complexity to the decision. But after all, the set of core and core-core CPI data would need to go up in June, rather than down, for BoJ to act again on interest rate.

Other key data to watch this week include retail sales figures from Canada, the US, and the UK, employment data from the UK and Australia, and German ZEW economic sentiment index.

Here are some highlights for the week:

• Monday: New Zealand BusinessNZ services index; China GDP, industrial production, retail sales, fixed asset investment; Swiss PPI; Eurozone industrial production; Canada manufacturing sales, wholesale sales; US Empire State manufacturing.
• Tuesday: Japan tertiary industry index; Eurozone trade balance; Germany ZEW; Canada housing starts, CPI; US retail sales, import prices, business inventories, NAHB housing index.
• Wednesday: New Zealand CPI; UK CPI, PPI; Eurozone CPI final; US building permits, housing starts, industrial production, Fed's Beige Book report.
• Thursday: Japan trade balance; Australia employment; Swiss trade balance; UK employment; ECB rate decision; US jobless claims.
• Friday: UK Gfk consumer confidence; Japan CPI; Germany PPI; UK retail sales, public sector net borrowing; Eurozone current account; Canada retail sales, IPPI and RMPI.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2930; (P) 1.2960; (R1) 1.3019; More...

Intraday bias in GBP/USD remains on the upside despite current retreat. Rise fro 1.2298 is in progress for 100% projection of 1.2298 to 1.2859 from 1.2612 at 1.3173, which is slightly above 1.3141 key medium term resistance. On the downside, below 1.2898 minor support will turn bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, corrective pattern from 1.3141 medium term top (2023 high) could have completed with three waves to 1.2298 already. This will now remain the favored case as long as 1.2612 support holds. Firm break of 1.3141 will target 61.8% projection of 1.0351 (2022 low) to 1.3141 from 1.2298 at 1.4022.

Economic Indicators Update

China's GDP grew 4.7% yoy in Q2, down from 5.3% in Q1 and missing expectations of 5.1%. For the first half of the year, GDP growth stood at 5% year-on-year.

The National Bureau of Statistics noted, "The current external environment is complicated, while domestic demand remains insufficient. We still need to consolidate the foundation for economic recovery."

June's industrial production increased by 5.3% yoy, exceeding expectations of 5.0% yoy. However, retail sales grew only 2.0% yoy, well below the forecasted 3.3% yoy.

Fixed asset investment in the first six months rose by 3.9% ytd yoy, meeting expectations. Property investment saw a -10.1% yoy decline, consistent with May's fall. Additionally, home sales by floor area dropped by -19.0% yoy.

New Zealand BusinessNZ Performance of Services Index fell from 42.6 to 40.2 in June, marking the lowest level for the sector outside a COVID lockdown month since the survey began in 2007.

BusinessNZ chief executive Kirk Hope noted that after a poor May result, June's figures "simply got worse". Activity/Sales dropped to 35.6 and New Orders/Business fell to 38.3, both hitting record lows for non-lockdown months. Employment decreased to 45.6, the lowest since February 2022, while Supplier Deliveries declined to 41.6, the lowest since March 2022.

Negative comments rose to 67.0% in June, up from 65.4% in May and 66.3% in April, with respondents citing recessionary pressures.

BNZ Senior Economist Doug Steel observed, "The Performance of Services Index has been well below average for more than a year. Moreover, the weakness appears to be accelerating."

Full NZ BNZ PSI release here.

In a podcast today, BoE MPC member Swati Dhingra emphasized that "now is the time" to start normalizing interest rates and to "stop squeezing living standards" as the central bank has been doing to curb inflation.

Dhingra pointed out that demand in the UK is too weak for inflation to surge again, noting that inflation returned to 2% in May. She stated, "I don't see some kind of consumption boom and if we're going to start moderating from the very high level of interest rate that we are at now... it is going to take some time for that to happen, for us to moderate it as well as for that to then feed into the real economy."

Known as a dove within the MPC, Dhingra has consistently voted since February to cut the Bank Rate from its 16-year high of 5.25%.

Key Highlights

• EUR/USD rallied above the 1.0820 resistance zone.
• A key bullish trend line is forming with support at 1.0850 on the 4-hour chart.
• GBP/USD gained bullish momentum and almost tested the 1.3000 resistance.
• Gold prices are now consolidating near the $2,400 zone.

EUR/USD Technical Analysis

The Euro started a steady increase above the 1.0800 level against the US Dollar. EUR/USD cleared the 1.0820 and 1.0850 resistance levels to enter a positive zone.

Looking at the 4-hour chart, the pair settled above the 1.0850 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even spiked above the 1.0900 level and tested the 1.0910-1.0920 resistance zone.

It is now consolidating gains near the 1.0880 zone. If there is a fresh increase, the pair could face resistance near the 1.0910 level. The next resistance sits at 1.0920.

The main hurdle sits at 1.0950. A clear move above the 1.0950 resistance might send it toward the 1.1000 level. Any more gains might open the doors for a test of the 1.1050 zone in the coming days.

Immediate support is near the 1.0880 level. The next major support is near the 1.0850 level. There is also a key bullish trend line forming with support at 1.0850 on the same chart. A downside break and close below the 1.0850 support zone could open the doors for more losses.

Looking at Gold, the price gained bullish momentum above the $2,400 level and the bulls seem to be in control above the $2,380 level.

Economic Releases

• NY Empire State Manufacturing Index for July 2024 – Forecast -6.0, versus -6.0 previous.

• GBPUSD under bullish pressure
• Likely to rise to resistance level 1.3120

GBPUSD currency pair is under bullish pressure after the earlier breakout of the resistance level 1.2850, which has been reversing the pair from 2023.

The breakout of the resistance level 1.2850 results from the simultaneously strongly bullish sterling sentiment and the equally weak USD sentiment.

GBPUSD can be expected to rise further to the next round resistance level 1.3120 (former multi-month high from the middle of 2023).