Daily Pivots: (S1) 0.9908; (P) 0.9927; (R1) 0.9954; More.....

Intraday bias in USD/CHF remains on the upside for 0.9951 resistance. Break will confirm resumption whole rebound from 0.9695. Next target will be 1.0014 resistance. On the downside, break of 0.9874 minor support will turn bias back to the downside for 0.9803 support and below.

In the bigger picture, up trend from 0.9186 (2018 low) should have completed at 1.0237 already. Deeper decline would be seen to 61.8% retracement of 0.9186 to 1.0237 at 0.9587 and below. For now, USD/CHF is seen as in long term range pattern between 0.9186 and 1.0342. Hence, we'd pay attention to bottoming signal below 0.9587. However, sustained break of 1.0014 will revive medium term bullishness and turn focus back to 1.0237 high.

The GBP/USD completed ABCDE (blue) price swings within a wave 4 (purple) triangle pattern. The bearish breakout indicates a continuation towards the 61.8% Fibonacci target for the moment at 1.23-1.2250. Later on, price could retest the previous bottom and low of the last decades on the monthly chart at 1.20.

The GBP/USD could be in a wave 3 (blue) impulse at the moment. The main targets of the wave 5 (green) of wave 3 (blue) are the Fibonacci levels of wave 5 vs 1+3. Once price completes a wave 3 (blue), then a retracement within wave 4 is expected.

General Trend:

• Chipmakers weigh on Kospi as dispute between Japan/South Korea persists; Ssangyong Motor drops over 6% as loss widened
• Hang Seng declines as China’s HK and Macau Affairs Office (HKMAO) is due to comment on protests for the first time (announcement expected around 7 GMT); Financials lead declines in Hong Kong
• China financials index lags as Bank of Jinzhou received a bailout agreement
• Weaker earnings from Keyence weigh on electronics-related firms in Japan
• Australia ASX 200 index outperforms on Telecoms, Financials and Energy companies
• Rare-earth miner Lynas declined, Q4 revenues dropped on lower prices and strategy to limit sales to strategic customers
• Bubs Australia rises over 4%, Q4 goat milk infant formula sales +341% y/y
• US and China are due to hold trade talks in China on July 30-31 (Tuesday-Wed)
• AUD/JPY and Australian bond yields decline ahead of Wednesday’s Q2 CPI data
• BoJ decision expected on Tuesday
• Fed to hold policy meeting July 30-31 (Tues-Wed)
• Japanese companies expected to report earnings later today include Fanuc and Komatsu

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• (AU) Australia Q2 HIA New Home Sales +0.8% q/q (first rise since Q4 2017), new home sales over the year to June -12.4% y/y – US financial press
• LYC.AU Reports Q4 Rev A$87.5M v A$91.7M y/y; NdPr Production: 1.5Kt v 1.3Kt y/y; Production Volume: 4.6Kt v 4.1Kt y/y
• (AU) Consensus expectations suggest Australia Q2 trimmed mean (core) CPI will come in at 1.5% y/y, below the RBA’s May forecast of 1.6%; NAB said any miss in headlined [inflation] may increase market expectations for an Aug rate cut from the current level of ~20% - US financial press

Japan

• Nikkei 225 opened -0.1%
• (JP) Japan Jun Retail Sales M/M: 0.0% v -0.3%e; Y/Y: +0.5% v 0.2%e
• (JP) Japan PM Abe is unlikely to meet with South Korea Pres Moon at UN in Sept unless 'constructive steps' are taken by South Korea - Japan Press
• (KR) South Korea sells KRW800B in 3-month Monetary Stabilization Bonds (MSB); avg yield 1.42% v 1.49% prior

Korea

• Kospi opened -0.4%
• (KR) South Korea June exports seen -10% y/y – Yonhap
• (KR) South Korea Govt: Nothing has been decided on sending troops to Hormuz Strait

China/Hong Kong

• Hang Seng opened -0.5%; Shanghai Composite opened flat
• (CN) CHINA JUN INDUSTRIAL PROFITS Y/Y: -3.1% V +1.1% PRIOR
• (CN) China State Administration of Foreign Exchange (SAFE): At the end of 2014 USD assets accounted for 58% of FX reserves v 79% in 2005
• (CN) China Customs: Will allow soybean imports from all parts of Russia
• (HK) On Monday China's top Hong Kong policy office is expected to respond for the first time to the protests that started in June; The announcement is expected to be the first HKMAO press briefing on HK since the 1997 handover – SCMP
• (CN) China PBOC sets yuan reference rate: 6.8821 v 6.8796 prior
• (CN) China PBoC Open Market Operation (OMO): Skips for 5th consecutive session; Net CNY50B drained v CNY100B drained prior
• (CN) China State media notes that it does not expect any big breakthrough on trade talks with the US this week, reiterates China could wait until 2020 election to make a deal
• (CN) China starts anti-dumping investigation on some chemicals from US, Japan and EU

Other Asia

• DBS.SG Reports Q2 (S$) Net 1.6B v 1.5Be, Rev 3.71B v 3.20B y/y
• (IN) India Fin Min Sitharaman: Significant rate cut over and above 75bps would be good for India - India press

North America

• (US) Former Fed Chair Yellen supportive of 25bps rate cut at FOMC meeting this week due to global economic growth slowdown and inflation - US press

Europe

• (EU) ECB's Nowotny: See historically low interest rates in the long term - financial press
• (UK) Min Gove (Brexit Supporter): Govt will make "intensive efforts" to get a better Brexit deal; but we must operate on the assumption that they will not and we will have a no deal Brexit and must be ready - Sunday Times Op Ed
• (IR) Iran Official Abbas Araqchi: Emergency meeting with parties related to 2015 nuclear deal were constructive, unresolved issues remain; Iran will continue to reduce its nuclear commitments if Europe cannot save the deal – press
• (UK) Trade Min Truss: Main priority now will be agreeing a Free Trade Agreement (FTA) with the US - Telegraph

Levels as of 1:20 ET

• Nikkei 225, -0.5%, ASX 200 +0.5%, Hang Seng -1.5%; Shanghai Composite -0.3%; Kospi -1.7%
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.2%, Dax -0.3%; FTSE100 flat
• EUR 1.1140-1.1124 ; JPY 108.70-108.42 ; AUD 0.6917-0.6902 ;NZD 0.6642-0.6626
• Gold +0.1% at $1,420/oz; Crude Oil -0.1% at $56.12/brl; Copper -0.1% at $2.687/lb

Daily Pivots: (S1) 1.1173; (P) 1.1213 (R1) 1.1251; More.....

Intraday bias in EUR/USD remains neutral at this point, for consolidation above 1.1101 temporary low. Stronger recovery cannot be ruled out. But as long as 1.1282 resistance holds, further decline is expected. Sustained break of 1.1107 low will resume larger down trend from 1.2555. Though, firm break of 1.1282 will bring stronger rise to 1.1412 resistance.

In the bigger picture, on the one hand, 1.1107 is seen as a medium term bottom on bullish convergence condition in weekly MACD. On the other hand, rejection by 55 week EMA retains medium term bearishness. Outlook stays neutral for now. On the downside, break of 1.1107 will resume the down trend from 1.2555 (2018 high) to 78.6% retracement of 1.0339 to 1.2555 at 1.0813. Meanwhile, break of 1.1412 will resume the rebound to 38.2% retracement of 1.2555 to 1.1107 at 1.1660.

Daily Pivots: (S1) 1.2353; (P) 1.2406; (R1) 1.2437; More...

GBP/USD's break of 1.2382 temporary low suggests fall resumption and intraday bias is back on the downside. Sustained trading below 1.2391 key support will extend larger down trend to 61.8% projection of 1.4376 to 1.2391 from 1.3381 at 1.2154 next. In any case, outlook will remain bearish as long as 1.2522 resistance holds, in case of recovery.

In the bigger picture, down trend from 1.4376 (2018 high) is still in progress. Break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don’t expect a firm break there yet. Hence, focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Yen opens the week broadly higher, following mild risk aversion in Asian markets. Traders are turning cautious ahead of FOMC rate decision, a string of worldwide economic data, as well as resumption of US-China trade negotiations. Swiss Franc is the second strongest so far while Dollar is the third. On the other hand, commodity currencies are generally lower together with Sterling. The Pound is awaiting more guidance from Prime Minister Boris Johnson on how he's handling Brexit.

Technically, GBP/USD's break of 1.2382 suggests decline resumption. Sustained trading below 1.2391 low would confirm medium term down trend resumption for next key level at 1.1946 (2016 low). EUR/USD recovered after breaching 1.1107 low. Subsequent recovery has been weak and focus remain on this key support level. Sustained break will resume down trend from 1.2555. Meanwhile, 0.9951 resistance in USD/CHF and 108.99 in resistance in USD/JPY will also be watched to confirm underlying Dollar strength.

In Asia, Nikkei closed down -0.19%. Hong Kong HSI is down -1.49%. China Shanghai SSE is down -0.18%. Singapore Strait Times is down -0.78%. Japan 10-year JGB yield is up 0.006 % -0.144.

US-China trade negotiations to restart on Tuesday, expectations are low

US-China trade negotiations are set to resume in Shanghai on Tuesday but expectations are rather low. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will meet China's team again for a two day meeting. Trump indicated on Friday that China may want to drag on till after 2020 election in the US. He told reported at that White House China would probably said “let's wait and see if one of these people who gives the United States away, let's see if one of them could get elected.”

White House economic adviser Larry Kudlow also said on Friday he "wouldn't expect any grand deal" at this week's meeting. Instead, the team would just try to "reset the stage". Though, he added, "we strongly expect the Chinese to follow through (on) goodwill and just helping the trade balance with large-scale purchases of US agriculture products and services.”

Separately, China's state media CCTV said on Sunday, citing the National Development and Reform Commission and Ministry of Commerce, that the country has already made enquiries to US suppliers for soybeans, cotton, pork, sorghum and other agricultural products since July 19. CCTV reported “as long as the American agricultural products are reasonably priced and of good quality, it is expected that there will be new purchase.” though, it also urged that US should  “take concrete measures to implement its relevant commitments and create favorable conditions for bilateral economic and trade cooperation”.

CBI: Both UK and EU are under-prepared for no-deal Brexit

The Confederation of British Industry warned in a report, published on Sunday, that neither UK nor EU are ready for no deal Brexit, as contingency planning study finds. The report criticized that while US has made many proposals "many of its plans delay negative impacts but do not remove them". EU has "taken fewer steps to reduce the damage of no deal". And, "very few joint actions to mitigate no deal have taken place, creating a high number of areas where continued UK-EU negotiations are inevitable". Business efforts have been "hampered by unclear advice, tough timelines, cost and complexity".

Josh Hardie, Deputy-Director General, said: ". Both sides are underprepared, so it's in all our interests. It cannot be beyond the wit of the continent's greatest negotiators to find a way through and agree a deal... It's not just about queues at ports; the invisible impact of severing services trade overnight would harm firms across the country... Preparing for no deal is devilishly difficult. But it is right to prepare."

Fed rate cut to highlight the week, but economic data could be equally market moving

Three central banks will meet this week. BoJ and BoE are both expected to keep monetary policy unchanged. BoE will also release quarterly Inflation Report with new economic projections. But both events could be largely ignore by the markets. Main even is FOMC meeting which is expected to deliver a -25bps rate cut. We'd emphasize that it's not exactly as certain as markets have priced in. Even if a cut is delivered, voting should be non-unanimous and Fed could indicate that it's more of a one-off. There is prospect of Dollar buying after that. Suggested readings on Fed: FOMC Preview – Expecting -25 bps Cut From a Divided Fed.

Economic data featured this week will very likely be market moving too. US will release PCE inflation, ADP employment, ISM manufacturing and non-farm payrolls. These data are important to decide whether Fed's rate cut would continue forward. Also, Eurozone GDP, CPI and unemployment will reveal how bad the economy is heading to, and thus, the need for additional EB stimulus.

Additionally, UK will release manufacturing and construction PMI. Canada will release GDP and trade balance. Australia will release CPI and retail sales. China will release PMIs too.

Here are some highlights for the week:

• Monday: Japan retail sales; UK M4 money supply, mortgage approvals.
• Tuesday: BoJ rate decision, Japan unemployment rate, industrial production; Australia building approvals; France GDP; German Gfk consumer climate, CPI; Swiss KOF economic barometer; US personal income and spending, S&P Case-Shiller house price, consumer confidence, pending home sales.
• Wednesday: China PMIs; Australia CPI, private sector credit; New Zealand ANZ business confidence;l Japan consumer confidence, housing starts; UK BRC shop price, Gfk consumer confidence; Germany retail sales, unemployment; Eurozone CPI, GDP, unemployment rate; Canada GDP, IPPI and RMPI; US ADP employment, employment cost index, Chicago PMI, FOMC rate decision.
• Thursday: Australia AiG manufacturing index, import prices; China Caixin PMI manufacturing; Eurozone PMI manufacturing final; UK PMI manufacturing; BoE rate decision and inflation report; US Challenger job cuts, jobless claims; ISM manufacturing PMI, construction spending.
• Friday: Japan monetary base, BoJ minutes; Australia retail sales, PPI; Swiss CPI, manufacturing PMI; UK construction PMI; Eurozone PPI, retail sales; Canada trade balance; US non-farm payrolls, trade balance, factory orders.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2353; (P) 1.2406; (R1) 1.2437; More...

GBP/USD's break of 1.2382 temporary low suggests fall resumption and intraday bias is back on the downside. Sustained trading below 1.2391 key support will extend larger down trend to 61.8% projection of 1.4376 to 1.2391 from 1.3381 at 1.2154 next. In any case, outlook will remain bearish as long as 1.2522 resistance holds, in case of recovery.

In the bigger picture, down trend from 1.4376 (2018 high) is still in progress. Break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don’t expect a firm break there yet. Hence, focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Economic Indicators Update

Market movers today

While the data front still looks thin today, a crucial week for markets takes off. This week, the Fed can either hold back or push markets closer to a H2 cyclical recovery. In the positive outcome, we see plenty of potential upside left in the CAD, AUD, NZD and Scandies against the USD. EUR/USD is also set to benefit but likely with a lower beta.

Preliminary EU harmonised inflation data for July from Spain is due out today. Bloomberg consensus expects a sharp deceleration to -1.2% m/m from -0.1% m/m previously.

The Dallas Fed manufacturing outlook level of general business activity for July is due to be published today. The index is likely to rebound from the current three-year low level as trade war escalation has stopped for now. Previously, businesses in Texas pointed to tariffs, and specifically trade talks with China, as a contributing factor to the prevailing uncertainty.

Selected market news

Stock markets slid in Japan, but headed up in Australia. The oil price, US futures and the USD were steady after the S&P 500 and Nasdaq Composite reached new all-time highs last Friday.

The JPY strengthened further. The Bank of Japan (BoJ) finishes a two-day policy meeting on Tuesday morning. The global slowdown has taken its toll on the Japanese manufacturing sector but domestic demand has fared okay. As long as USD/JPY keeps a safe distance from 100, we expect the BoJ to stand pat and hold on to the remaining few easing tools it has left. With the October VAT tax hike closing in, it might come in handy later on.

The BoJ might extend its forward guidance and promise low rates beyond spring 2020 (in the wordings now), in order to signal its readiness to do something if needed. However, the market reaction is likely to be negligible if the extension just goes further into 2020. At this meeting, we also get an update on the BoJ's expectations for the economy. We are likely to see yet another downward revision of the inflation outlook for the fiscal year 2019 here.

US Treasury Secretary Mnuchin and the US Trade Representative Lighthizer fly to Shanghai today for the first high-level negotiations after these stopped in May. US President Trump mentioned China might want to wait until after the 2020 US presidential elections as the Chinese authorities would prefer to make a deal with a Democrat.

Last Friday, the Bank of Russia (CBR) delivered a 25bp cut to the key rate, lowering it to 7.25% in line with our expectations, Bloomberg and Reuters consensus. The decision was RUB-neutral despite a moderately dovish statement. We see that under the current conditions, a September 25bp cut is still very likely. Now the focus will be on September's press conference and whether the CBR could possibly cut twice later this year.

GBP/USD declined heavily below the key 1.2480 and 1.2425 support levels. EUR/GBP is currently climbing higher and it could even climb above the 0.9000 resistance area.

Important Takeaways for GBP/USD and EUR/GBP

• The British Pound started a major decline after it failed to stay above the 1.2460 support level.
• There was a break below a contracting triangle with support near the 1.2445 level on the hourly chart of GBP/USD.
• EUR/GBP climbed higher steadily and broke the key 0.8950 resistance area.
• There was a break above a major bearish trend line with resistance near 0.8970 on the hourly chart.

GBP/USD Technical Analysis

The British Pound failed to hold gains above the 1.2500 pivot level and started a steady decline against the US Dollar. The GBP/USD pair broke the key 1.2480 and 1.2450 support levels to enter a bearish zone.

There was a break below the 1.2425 support level and the 50 hourly simple moving average. Moreover, there was a break below a contracting triangle with support near the 1.2445 level on the hourly chart of GBP/USD.

Finally, there was a break below the 1.2400 support and the pair traded as low as 1.2361 on FXOpen. At the moment, the pair is showing a lot of bearish signs below the 1.2400 level.

An immediate resistance is near the 1.2395 and 1.2400 levels. The 23.6% Fib retracement level of the recent decline from the 1.2517 high to 1.2361 low is also near the 1.2398 level to act as a strong resistance.

However, the main resistance is near the 1.2425 level, which was a major support earlier. Besides, the 38.2% Fib retracement level of the recent decline from the 1.2517 high to 1.2361 low is also near the 1.2421 level to act as a resistance.

On the downside, an initial support is near the 1.2360 and 1.2350 levels. If there is a downside break below 1.2350, the pair could start a downside extension towards the 1.2300 level.

EUR/GBP Technical Analysis

The Euro formed a strong support near the 0.8900 level against the British Pound. The EUR/GBP pair started a steady rise above the 0.8920 resistance and broke the key 0.8950 resistance level.

There was a proper close above the 0.8950 resistance and the 50 hourly simple moving average. The pair even gained traction above the 76.4% Fib retracement level of the last decline from the 0.9005 high to 0.8892 low.

Moreover, there was a break above a major bearish trend line with resistance near 0.8970 on the hourly chart. It opened the doors for more gains and the pair is now trading near the 0.9000 resistance.

If there are more gains and an upside break above 0.9000, the pair could continue to rise towards the 0.9030 level. The 1.236 Fib extension level of the last decline from the 0.9005 high to 0.8892 low is near the 0.9030 level to act as a strong resistance.

Any further gains above 0.9030 might call for a test of the key 0.9060 resistance level in the coming sessions. Conversely, if EUR/GBP fails to climb above 0.9000 or 0.9005, it could start a fresh decrease.

An initial support is near the 0.8980 level, below which EUR/GBP could slide towards the main support near the 0.8950 level plus the 50 hourly simple moving average.

For the 24 hours to 23:00 GMT, the EUR declined 0.19% against the USD and closed at 1.1125 on Friday.

The US dollar rose against a basket of currencies, following better-than-expected US gross domestic product (GDP) data.

In the US, data showed that the preliminary annualised GDP advanced 2.1% on a quarterly basis in 2Q 2019, following a rise of 3.1% in the previous quarter. Market participants had expected the GDP growth to slow to 1.9%.

In the Asian session, at GMT0300, the pair is trading at 1.1132, with the EUR trading 0.06% higher against the USD from Friday’s close.

The pair is expected to find support at 1.1112, and a fall through could take it to the next support level of 1.1093. The pair is expected to find its first resistance at 1.1151, and a rise through could take it to the next resistance level of 1.1171.

Amid no major economic releases in the Euro-zone today, traders would keep an eye on the US Dallas Fed manufacturing index for July, set to release later in the day.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP declined 0.52% against the USD and closed at 1.2387 on Friday.

In the Asian session, at GMT0300, the pair is trading at 1.2371, with the GBP trading 0.13% lower against the USD from Friday’s close.

The pair is expected to find support at 1.2338, and a fall through could take it to the next support level of 1.2306. The pair is expected to find its first resistance at 1.2429, and a rise through could take it to the next resistance level of 1.2488.

Trading trend in the Sterling today, is expected to be determined by UK’s net consumer credit and mortgage approvals, both for June, scheduled to release in a few hours.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.