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The US Dollar traded flat against the Canadian Dollar on Tuesday. The USD/CAD currency pair was trading below the weekly R2 at 1.3156 during yesterday's trading session.

Everything being equal, it is likely that the exchange rate will continue its upward movement today. Bullish traders could aim for a resistance level formed by the weekly R3 at 1.3202 today.

However, the weekly R2 at 1.3156 could provide resistance for the currency exchange rate during the following trading session.

The New Zealand Dollar depreciated about 50 base points against the US Dollar on Tuesday. The currency pair hit a one-week low at 0.6693 during the morning hours of Wednesday's trading session.

The exchange rate could reversal from the support level at 0.6693 within this session. If the potential reversal occurs, a surge towards the 50-hour simple moving average at 0.6738 could be expected today.

However, if the currency exchange rate passes the support level as mentioned earlier, the pair might end today's trading session on bearish sentiment.

Notes/Observations

• Major European PMI data disappoints:
• Markets awaiting the latest round of global monetary stimulus led by the ECB (minimum to see a dovish forward guidance)

Asia:

• Japan PM Abe Adviser Hamada: If Fed acts BOJ may need to do something about the JPY currency (yen); concerned about yen nearing 100 level
• Japan July Preliminary PMI Manufacturing: 49.6 v 49.3 prior (3rd straight contraction)
• China released white paper accusing US of undermining global strategic stability by adjusting its national security and defense strategy; Govt would not renounce use of force to reunify Taiwan; vowed to take all military measures to defeat separatists; to accelerate building cyber capacity. Hong Kong had option of asking for Chinese military's help in maintaining public order

Europe/Mideast:

• incoming UK PM Johnson has said that everyone in his Cabinet must sign up to the possibility of a no deal Brexit, and wanted more than half of his ministers to be Brexiteers.
• France Budget Min Darmanin: Government plans to cut 15,000 civil service jobs

Americas:

• US Trade negotiators to head to China on Monday, July 29th for three days of face to face talks (1st since G20)
• DOJ opens broad new antitrust review of big tech into whether dominant firms are unlawfully preventing competition

Energy:

• Weekly API Oil Inventories: Crude: -11.0M v -1.4M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.21% at 390.70, FTSE -0.97% at 7,483.35, DAX +0.11% at 12,504.19, CAC-40 -0.46% at 5,592.16, IBEX-35 -0.04% at 9,278.00, FTSE MIB +0.06% at 21,966.50, SMI -0.40% at 9,925.50, S&P 500 Futures -0.33%]

Market Focal Points/Key Themes:

• European Indices trade mostly lower this morning following a mixed session in Asia and lower US Equity futures. On the macro front German, French and European prelim manufacturing PMI missed expectations weighing on markets.
• On a busy morning for corporate earnings, shares of Deutsche Bank fall over 4% following Q4 results and a wider loss than expected as well as a sharp fall in trading revenue. Aston Martin Lagonda declines over 22% following a profit warnings, with Valmet, Caverion, Sipheon and SEB among other names declining on earnings.
• Shares of Daimler trades higher after a rise in Revenue and affirmed outlook; PSA Group also gains on a a Revenue and profit beat, with Covestro, Akzo Nobel, Dassault System, ASM International, Ingenico and Repsol among other names gaining on earnings.
• In other news Hugo Boss declines on a secondary offering by holder, while Metro in Germany also declines as the board advises against accepting a €5.8B bid from EP capital.
• Looking ahead notable earners include Anthem, Boeing, UPS, AT&T, Catepillar and Boston Scientific among others.

Equities

• Consumer discretionary: ITV [ITV.UK] +3% (earnings), Hugo Boss [BOSS.DE] -4% (book offering), Ingenico [ING.FR] +7% (earnings), Kesko [KESKOB.FI] +2% (earnings), Just Group [JUST.UK] -10% (trading update), Clariant [CLN.CH] -4% (CEO resigns)
• Financials: Deutsche Bank [DBK.DE] -5% (earnings)
• Industrials: Daimler [DAI.DE] +1% (earnings; outlook cut), PSA [UG.FR] +1.5% (earnings; outlook cut), Metro [B4B.DE] -3% (Board against offer), Covestro [1COV.DE] +2.5% (earnings), Dassault Systems [DSY.FR] +2% (earnings), Aston Martin [AML.UK] -23% (profit warning), Skanska [SKAB.SE] +2% (earnings)
• Technology: Sopheon [SPE.UK] -22% (trading update)
• Materials: Akzo Nobel [AKZA.NL] +4.5% (earnings)

Speakers

• UK Health Min Hancock said to rule out Tory electoral agreement with Brexit party
• South Africa Central Bank (SARB) Gov Kganyago: Country's growth problems fell outside the SARB's reach; Reiterated stance that rate cut had limited impact on GDP
• China Foreign Ministry spokesperson Geng Shuang reiterated opposition to external interference in Hong Kong. Deflected question on why upcoming trade talks with US to resume in Shanghai (not Beijing)
• Iran President Rouhani: Seizure of UK tanker by revolutionary guards was powerful and professional; ready to negotiate but not if negotiations meant surrender. Would not allow chaos in the Persian Gulf and Strait of Hormuz

Currencies/ Fixed Income

• EUR: The EUR/USD pair tested 2-month lows around 1.1130 after numerous Preliminary PMI data disappointed for the region. The region had seen some stabilization in PMI data the past few months but was not the case today. The lower level is seen in the 1.111 region which represents the 2 year low, where as if we see strengthening the level to the uppser side is in the region of 1.1280. German Bund yield continues to hover only slightly above all-time lows, a signal that expectations of more stimulus by the ECB.
• GBP: Yesterday the UK Parliament voted as Boris Johnson to become the Head of the Tory leadership Party and the new Prime Minister. The Cable initially sold off making a new weekly low before reversing and trading higher on the day. Before there is any true reversal of this sell off of recent months it will have to break the 1.258 region. Incoming UK PM Johnson said to have mandated that everyone in his Cabinet must sign up to the possibility of a no deal Brexit, and wanted more than half of his ministers to be Brexiteers.
• AUD was softer during the Asian session after Westpac analysts forecasted two more RBA rate cuts by February. Levels to the downside are the 1 month low at 0.6910

Economic Data

• (FI) Finland Jun PPI M/M: -1.1% v +0.1% prior; Y/Y: -0.9% v +0.9% prior
• (FR) France July Business Confidence: 105 v 106e; Manufacturing Confidence: 101 v 102e; Production Outlook Indicator: 0 v 3e; Own-Company Production Outlook: 6 v 8e
• (FR) France July Overall Demand Survey: -3 v +3 prior
• (CZ) Czech July Consumer Confidence Index: 4.0 v 2.8 prior; Business Confidence: 11.5 v 11.9 prior; Composite (Consumer & Business Confidence ): 10.0 v 10.1 prior
• (FR) France July Preliminary PMI Manufacturing: 50.0 v 51.7e (4th month without a contraction); PMI Services: 52.2 v 52.8e; PMI Composite: 51.7 v 52.7e
• (DE) Germany July Preliminary PMI Manufacturing: 43.1 v 45.2e (7th month of contraction and lowest since July 2012); PMI Services: 55.4 v 55.3e; PMI Composite: 51.4 v 52.4e
• (EU) Euro Zone July Preliminary PMI Manufacturing: 46.4 v 47.7e (6th month of contraction and lowest since Dec 2012); PMI Services: 53.3 v 53.3e; PMI Composite: 51.5 v 52.2e
• (EU) Euro Zone Jun M3 Money Supply Y/Y: 4.5% v 4.6%e
• (ZA) South Africa Jun CPI M/M: 0.4% v 0.3%e; Y/Y: 4.5% v 4.4%e
• (ZA) South Africa Jun CPI Core M/M: 0.4% v 0.3%e; Y/Y: 4.3% v 4.2%e
• (TW) Taiwan Jun M2 Money Supply Y/Y: 3.1% v 3.4% prior; M1 Money Supply Y/Y: 7.4% v 7.2% prior
• (UK) Jun BBA Loans for Housing: 42.7K v 42.7Ke

Fixed Income Issuance

• (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills

Looking Ahead

• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
• 06:45 (US) Daily Libor Fixing
• 07:00 (RU) Russia OFZ bonds auction
• 07:00 (US) MBA Mortgage Applications w/e July 19th: No est v -1.1% prior
• 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 88.5 prior
• 07:00 (UK) Weekly PM Question time in House
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 09:00 (BE) Belgium July Business Confidence: -4.9e v -4.9 prior
• 09:00 (CL) Chile Jun PPI M/M: No est v 0.0% prior
• 09:45 (US) July Preliminary Markit Manufacturing PMI: 51.0e v 50.6 prior; Services PMI: 51.8e v 51.5 prior; PMI Composite: No est v 51.5 prior
• 10:00 (US) Jun New Home Sales: 659Ke v 626K prior
• 10:30 (US) Weekly DOE Oil Inventories
• (CO) Colombia Jun Industrial Confidence: No est v 7.1 prior; Retail Confidence: No est v 26.3 prior
• 11:30 (US) Treasury to sell 2-Year Floating Rate Notes
• 12:00 (CA) Canada to sell 10 Year Bonds
• 13:00 (US) Treasury to sell 5-Year Notes

Yesterday, the EUR/USD currency pair declined to the support level formed by the weekly S2 at the 1.1152 mark. During Wednesday's morning, the pair surpassed the given support.

Given, that the exchange rate is pressured by the 55-, 100– and 200-hour SMAs, currently located in the 1.1187/1.1227 range, it is expected, that bears could continue to prevail. However, note, that the rate has to surpass the 2018/2019 minimum at 1.1124.

If the given level holds, it is likely, that the pair could trade sideways around the psychological level at 1.1140 in the nearest future. Otherwise, the rate could target the weekly S3 at the 1.1103 mark.

On Tuesday, the GBP/USD exchange rate traded sideways around the psychological level at 1.2450. During today's morning, the rate was still consolidating at the given level.

From a technical perspective, it is unlikely, that the currency pair could extend gains due to the resistance cluster formed by the 55-, 100– and 200-hour SMAs, as well the weekly PP in the 1.2462/1.2492 range.

If the given resistance holds, it is expected, that the rate could reverse south and target the support level formed by the weekly S1 and the Fibo 0.00% circa 1.2400. Otherwise, the pair could maintain its consolidation.

During the previous trading session, the USD/JPY currency pair traded sideways around the psychological level at 108.20.

During Wednesday's morning, the pair was testing the support cluster formed by the 55-, 100– and 200-hour SMAs, as well the weekly and monthly PPs in the 107.78/108.05 range.

If the given support holds, it is expected, that a reversal north could occur in the nearest future. Note, that the exchange rate is pressured by the weekly R1 a 108.35. Otherwise, the rate could target the psychological level at 107.60.

Yesterday, the XAU/USD exchange rate tried to breach the short-term ascending channel south. During today's morning, the rate was testing the resistance of the 100-hour SMA at 1,426.59.

From a theoretical point of view, it is expected, that a reversal north should occur in the nearest future. Also, note, that the rate is supported by the 55– and 200-hour SMAs, currently located circa 1,420.00.

On the other hand, if the given moving averages hold, it is likely, that gold could maintain its consolidation against the US Dollar.

The US dollar index is heading strongly upwards at a new seven-week high of 97.45 after the jump above the 50-day simple moving average (SMAs), posting remarkable gains. However, the stochastic oscillator seems to be overbought as it is trying to turn lower, while the RSI is flattening in the positive territory but remains above the uptrend line.

Should the price stretch north the two-year high of 98.25 could come into focus. If the buying interest extends, attention could then turn to the 98.70 resistance barrier, taken from the minor low in March 2017.

Alternatively, in case of a failed attempt to gain more ground, the price could return to the 97.20 support level. If traders continue to sell the index, the price could decline until the 50- and then at the 200-SMAs currently at 96.88 and 96.54 respectively before touching 96.27. More losses could send the index towards the 23.6% Fibonacci retracement level of the upward movement from 88.10 to 98.25 near 95.84.

In the long-term, the market retains the bullish structure as it has been trading within an ascending sloping channel since June 2016.

GBPCAD's prevailing downtrend came to a halt on July 16, as price printed a morning star pattern. Potential reversal also is implied from the candles after the pattern, indicating uncertainty to the direction. Concurring we can see that the Tenkan-sen average has moved horizontally.

As momentum evaporates the MACD moves above the red trigger line in the negative zone, with the RSI above 30 level becoming slightly flat. The ADX still indicates a strong trend. The 50-, 100- and 200-day simple moving averages (SMAs) still confirm bearish bias.

A short-term pullback confirmed by more bullish candles could see the 23.6% Fibonacci retracement of the down move from 1.7727 to 1.6145, of 1.6517 be tested, before near resistance of 1.6590. If a keep on upwards unravels, a visit to the 50-SMA, around 1.6725 would play out before the 38.2% Fibo of 1.6750. A more definitive push north would need to fracture the resistances and Fibonacci levels, before the 61.8% Fibo of 1.7120 can be violated for a bullish bias shift.

The enduring negative scenario would see the 100-SMA cross the 200-SMA downwards and have price penetrate the recently formed 22-month low of 1.6145. If the bearish bias dominates again, the seven-and-a-half-month low of 1.5830 would be the next target.

Overpowering bearish bias seems to be here to stay, but traders need to be aware of a short-term pullback, and only a break above the 1.7120 resistance will turn the bias positive.

After a solid start into the week, global equities took a breather on Wednesday, at least during the European morning, as earning season is in full swing. Investors are impatiently waiting the publication of a fresh batch of earnings, including At&T, Boeing and Caterpillar. There is therefore a good chance to see increased market volatility especially for the Dow Jones index. At the time of writing, S&P 500 futures were down 0.30%, the Nasdaq fell 0.55%, while European indices were treading water despite positive surprise from Peugeot (+0.78), Daimler (+0.75%) and even Deutsche Bank (-3.75%). In Switzerland, most of companies reported better-than-expected results with Lonza rising 2% and Sulzer up +1.30%. EFG slid -8.27% amid net income contracted almost a third over the last twelve months. The SMI is down 0.10%.

In the FX market, the Australian dollar was the worst performer as it gave up another 0.35% against the buck. AUD/USD fell from $0.7005 to $0.6980 during the Asian session as the case for another rate cut by the RBA in August builds up. Since 19 July, the Aussie dropped 1.50% against the buck. We anticipate further loss for the Australian dollar, with the 0.69 threshold as next target.

The greenback continued to rally ahead of next week FOMC meeting. The continuous appreciation of the dollar suggests that investors anticipates that other central banks will act more aggressively than the Fed when it comes to cutting rates and expanding quantitative easing. Indeed, the ECB that is holding its July meeting tomorrow is expected to restart quantitative easing and to cut rates eventually. According to the money market, there is a 43% chance of a 10bps cut to the deposit rate tomorrow. This probability rises to 82% for September, 89% for October and 92% for December. Accordingly, the single currency kept moving lower with EUR/USD hitting a fresh multi-month low of 1.1127, down 0.12% on the session. We expect the ECB to come out much more dovish than the Fed would at its meeting next week. Against such a backdrop, the buck should continue to appreciate.