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The British pound is starting to lose its recent gains against the US dollar after sellers forced the pair below the 1.2480 support level. The GBPUSD pair may launch its next upside move towards the 1.2550 level if bulls can hold price above the 1.2440 level. Bears need to hold price below the 1.2440 level to encourage more traders to enter back into the GBPUSD short trade.

The GBPUSD pair is only bullish while trading above the 1.2480 level, key resistance is located at the 1.2525 and 1.2550 levels.

If the GBPUSD pair trades below the 1.2480 level, key support is found at the 1.2460 and 1.2440 levels.

The euro is starting to probe the middle of its three-day trading range against the US dollar as financial markets remain unimpressed with the lack of action from the ECB on Thursday. The risk is now to the upside for the EURUSD pair, with a further short squeeze towards at least the 1.1210 level still possible. US GDP later today is likely to prompt the next strong directional move in the EURUSD pair.

The EURUSD pair is heavily bearish while trading below the 1.1160 level, key support is found at the 1.1100 and 1.1050 levels.

If the EURUSD pair trades above the 1.1160 level, bulls could test back towards the 1.1185 and 1.1210 levels.

USDCAD found some footing around the nine-month low of 1.3015 last week and completed the fifth consecutive green day. Currently, the pair is approaching the 40-simple moving average (SMA), experiencing some gains above the 1.3145 barrier.

The stochastic oscillator seems to be strengthening momentum above the 80 level, while the RSI is standing above the 50 level with weaker movement than before, signaling a more cautious trading in the short term.

The 40-day SMA at 1.3182 could act as immediate resistance for the bulls. Breaking that line, the bullish action may likely continue until the 1.3240 level, taken from the inside swing low on June 10, while more advances could drive the market until the 23.6% Fibonacci retracement level of the upward wave from 1.2250 to 1.3664 around 1.3330.

In the alternative scenario, where the price closes decisively below the 1.3145 – 1.31200 zone, which encapsulates the 38.2% Fibonacci, a negative move could accelerate towards the 1.3015 region. Sharper declines would shift the attention to the 50.0% Fibo of 1.2955, continuing the bearish structure.

To sum up, the near-term risk is currently viewed bullish, while in the medium-term, the sentiment seems to be turning even more bearish.

China shares outperform

Asia shrugged off the weaker close on Wall Street and extended the recent bullish run with gains of between 0.20% and 0.45% for US indices, though none managed enough gains to reach fresh record highs, as we await Q2 GDP data for the US. China shares jumped 0.51%, extending gains to a fourth consecutive day and hitting the highest level in nearly three weeks as face-to-face trade negotiations between the US and China are due to restart early next week.

The 55-day moving average at 13,201 has turned positive this week and looks set to cross back above the 100-day moving average at 13,229 early next week.

ChinaA50 Daily Chart

Risk appetite not reflected in currencies

The broader positive risk appetite was not apparent in currency markets, with the beta-risk Australian dollar trading negatively on the day. AUD/USD fell 0.12% to 0.6943 while AUD/JPY also slid 0.12% to 75.41. AUD/USD has now fallen for six straight days, the longest losing streak since January/February 2018. The FX pair opened below the 55-day moving average at 0.6956 for the first time since July 10.

AUD/USD Daily Chart

Euro settling mid-range

Following its wild gyrations yesterday, EUR/USD seems to have found its level this morning near the middle of yesterday’s 1.1101 to 1.1188 range. For yesterday to be confirmed as a bullish outside-range day on the charts, we would need a higher close today. The FX pair is now at 1.1149 with the 55-day and 100-day moving averages lurking above at 1.1237 and 1.1243, respectively.

As my London colleague, Craig Erlam, mentioned here, the fact that cutting rates was not discussed yesterday does not mean it will not be at future meetings. Indeed, in Draghi’s press conference yesterday he said that he sees rate at current, or even lower, levels at least through the first half of 202, or as long as necessary. As a result, any upmove in EUR/USD is likely to be correctional in nature within the broader downtrend.

EUR/USD Daily Chart

US growth to slow

The main event on today’s data calendar will undoubtedly be US GDP growth numbers for the second quarter. Estimates suggest growth slowed to 1.8% annualized from 3.1% in Q1, which would be the slowest rate of expansion since the first quarter of 2016. No doubt US President Trump will blame the Fed for the lascklustre performance due to their hiking cycle last year.

Aside from the GDP data, the personal consumption expenditure – prices index is expected to tick higher to +0.6% q/q from +0.5% in Q1.

General Trend:

• Asian markets opened slightly lower before continuing to decline, following mixed US earnings
• North Korea said missile firing was a warning to South Korea “warmongers” to stop importing weapons and conducting joint military drills
• ECB left rates unchanged and tilted its forward guidance towards an easing. Staff looking at options for tiering and potential bond buying program, some sort of QE with additional stimulus expected to be announced at the Sept meeting
• Softbank raises $108B new Vision fund that will be targeted at AI
• Markets will now await BOJ and Fed rate decisions next week. Some BOJ officials said to doubt the benefit of stronger guidance
• US DOJ confirms it will make an announcement on significant merger enforcement action tomorrow (Sprint, T-Mobile deal?)

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%
• MIN.AU Reports Q4 Total Iron Ore Production: 2.53M WMT v 3.06M WMT y/y; Spodumene Production 90Mt v 109Mt y/y
• GBT.AU Comments on A$4.00/shr FNZ takeover offer, unable to accept
• (AU) Australia Competition and Consumer Commission’s (ACCC) releases final report on digital platforms inquiry: Recommends unfair contract terms be illegal; - Imbalance of power between media and Google and Facebook; Suggests merger laws be updated; Govt to respond by the end of the year

Japan

• Nikkei 225 opened -0.3%
• (JP) Japan some BOJ officials express doubt over the potency of stronger guidance - Financial Press
• (JP) Japan will decide on South Korea white list on Aug 2nd at earliest; Follow Up: Japan Cabinet Chief Suga: Schedule for decision on South Korea whitelist has not been decided
• 7201.JP Reports Q1 Net ¥6.34B v ¥115.83B y/y, Op ¥1.51B v ¥37.2Be, Rev ¥2.37T v ¥2.72T y/y; to cut headcount by ~12.5K jobs
• (JP) Japan July Tokyo CPI Y/Y: 0.9% v 1.0%e; CPI Ex-Fresh Food Y/Y: 0.9% v 0.8%e
• 9984.JP New Visions Fund 2 raises $108B, to invest $38B into the second Vision Fund
• (JP) Japan Econ Min Motegi said to meet with USTR Lighthizer in Washington on Aug 1 - US Financial Press

Korea

• Kospi opened -0.5%
• (KR) North Korea Leader Kim inspected personally the new tactical guided weapon firing yesterday - North Korean state press
• (KR) North Korea leader Kim: Missile firing was a warning to South Korea's "warmongers"
• (KR) US State Dept: aware of reports that North Korea fired projectiles; urges no more provocations and still seeks diplomatic engagement
• (KR) North Korea 2018 GDP y/y: -4.1% v -3.5% in 2017 - Bank of Korea (BOK)

China/Hong Kong

• Hang Seng opened -0.7%; Shanghai Composite opened -0.3%
• (CN) China Ministry of Commerce (MOFCOM): China to host the US for 12th round of trade consultations July 30-31 in Shanghai- Xinhua
• (CN) Yuan volatility has significantly decreased since mid-June as China households and companies have started selling when RMB is low on the assumption Beijing will step in to halt depreciation - US Financial Press
• 2282.HK Reports H1 (HKD) Rev 11.3B v 9.07B y/y
• 486.HK Reports Q2 prelim Aluminum Production: 938Kt, +1% q/q; Aluminum Sales 1.08Kt, +20.8% q/q
• (CN) China PBOC sets yuan reference rate: 6.8796 v 6.8737 prior
• (CN) China PBoC Open Market Operation (OMO): Skips for 4th consecutive session; Net CNY100B drained v CNY100B drained prior
• (CN) China Automobile Association (CAAM) cuts 2019 outlook of auto sales to 26.68, -5% y/y due to slower H1 sales - Chinese press
• (CN) China Ministry of Commerce (MOFCOM) responds to US open letter on China: Provoking confrontation between China and the United States does not enjoy U.S. mainstream public support, while promoting win-win cooperation between the two countries conforms to the wishes of the people

Other

• (SG) Singapore Semiconductor Industry Assoc Exec Director: Chipmakers producing at ~60% capacity v 80% seasonal average; cites US-China trade war slowdown; some firms are freezing headcounts but currently no talk of layoffs

North America

• (US) INITIAL JOBLESS CLAIMS: 206K V 218KE; CONTINUING CLAIMS: 1.68M V 1.69ME
• (US) House of Representatives passes the 2-year budget deal that suspends the debt ceiling (as expected)
• (US) DoJ Assistant Attorney General (AG) Delrahim to announce a significant merger enforcement action July 26th 11:00ET
• HSY Confirms it will be raising prices for wholesalers by ~10%, retailers will have to decided if they will pass cost increase along to customers
• SBUX Reports Q3 $0.78 v $0.72e, Rev $6.82B v $6.68Be
• MAT Reports Q2 -$0.25 v -$0.35e, Rev $860.1M v $821Me
• GOOGL Reports Q2 $14.21 v $11.50e, Rev $31.7B (ex $7.23B of TAC) v $30.9Be
• INTC Apple to acquire Majority of Intel’s smartphone modem business for $1B, as speculated

Europe

• (EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; maintains guidance
• (EU) ECB STAFF EXAMINING OPTIONS FOR TIERING AND POTENTIAL QE BOND BUYING PROGRAM (QE)
• RNO.FR Reports H1 Net €1.05B v €2.04B y/y, Op €1.52B v €1.73B y/y, Rev €28.1B v €28.5Be; Cuts FY19 Rev

Levels as of 01:20ET

• Hang Seng -0.6%; Shanghai Composite -0.2%; Kospi -0.6%; Nikkei225 -0.6%; ASX 200 -0.3%
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.4%, Dax +0.4%; FTSE100 -0.1%
• EUR 1.1143-1.1151; JPY 108.56-108.73; AUD 0.6940-0.6956; NZD 0.6651-0.6670
• Commodity Futures: Gold +0.1% at $1,415/oz; Crude Oil +0.4% at $56.23/brl; Copper -0.1% at $2.70/lb

Market movers today

It will be a rather thin calendar day ahead, flavoured by more Q2 19 earnings releases globally.

In Europe, consumer and economic sentiment data for France and Italy are due for release.

The US BEA will release its advance report on Q2 19 GDP. The Bloomberg consensus median expects a slowdown in annualised growth to 1.8% q/q from the previous 3.1% q/q, while we forecast GDP grew at an annualised rate of 2.3% in Q2 19, led by robust consumer spending and government expenditures. The latter component growth is likely to be derived from a rebound in federal government hours after the negative contribution of the long shutdown in Q1 19.

The Bank of Russia (the CBR) will announce its decision on the key rate. In line with Bloomberg consensus, we expect a 25bp cut today to 7.25%, as inflation has continued to decelerate closer to the 4.0% central bank target. The CBR has earlier joined the global monetary easing race and it is likely to deliver at least another 25bp hike in 2019 in order to support moderate economic growth.

Selected market news

At yesterday's meeting Mario Draghi sent a strong signal to the market that further stimulus is on its way to help the ailing economy. As we expected, the ECB adjusted the forward guidance as a first step, opening up the possibility of policy rates remaining 'at present or lower levels' at least through H1 20. In our view, this has set the scene for a deposit rate cut, which we expect to be announced at the September meeting (we expect a 20bp rate cut), paired with a restart of the QE programme and extended forward guidance. Markets are currently pricing 12bp of cut in September.

The ECB's assessment of the inflation and economic outlook and risks was broadly unchanged. While resilience is still apparent in the service and construction sectors, Draghi stressed the outlook was getting worse and worse, especially in manufacturing. This means the expected rebound in H2 19 is now less likely with incoming data. The risk of recession was seen as 'pretty low' (from 'very low' in June).

In a phone call with the newly elected UK PM Boris Johnson, European Commission President Jean-Claude Juncker slapped away hopes of a new Brexit pact by stating that the current one is 'the best and only' deal possible. Johnson assured that the British government is 'turbocharging' preparations for a hard exit.

The Turkish central bank delivered a dovish surprise cutting its policy rate by 425bp to 19.75%, while Bloomberg consensus expected a 250bp cut. As the prospects for the Turkish economy remain blurry for 2019, the turn towards bold monetary easing will bring some relief for Turkey's GDP and is thus marginally supportive for the TRY. We expect more cuts in H2 19.

The EUR/USD bullish bounce at the 1.11 support and double bottom could indicate a failure of the bears to continue with the downtrend. Of course, if a breakout and close below 1.11 occurs today then a continuation towards the next round level at 1.10 is still likely. But for the moment, the bounce could become a larger bullish reversal, especially if price is able to show a new bullish push within a potential wave A (pink).

The EUR/USD could be building a wave 1-2 (purple) pattern as long as price stays above the 100% Fibonacci retracement level of wave 2 vs 1. The 1.11 support remains a key decision zone for a bounce or break.

For the 24 hours to 23:00 GMT, the EUR slightly rose against the USD and closed at 1.1146.

The European Central Bank (ECB) left its benchmark interest rate unchanged at 0.00% and indicated that interest rates would remain at the current low level throughout the first half of 2020. Further, the central bank notified its plan to restart its bond-buying program in order to boost the country’s economic growth. In a statement post-meeting, the ECB President Mario Draghi, highlighted the need for significant stimulus for the euro area economy, to ensure that financial conditions remain very favourable and support the euro area expansion. Further, he stated that growth is set to slow in the second and third quarters, citing ongoing global trade tensions, and hence, a rebound in the second half of the year is less likely.

In economic news, Germany’s Ifo business climate index fell to a level of 95.7 in July, more than market expectations for a decline to a level of 97.2. The index had registered a revised reading of 97.50 in the previous month. Moreover, the nation’s Ifo business expectations index unexpectedly slid to a decade low level of 92.2 in July, compared to a revised level of 94.0. Further, the Ifo current assessment index declined to a level of 99.4 in July, surpassing market consensus for a drop to a level of 100.4. The index had recorded a revised level of 101.1 in the previous month.

In the US, data showed that the advance goods trade deficit narrowed to $74.20 billion in June, following a revised deficit of $75.00 billion in the prior month. Market participants had anticipated the nation to post a deficit of $72.5 billion.

Meanwhile, the US flash durable goods orders rose 2.0% on a monthly basis in June, compared to a revised drop of 2.3% in the previous month. Also, the nation’s seasonally adjusted initial jobless claims unexpectedly fell to a 3-month low level of 206.0K in the week ended 20 July 2019, defying market expectations for a rise to a level of 218.0k. In the prior week, initial jobless claims had recorded a reading of 216.0K.

In the Asian session, at GMT0300, the pair is trading at 1.1148, with the EUR trading a tad higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1104, and a fall through could take it to the next support level of 1.1060. The pair is expected to find its first resistance at 1.1190, and a rise through could take it to the next resistance level of 1.1232.

Amid lack of macroeconomic releases in the Euro-zone today, traders would keep an eye on the US annualised gross domestic product for the second quarter, set to release later in the day.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 0.9863; (P) 0.9890; (R1) 0.9937; More...

Breach of 0.9908 minor resistance suggests that pull back from 0.9951 has completed at 0.9803. And, rebound from 0.9695 is still in progress. Intraday bias is turned back to the upside for 0.9951 first. Break will target 1.0014 resistance. On the downside, break of 0.9803 will turn bias to the downside for 0.9695 instead.

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.

For the 24 hours to 23:00 GMT, the GBP declined 0.23% against the USD and closed at 1.2452.

In the Asian session, at GMT0300, the pair is trading at 1.2449, with the GBP trading slightly lower against the USD from yesterday’s close.

The pair is expected to find support at 1.2418, and a fall through could take it to the next support level of 1.2387. The pair is expected to find its first resistance at 1.2499, and a rise through could take it to the next resistance level of 1.2549.

Looking ahead, traders would await UK’s consumer credit and mortgage approvals, slated to release next week.

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