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Cable is holding within tight range and maintaining positive tone on fresh optimism after Boris Johnson took office as Britain’s new PM that temporarily overshadows fears of no-deal Brexit.

Talks about new deal, referendum, election or another extension of Brexit deadline, bring various scenarios in play again.

First steps of new PM to dismiss a number of members of May’s cabinet, added to volatility.

Boris Johnson will face the same obstacles as his predecessor Theresa May and will not have much time as summer break in August will keep the whole process on hold and then the problem will need to be solved in two months – September and October.

Johnson promised a new Brexit deal, which looks quite unlikely and possible way out of current deadlock would be new Brexit referendum, as nothing has substantially changed in whole story after May’s repeated and unsuccessful attempts to get more concessions from the EU and persuade the UK parliament to approve her plan.

Near-term action holds within triangular consolidation above new multi-month low at 1.2381 and lacking firmer direction signals for now.

Wednesday’s rally was capped by falling trendline from 1.2783 (25 June high) and closed below 10DMA (1.2489) that keeps the downside vulnerable.

Rising momentum, falling stochastic and flat RSI are conflicting and focus turns towards ECB and Fed that would provide fresh signals.

Break above triangle resistance and 20DMA (1.2503/22) would provide fresh bullish signals for further recovery, which would require validation on lift above 1.2566/79 (30DMA / 12 July high).

Conversely, repeated close below 10DMA would provide initial negative signal, while break and close below triangle’s support line (1.2438) would further weaken near-term tone and increase downside risk.

Res: 1.2484, 1.2503, 1.2522, 1.2566
Sup: 1.2464, 1.2438, 1.2417, 1.2400

The Euro remains in red and moved lower in early European trading on Thursday, awaiting today’s key event, ECB interest rate decision.

Negative sentiment was soured further by weak PMI data from EU members, with focus on the strongest contraction of German manufacturing sector in seven years.

With negative signals coming from Europe and expectation for ECB’s 10bps rate cut today, near-term action remains firmly biased lower.

Markets expect the ECB to join establishing global easing trend and dovish statement that would open way for further easing in September.

Fresh weakness probes below Wednesday’s low at 1.1126 and increasing risk of attacking key support at 1.1107 (2019).

Firm break below the base at 1.11 zone would spark fresh acceleration lower and expose psychological 1.10 support.

Bearish daily techs add to scenario, but deeply oversold stochastic and north-turning momentum signal that bears may show strong hesitation on approach to key 1.11 support zone.

Broken pivotal supports at 1.1180/1.1200 now mark solid resistances and expected to cap and keep bears in play.

Res: 1.1143, 1.1155, 1.1180, 1.1205
Sup: 1.1125, 1.1116, 1.1107, 1.1050

The GBP/USD has formed a bearish trend line below D L3 confluence with Red Levels. At this point, we can also see the two POC which could tank the price.

1.2470-80 is the first POC zone. If the price doesn’t reject, it could go higher towards POC2 1.2510-20. Watch for signs of reversal within the POCs. Targets are 1.2450 and 1.2424. Bears are dominating as long as the price is kept below W H3 and Red level confluence below 1.2557..

German Ifo Business Climate dropped to 95.7 in July, down from 97.5 and missed expectation of 97.0. Expectations Index dropped to 92.2, down from 94.0, missed expectation of 94.0. Current Assessment Index dropped to 99.4, down from 101.1, missed expectation of 100.4.

Clemens Fuest, President of the ifo Institute, said "the mood in German C suites is growing uneasy... Companies were less satisfied with their current business situation and are also looking ahead with increased skepticism. The German economy is navigating troubled waters."

Manufacturing index was in "freefall" and dropped from 1.3 to -4.3. "Such a major decline was last seen in February 2009" and, "no improvement is expected in the short term, as businesses are looking ahead to the next six months with more pessimism." Services Sector index dropped from 20.3 to 17.7, with expectations slightly pessimistic for the first time since July 2009. Trade index "slid sharply" from 7.9 to 1.4. "Companies are assessing their current situation as considerably less positive, and their outlook for the coming months is markedly more skeptical." Construction Index dropped rose from 23.0 to 23.3.

Full release here.

Chinese Ministry of Commerce spokesman Geo Feng confirmed that next round of US-China trade negotiation will happen in Shanghai for two days on July 30-31.

It's reported that China has already agreed on unspecified purchases of US agricultural production. Gao said in a regular press conference that "Some Chinese firms are willing to continue to buy some U.S. agricultural goods, and they have asked for prices from their U.S. suppliers and will sign commercial contracts soon."

But Gao also clarified that the purchases will be decided by companies themselves according to market functioning. Such purchases bear no direct relationship to restart of trade talks.

Volkswagen

The world's biggest carmaker disclosed in its earning that softening demand has left a dent on its operating profit which fell by 8.1 percent. However, the company didn't back down from its full year outlook, unlike its rivals. The drop in profit was mainly due to the reason that less cars were delivered. Having said this, the company is in a much better shape and it has shown its resilience to the current industry turmoil. VW’ strategy to offer SUVs among its fleet of cars paid off good dividend because this was the area where VW didn't perform well before.

The key to be successful in the auto industry is to stay ahead of the curve and the race is on between all major brands to develop electric and driverless cars, something which requires enormous investment. The recipe to keep the cost low is to develop spare parts which can be used across various different models because this help in saving cost given that the company does offer small and mid-size vehicles.

Overall, we hold optimistic views on VW and it's especially because the company has also targeted truck business by bringing its own model Traton SE.

Tesla

Misery isn't over for Tesla and it seems that there is plenty more to come. This was the prime message or let's say the key takeaway from companies recent earning. Tesla shares plummeted due to worse than expected loss and there is more to come. The company lost $1.12, a share a number which is far bigger than the market expectation and the hopes of company returning to profit have diminished once again.

For Tesla the strongest demand comes from the Model 3, but unfortunately there isn't enough margin to cushion expenses. Thus, the record deliveries of Tesla Model 3 could not help the company. The firm needs to create a successful sales model not only for the US but also for its foreign market.

Another bombshell was dropped on investors by the founder of the company, Ellan Musk. He changed another person at a senior executive role. J.B Straubel, who served the company for 15 years as a CTO, left the position and became an advisor. In January this year the chief financial officer was also change in a similar fashion. Changes at the management level under these conditions isn’t unusual but in the short time, it does rattle investor confidence.

Total

The French energy giant reported its earnings today, its net income dropped to 2.89 and there was a strong disappointment in its profit number, it fell short of estimates. Another lacklustre area was adjusted net income which was almost a fifth lower than the previous year. The weakness in the earnings is mainly due to the economic slowdown and the softness in the commodity prices. Nonetheless, the company's cash position is still strong and this enabled it to go ahead with the planned share buyback programme. Overall, we believe that the results aren’t bad at all from a shareholder’s perspective because Total has adopted aggressive measures for cost cuts and this enabled it maintain its dividend even if the oil price was below $50. investment

Is the ECB looking to steal the spotlight this week?

The ECB meeting on Thursday has just got a lot more interesting, with markets pricing in a high probability of a rate cut despite a previously widely held belief that it won’t come until September.

Odds for a 10 basis point rate cut rose to 48% according to Reuters, a day before the decision is due to be announced and following the release of some pretty woeful manufacturing data.

While this is still below the threshold that is usually associated with a move being highly probably, it is still very significant and puts additional focus on the decision and press conference that follows.

• Surprise July rate cut odds rise
• ECB to take a page out of Fed’s playbook?
• Should the ECB wait until October?

The manufacturing data on Wednesday was particularly poor, with the eurozone PMI slipping to a more than six year low, at 46.4, which unfortunately is not a blip and instead the continuation of a very worrying trend. Germany saw its reading fall to an even more pitiful 43.1, the lowest since the global financial crisis.

Obviously, this one release alone isn’t going to be hugely influential but it is one of many indicators that the ECB will be worried about, including persistent below target inflation and growth that has been on a downward trajectory since the start of last year.

Unemployment is one bright spot, standing at its lowest level since the middle of 2008, but with certain indicators offering red flags and the global economic outlook being a cause for concern, it wouldn’t be a shock for the central bank to consider acting early.

Only last week, the New York Fed President John Williams gave a speech about the benefits of preventative action in avoiding a downturn and having to rely on much less firepower than central banks have had in the past. If this is true of the US then it’s frighteningly so in the eurozone.

One thing that may encourage the ECB to hold off on a rate cut beyond September is that Mario Draghi’s term as President ends in September so it would allow his successor to be the one that steers the central bank in a new direction.

That said, Draghi’s predecessor raised interest rates a couple of times leading up to his departure, which were quickly reversed after his appointment. Perhaps Draghi and his colleagues will decide to wait before embarking on a new course this time around.

The GER30 index gained considerable traction this week, with the price breaching the downward move that started from the almost one-year high of 12,661 and passing through the Ichimoku cloud. The technical picture suggests a cautiously bullish bias for the short-term as the MACD keeps running above its red signal line and the RSI is flattening around the 70 overbought area.

The bulls could continue the rally until the 12,620-12.640 area. Should the bullish pressure strengthen above the 12,661 top, resistance could rise up to the 12,860 key barrier.

Alternatively a drop under the former 12,520 support level could push the price straight to the 61.8% Fibonacci of 12,482 of the downleg from 12,661 to 12,000, though the 50% Fibonacci of 12,417 may appear more interesting as any violation at this point would shift the current bullish sentiment back to neutral.

In brief, the GER30 stock index is likely to maintain bullish momentum in the short-term, though with the market trading in overbought area, a downside reversal is possible.

Daily Pivots: (S1) 107.99; (P) 108.13; (R1) 108.33; More...

Intraday bias in USD/JPY remains neutral at this point. On the upside, break of 108.37 will extend the rebound from 106.78 with another rise, possibly through 108.99 resistance. On the downside, break of 107.21 will resume the fall from 108.99 to 106.78 low. Decisive break there will resume whole decline from 112.40.

In the bigger picture, decline from 118.65 (Dec 2016) is still in progress, with the pair staying inside long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we'd expect strong support above 98.97 (2016 low) to contain downside to bring rebound. In any case, break of 112.40 is needed to the first serious sign of medium term bullishness. Otherwise, further decline will remain in favor in case of rebound.

The ECB is to release its interest rate decision today and is expected to remain on hold at 0.0%.EUR OIS imply a probability of 52.15% for the bank to remain on hold at the current stage. However there is also another 47.85% probability to cut rates by 10 basis points. However, we believe that if the bank does not cut rates today, it would probably prepare the ground to do so in its September meeting. Traders are expected to be influenced by the accompanying statement and the following press conference of ECB President Mario Draghi. Market participants could be interested to see how ECB plans to take action to improve the economic condition of Europe. Even though the Unemployment rate has remained rather stable, Retail Sales y/y have dropped to 1.3% and the HICP final figure being at 1.3% far from the 2% target, are questionable. The overall expectation of the market is that the bank is expected to have a dovish outlook based the recent soft economic data. Should the bank sound dovish as expected, we could see the common currency weakening.

CBRT interest rate decision

During the late European session, we get CBRT’s interest rate decision. The bank is expected to cut the 1 week repo rate to 21.50%. Other reports state the rate cut could be larger or smaller. In any case CBRT could be forced to take action as Turkish businesses have been in a difficult situation while the country’s inflation has been dropping both monthly and yearly. The event could be a test of the central banks independence as many believe it follows Turkish President Tayyip Erdogan's views. In the past, reports claimed Erdogan dismissed the previous CBRT governor due to a disagreement they had on the actions that should be taken. TRY could come under strong volatility at the time of the event

EURUSD 4 Daily

Support: 1.0970 (S1), 1.1040 (S2), 1.1100 (S3)
Resistance: 1.1140 (R1), 1.1180 (R2), 1.1220 (R3)

USDTRY 4 hour

Support: 5.7090 (S1), 5.6450 (S2), 5.5745 (S3)
Resistance: 5.8120 (R1), 5.9280 (R2), 6.0175 (R3)