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WTI oil price is trading within narrow range on Monday and extending directionless mode into second week.

Talks between Iran and major powers over the weekend ended in overall positive tone that increased pressure on oil price, but negative impact was offset by strong rise in US consumer spending that signals positive outlook for oil consumption.

Pullback from 15 July high ($60.98) following repeated failure to clearly break above psychological $60 barrier, was contained by the base of thick daily cloud, which continued to limit downside attempts during past six days.

Daily studies are in bearish configuration but oil price lacks strength for eventual break below cloud base (currently at $55.86), as fundamentals continue to send mixed signals.

Bearish scenario sees risk of extension towards key Fibo support at $54.55 (61.8% of $50.59/$60.96) on firm break of daily cloud base.

Conversely, strong bullish signal can be expected on rally through a cluster of converged daily MA’s (200/55/20/30) in $57.00/44 zone.

More likely near-term scenario could extended range-trading between clod base and MA’s, as price action is looking for a catalyst that would generate fresh direction signal.

Res: 56.33, 56.54, 57.00, 57.44
Sup: 55.86, 55.31, 55.00, 54.84

UK Prime Minister Boris Johnson's spokesman said today that John is ready for Brexit talks, only when EU is willing to change its position.

The spokesman said "the PM has been setting out to European leaders the position ... that the Withdrawal Agreement with the backstop has not been able to pass parliament on the three occasions it was put in front of parliament. Therefore it needs to change".

And, "the prime minister would be happy to sit down when that position changes. But he is making it clear to everybody he speaks to that that needs to happen."

It's a very quiet start to an otherwise hectic week, with markets everywhere looking a little flat as we await a barrage of newsflow in the coming days.

Naturally, the Fed is front and centre, which is hardly surprising when you consider they're basically keeping the markets afloat single handed at the moment. A rate cut is fully priced in this week but with 50 basis points still somehow 18% priced in, unless Powell gets his communication spot on, markets could be primed for disappointment.

Of course, with a third of the S&P 500 and quarter of the Dow reporting earnings, US/China trade talks restarting in Shanghai and the jobs report coming on Friday, traders are not short of other things to focus on. That said, expectations for talks are quite low, earnings season is going well against a backdrop of an earnings recession, low expectations and a slowing economy, and the jobs report has simply fallen down the pecking order for now.

It also never helps that weeks like this have very little to offer on the opening day, meaning traders are left to position themselves ahead of a hectic period which, as we're seeing, often leaves them a little flat across the board.

Gold resilient as central banks prepare the taps

With this in mind, two instruments that traders will be paying huge attention to this week are the dollar index and gold. Both are a little flat in early trade which may continue into the Fed decision on Wednesday. The dollar has rebounded strongly off its lows this month to trade back near its highs. This may be a reflection of US data not being as bad as it was and the Fed being less dovish, particularly on this meeting, than markets but probably also largely reflects other currencies getting hit hard for a variety of reasons, most notably the euro and pound.

Gold has been relatively resilient to the dollar's gains but this is likely being strongly aided by central banks becoming much more dovish, with the ECB last week admitting its exploring various options including more QE. This has previously been very beneficial for gold and could be particularly so in this period of negative interest rates. Key levels to the downside for gold are $1,400 and then $1,380.

Oil stable after free pass last week

Oil is relatively stable on Monday and has been becoming increasingly so since early last week. Large drawdowns were given a relatively free pass last week due to the effects of Tropical Storm Barry, despite being one of a number of inventory declines in recent weeks. Clearly other factors are also carrying a heavy weight, including the economic output and constant warnings about falling demand growth from various agencies.

Bitcoin looking vulnerable as it clings on to $9,000

Bitcoin is not as in the headlines as it was a couple of weeks ago and price is struggling as a result, hanging in there between 9,000 and 10,000 but looking vulnerable to further declines after a strong late spring/ early summer rally. It's back in the red so far today and has already come close to testing $9,000 today but is so far clinging on. We need to see a break and hold back above $10,000 now to restore confidence for bulls in the near-term.

Notes/Observations

• Focus remains on central banks (BOJ on Tuesday, Fed on Wed, BOE on Thurs)
• Key macroeconomic data in the Euro Zone with inflation and growth in focus
• No-deal Brexit scenario rises under the hard stance the new UK govt is taking on Irish backstop
• Resumption of trade talks between China and the US on Tuesday

Asia:

• India Fin Min Sitharaman stated that she saw further room for reduction in interest rates and believed that significant rate cut over and above 75bps would be good for the country
• China State Administration of Foreign Exchange (SAFE) stated that t would strengthen medium and long-term asset allocation in FX reserve management: At the end of 2014 USD assets accounted for 58% of FX reserves v 79% in 2005
• Japan Government Pension Fund (GPIF) said to to begin hedging overseas bond investments citing risks of swings in FX markets

Europe/Mideast:

• PM Johnson reportedly has ruled out holding new elections before Oct 31st
• PM Johnson reportedly aims to woo Labour voters with £2B fund
• UK Min Gove (Brexit Supporter) Op ed article in Times that Govt to make "intensive efforts" to get a better Brexit deal; but must operate on the assumption that EU would not and then must prepare for a no deal Brexit outcome
• UK Labour’ party leader Corbyn (opposition) To do everything it can to prevent the country leaving the EU without a deal. On Parliamentary confidence vote: To review the situation after the summer recess
• ECB's Nowotny (Austria) stated that saw historically low interest rates in the long term. Expected rates to be lower in the longer term than they have been historically.

Americas:

• President Trump administration pressed WTO to stop lenient trade treatment of China and other nations
• Pres Trump tweet: China will probably say let's wait on a trade deal and try to delay until the 2020 US election. Dollar is the currency of choice; its a beautiful thing to have a strong dollar; the Euro is not doing so well; China's currency is very low. didn't say I'm not going to do something on the dollar

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.18% at 391.44, FTSE +1.25% at 7,643.57, DAX -0.05% at 12,413.97, CAC-40 -0.10% at 5,604.15, IBEX-35 -0.05% at 9,221.00, FTSE MIB -0.21% at 21,792.50, SMI -0.08% at 9,960.00, S&P 500 Futures -0.03%]

Market Focal Points/Key Themes:

• European Indices trade mixed today following a mostly lower session in Asia and flat US Index futures ahead of a heavy week for corporate earnings.
• On the earnings front shares of Siemens Healthineers trade higher on earnings, with low cost Airliner Ryanair also gaining after the company sustained Revenues despite a fall in profits. Drug name Sanofi Aventis also gains as the company beat on the top and bottom line and raised its outlook, with Bankia and KPS among other gainers on earnings.
• Sanne Group falls over 20% following a profit warnings with Sports Direct down a further 8% after earnings, which were weighed down by the recent acquisition of House of Fraser, as well as the naming of a new CFO and a share buyback, while Heineken also declines on earnings.
• On the M&A front shares of Just Eat rises almost 25% after Takeaway.com confirms offer to acquire the company in an all stock transaction; Swedish name Kappahl Holding rises almost 40% as Mellby Gard offered to acquire the company for SEK20/shr, while the LSE trades almost 15% higher as the company confirms Thomson Reuters and Blackstone are in talks to divest Refinitive to the LSE in a deal said to be worth $27B. In the US, Mylan shares rise on talks that its near a deal to be acquired by Pfizer.
• Looking ahead notable earners include Booz Allen, Insperity and Mecury General.

Equities

• Consumer discretionary: Just Eat [JE.UK] +23%, Takeaway.com [TKWY.NL] +4.5% (Just Eat offered to be acquired by Takeaway.com), Heineken [HEIA.NL] -5% (earnings), Ryanair [RYA.UK] +3% (earnings), AB InBev [ABI.BE] +1% (said to consider unit sale), Kappahl Holdings [KAHL.SE] +40% (offered to be acquired), Sports Direct [SPD.UK] -8% (delayed earnings; CFO steps down), Reach [RCH.UK] +5% (earnings; new CEO)
• Financials: LSE [LSE.UK] +14% (in talks to acquire Refinitiv), Bank of Ireland [BIRG.IE] -5.5% (earnings), Sanne Group [SNN.UK] -29% (profit warning)
• Healthcare: Sanofi-Aventis [SAN.FR] +3% (earnings), Novartis [NOVN.CH] -1% (trial missed endpoints)
• Technology: Keller Group [KLR.UK] -4% (earnings), Proactis [PHD.UK] +15% (received interest)

Speakers

• UK Foreign Sec Raab reiterated new govt stance that Irish backstop must go; upping the preparations for a no-deal Brexit outcome
• Ireland Agricultural Min Creed reiterated EU stance of no change to Brexit agreement; removal of Irish backstop would not happen
• Italy's League cabinet undersecretary Giorgetti: said to be pushing League leader Salvini for early elections
• Russia Foreign Ministry: in contact with representatives of Venezuela opposition leader Guaido
• Japan Econ Min Motegi: confirmed to meet with USTR Lighthizer in Washington on Aug 1, 2
• Japan Cabinet Office published its mid-year economic projections revised its 2019 forecasts. Cut its FY19/20 Real GDP from 1.3% to 0.9% and cut FY19/20 CPI from 1.1% to 0.7%
• Hong Kong and Macau Affairs Office (HKMAO) under the China State Council comments on HK protesters: Watching situation closely; China central govt support suspension of extradition bill. China supported HK Chief Executive Lam and reiterated its stance to support one country, two systems in Hong Kong
• China Foreign Ministry Spokeswoman Hua Chunying: changes to WTO rules should be decided by negotiation

Currencies/ Fixed Income

• USD continued to muster gains against the European currencies as the week began. Focus remained on key central banks this week which included BOJ on Tuesday, Fed on Wed, BOE on Thurs. The US Dollar index futures are currently trading at contract highs at around 97.84.
• EUR/USD was holding just above last week’s post ECB rate decision lows as attention turned to key macroeconomic data in the Euro Zone with inflation and growth in focus. Spain CPI data in the session showed that inflation still had a long way to go to achieve the ECB target level. Tuesday will see the release of German CPI data and French Q2 Preliminary GDP reading. Wed will see the Euro Zone GDP and flash CPI readings. The Euro trades lower with no firm levels to the downside until 1.084.
• GBP/USD slumped to its lowest level since March of 2017 as newly installed UK Cabinet officials tote the PM Johnson’s hard line that the Irish backstop must go. Various ministers noting that UK was upping the preparations for a no-deal Brexit outcome as they believed the EU would not renegotiate the withdrawal agreement. Looking at levels in the spot cable market the next level to the downside is near the 1.21 handle.

Economic Data

• (FI) Finland July Consumer Confidence: -3.9 v -4.6 prior; Business Confidence: -4 v -4 prior
• (ZA) South Africa Jun M3 Money Supply Y/Y: 9.0% v 8.5%e; Private Sector Credit Y/Y: 6.9% v 7.1%e
• (ES) Spain July Preliminary CPI M/M: -0.6% v -0.7%e; Y/Y: 0.5% v 0.6%e
• (ES) Spain July Preliminary CPI EU Harmonized M/M: -1.1% v -1.2%e; Y/Y: 0.7% v 0.6%e
• (ES) Spain Jun Adjusted Retail Sales Y/Y: 2.4% v 2.7%e; Retail Sales (unadj) Y/Y: 0.3% v 3.1% prior
• (HU) Hungary Jun Unemployment Rate: 3.3% v 3.4%e
• (CH) Swiss Weekly Total Sight Deposits (CHF): 581.2B v 579.5B prior; Domestic Sight Deposits: 477.1B v 477.5B prior
• (AT) Austria July Manufacturing PMI: 47.0 v 47.5 prior (4th straight contraction)
• (IT) Italy Jun PPI M/M: -0.5% v 0.0% prior; Y/Y: 1.1% v 1.8% prior
• (UK) Jun Net Consumer Credit: £1.0B v £0.9Be; Net Lending: £3.7B v £3.5Be
• (UK) Jun Mortgage Approvals: 66.4K v 65.8Ke
• (UK) Jun M4 Money Supply M4 M/M: +0.1% v -0.1% prior; Y/Y: 2.3% v 2.1% prior; M4 Ex IOFCs 3M Annualized: 2.5% v 2.7% prior

Fixed Income Issuance

• (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month BOT bills; Avg Yield: -0.147% v -0.063% prior; Bid-to-cover: 1.46x v 1.41x prior

Looking Ahead

• (UR) Ukraine Central Bank (NBU) July Minutes
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Jun Unemployment Rate (Seasonally Adj): No est v 3.5% prior; Unemployment Rate (unadj): No est v 3.5% prior
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 09:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 09:00 (FR) France Debt Agency (AFT) to sell combined €4.1-5.3B in 3-month, 6-month, 9-month and 12-month Bills
• 09:30 (BR) Brazil Jun Primary Budget Balance (BRL): No est v -13.0B prior; Nominal Budget Balance: No est v -47.6B prior; Net Debt to GDP Ratio: No est v 54.7% prior
• 10:30 (US) July Dallas Fed Manufacturing Activity Index: -5.0e v -12.1 prior
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 16:00 (US) Weekly Crop Progress Report

The US dollar has staged a strong recovery against the Japanese yen, following a brief early-morning move towards breakout technical support, at 108.40. Dip-buyers appear to be back in control, with the 109.00 level the next major intraday resistance area to watch. Traders may also be cautious ahead of the Bank of Japan policy decision, which could lead to a spike in USDJPY volatility.

The USDJPY pair is only bearish while trading below the 108.40 level, key support below remains at the 108.20 and 108.00 levels.

The USDJPY pair is bullish while trading above the 108.40 level, key technical resistance remains at the 109.00 and 110.00 levels.

The British pound has fallen to a fresh two-year trading low against the US dollar as the new Conservative party government in the UK continued to issue a hard-line stance towards Brexit. The GBPUSD pair has broken through the 1.2350 support level, leaving the 1.2310 level the next major support level to watch. Bulls need to move price back above the 1.2350 level to encourage buying back towards the 1.2380 level.

The GBPUSD pair is heavily bearish while trading below the 1.2350, key support is found at the 1.2310 and 1.2280 levels.

If the GBPUSD pair trades below the 1.2380 level, key resistance is found at the 1.2410 and 1.2440 levels.

An impressive rally followed the rebound on the 23.6% Fibonacci of the upleg from 0.8489 to 0.9050, with EURGBP spiking above its simple moving averages (SMA) and the Ichimoku cloud in the four-hour chart.

In the meantime, the RSI seems to be slowing down in the overbought territory, flagging that the rally is exaggerated, and therefore downside corrections could soon take place. Nevertheless, as long as the MACD keeps gaining ground in the positive terittory and well above its red signal line, any weakness could appear temporary.

The bulls could initially rest near the 0.9037 barrier before challenging the 0.9050-0.9060 former resistance zone. A significant step higher should beat a taller wall around 0.9100 to bring a fresh buying towards a more important resistance of 0.9150.

Alternatively, if the market proves overbought and the bears retake control, the pair could fall into the 0.9000-0.8990 zone, while a sharper sell-off under the 50-period SMA could open the door for the 200-period SMA, which is currently laying around a key support area.

Sterling-dollar is under tremendous pressure today because of two main reasons: firstly, it is the strength in the dollar index which has pushed the pair below the critical level of 1.24. This is despite the fact that the Fed is going to cut the interest rate by 25 basis points this week. Secondly, Boris Johnson, the UK Prime Minister has increased chances for a no deal Brexit scenario which no one likes-especially not the investment community. The fact is that this is an uncharted territory and we already know with more certainty that leaving the EU with a deal is going to have meaning impact on the economy and leaving the EU without any deal is going to have even worse impact.

I still believe that Boris actually is playing a tactical game with the EU by sending them the message that he isn’t afraid of going for no deal Brexit if the EU doesn’t open the negotiation process. For traders, it is a matter of throwing the towel first. If ego remains the major obstacles, then a major accident is going to happen and this means no deal Brexit.

In terms of technical analysis, I think it is highly that the current downward move and the momentum behind it may push the sterling-dollar pair all the way to 1.2110, a low not witnessed since 13th March 2017. The near-term support is at 1.2255 and a break of this is going to open the floor towards the next support level mentioned above. As for resistance, it sits at 1.2459.

Another huge week ahead

The week is off to a mixed start which isn’t wholly surprising given just how much investors have to follow in what is typically a peaceful time of year.

There’s no summer lulls just yet, with the Fed about to embark on an easing cycle, the BoE offering its first assessment since Boris Johnson became PM, a third of S&P 500 and a quarter of Dow companies reporting second quarter earnings, the US jobs report being released and trade talks restarting between the US and China. As ever, this is almost entirely spread over four days so today may be the calm before the storm.

It’s tough to pick the headline act among all of these, more often that not we’d be looking at the jobs report but that’s fallen well down the pecking order this time around. It’s hard to look past Wednesday’s Fed decision because although a rate cut is entirely priced in, market expectations are high over the coming months which means Powell will have a job keeping up.

The market rally is so heavily reliant on central banks promising more accommodation that Powell will have to be very careful not to disappoint too much or it could be a very long summer. Earnings season may be going well thanks to a very low bar but we’re almost half way into the season and still heading for an earnings recession, so we can’t look here for support.

On Friday, the US dollar rose against a basket of major currencies and reached two-month highs. The US dollar index (#DX) closed in the green zone (+0.20%). Positive economic data from the US supported the American currency. Thus, US GDP (q/q) grew by 2.1% in the second quarter, while experts expected growth by 1.8%. This week, investors will be focused on the Fed's monetary policy decision. Experts expect that the regulator will reduce the interest rate for the first time in more than a decade due to the slowdown of economic growth and inflation. The Fed meeting will take place on July 31. Investors will closely monitor the comments by representatives of the Central Bank.

Also, financial market participants will be focused on trade negotiations between the United States and China. US Trade Representative, Robert Lighthizer, and US Treasury Secretary, Steven Mnuchin, will travel to Shanghai for a new round of talks with Chinese representatives on Tuesday. China's Vice Premier, Liu He, will lead the trade delegation for China's part.

UK Foreign Secretary, Dominic Raab, said that the UK accelerated preparations for "hard" Brexit – without an agreement with Brussels. The official reported that the new Prime Minister, Boris Johnson, made the decision and the Cabinet supported him.

The "black gold" prices are consolidating. At the moment, futures for the WTI crude oil are testing the mark of $56.25 per barrel.

Market Indicators

• On Friday, the bullish sentiment was observed in the US stock markets: #SPY (+0.67%), #DIA (+0.17%), #QQQ (+1.03%).
• The 10-year US government bonds yield has moved away from local highs. Currently, the indicator is at the level of 2.06-2.07%.

The news feed for 2019.07.29:

• Today, the publication of important economic news is not expected.