Sample Category Title

Pivot (invalidation): 1.3105

Our preference Long positions above 1.3105 with targets at 1.3135 & 1.3155 in extension.

Alternative scenario Below 1.3105 look for further downside with 1.3090 & 1.3070 as targets.

Comment The RSI lacks downward momentum.

Pivot (invalidation): 0.9805

Our preference Long positions above 0.9805 with targets at 0.9860 & 0.9875 in extension.

Alternative scenario Below 0.9805 look for further downside with 0.9780 & 0.9760 as targets.

Comment The RSI calls for a new upleg.

Pivot (invalidation): 107.80

Our preference Long positions above 107.80 with targets at 108.10 & 108.35 in extension.

Alternative scenario Below 107.80 look for further downside with 107.65 & 107.50 as targets.

Comment The RSI calls for a new upleg.

Pivot (invalidation): 1.2485

Our preference Short positions below 1.2485 with targets at 1.2455 & 1.2435 in extension.

Alternative scenario Above 1.2485 look for further upside with 1.2500 & 1.2520 as targets.

Comment The RSI is bearish and calls for further decline.

Pivot (invalidation): 1.1225

Our preference Short positions below 1.1225 with targets at 1.1180 & 1.1160 in extension.

Alternative scenario Above 1.1225 look for further upside with 1.1240 & 1.1255 as targets.

Comment The RSI is bearish and calls for further downside.

The GBP/USD made a bearish bounce again at the resistance zone (orange box) and 23.6% Fibonacci retracement level of wave 4 vs 3. A bullish bounce could confirm a potential inverted head and shoulders reversal chart pattern (green box) and either indicate a potential triangle chart pattern within the wave 4 or a larger bullish zigzag pattern up to the 38.2% Fibonacci level. Unless price breaks above the 38.2% Fib, the GBP/USD seems ready for a downtrend continuation after a lengthy correction although Brexit news and the announcement of the next UK prime minister could create volatility.

GBP/USD seems to be building a corrective wave B (blue) after a strong bullish up in wave A (blue). For the moment, a bullish bounce at the Fibonacci levels of wave B vs A seems the most likely path of least resistance. This remains valid unless price manages to break below the bottom and 100% Fib level at around 1.2382.

General Trend:

• Markets cautiously optimistic on news that US trade negotiators could visit China next week for their first face to face meeting since the G20. Trump agreed to making a decision on Huawei
• NZ$/USD fell 0.3% after RBNZ said that they were looking at unconventional policy strategies, but remain at a very early stage
• China PBOC skips the use of reverse repos and uses both MLF and Targeted MLF (TMLF) instead
• Trump and Congressional leaders reach a deal on debt ceiling that will increase spending in both non-defense and defense spending, deal will see debt limit extended for the remainder of Trump’s presidency (2-years), but be re-imposed in 2021
• BOJ Gov Lee warns that if Japan situation worsens will have to consider a response, active fiscal policy is needed, possibly will cut 2019 GDP outlook again
• South Korea keeping an eye on North Korea’s new submarine, which leader Kim was photographed inspecting

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• (AU) Australia RBA Assistant Gov Kent: A$ may be even higher if it werent for RBA rate cut; Australia is a long way away from unconventional policy - Q&A
• (NZ) Reserve Bank of New Zealand (RBNZ): Looking at unconventional policy strategies, unconventional policy work is at a "very early stage"
• (AU) Australia RBA Assistant Gov Kent comments on Committed Liquidity Facility: Many banks overseas faced significant liquidity problems having not paid enough attention to their liquidity management in the lead up to the crisis
• OZL.AU Reports Q2 production: Copper 28.5Kt, +5.1% y/y; Gold 27.1K oz, -3.7% y/y
• BLK.AU To sell package of tenements and other key assets for the Lake Way Project to Salt Lake Potash for A$10.0M cash
• (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: 116.3 v 115.9 prior
• (AU) Australia Foreign Exchange Committee Semi-Annual Turnover Report: Avg $119.1B/day in April

Japan

• Nikkei 225 opened flat
• 7238.JP Looking at various options for operations, considering closing 1 domestic plant and 2 in the US, cutting 3.8K jobs - Japan press
• (JP) Japan Fin Min Aso: Believe there is support for sales tax increase, election results showed more support than 3 years ago
• (JP) Japan Cabinet Sec Suga: Former Top FX Official Asakawa has asked to be special advisor to cabinet
• (JP) Japan Trade Min Seko: Japan to tell WTO its South Korean curbs don't break the rules
• (JP) Japan MoF sells ¥399.6B v ¥400B indicated in 0.50% 40-year JGBs, highest accepted yield 0.425% v 0.535% prior, bid to cover: 3.02x v 3.87x prior
• (JP) Japan PM Abe: To take plenty of measures to handle the sales tax increase in Oct; biggest challenge is low birthrate and aging - Speaking after upper house elections saw his coalition retain control (yesterday)

Korea

• Kospi opened +0.1%
• (KR) Bank of Korea (BOK) Gov Lee: Could cut 2019 GDP outlook if trade dispute with Japan gets worse, will have to consider a response if conditions worsen - speaking to parliament
• 005490.KR Reports Q2 (KRW) Net 681B v 619Be; Op 1.1T v 1.1Te; Rev 16.3T v 16.3Te
• (KR) US President Trump: There was "very positive" correspondence with North Korea recently; will meet for nuclear talks when N. Korea is ready – Yonhap
• 000270.KR Reports Q2 (KRW) Net 505.4B v 331.9B y/y; Op 533.6B v 352.6B y/y; Rev 14.5T v 14.1T y/y
• (KR) South Korea issues rebuttal to Japan's claim that South Korea has a lax system of control of goods that can be diverted for military purposes – Yonhap
• (KR) South Korean low budget airlines have reduced routes to Japan citing slow demand - Korean Press
• (KR) South Korea reports Russia military aircraft entered South Korea air space, fired warning shots at the plane - Korean press

China/Hong Kong

• Hang Seng opened +0.1%; Shanghai Composite opened flat
• (CN) US trade war negotiators said to likely to visit China next week for first face-to-face talk since G20 - financial press
• (CN) China Ministry of Industry and Information Technology (MIIT): An arduous effort will be needed to reach 2019 industrial target of 5.5-6.0%, due to H2 economic uncertainty - financial press
• (CN) CHINA PBOC CONDUCTS CNY297.7B V CNY267.4B PRIOR 1-YEAR TARGETED MEDIUM-TERM LENDING FACILITY (TMLF) AT 3.15% V 3.15% PRIOR (3RD USE OF TMLF); AND OFFERS CNY200B IN 1-YEAR MEDIUM TERM LENDING FACILITY (MLF) V CNY200B PRIOR AT 3.3% V 3.3% PRIOR; NET DRAINS CNY164.3B
• (CN) China PBOC sets yuan reference rate: 6.8818 v 6.875 prior
• (CN) China PBoC Open Market Operation (OMO): Skips v injects CNY50B in 7-day reverse repos prior; Net CNYB injected v CNY50B injected prior
• HUAWEI.CN Denies press reports: Do not have any business presence in North Korea
• (CN) China new Science and Technology Innovation Board, STAR, (similar to Nasdaq) falls on its second day of trade
• (CN) China CIRC orders 20 property insurers to cease using certain products correct mistakes; bans 11 insurers from new property products for 3-6 months
• (HK) Hong Kong Chief Exec Lam: Strongly condemns attacks in Yuen Long; protests around the China Liaison office a challenge to national sovereignty - press conference; govt to make attempt to arrest attackers

Other

• (SG) Analysts note that depending on upcoming June inflation data Singapore Central Bank (MAS) may easy policy ahead of semi-annual meeting in October
• (PH) Philippines Central Bank Chief Diokno: Further monetary easing depends on how strong growth is; BSP is prudent in calibrating monetary policy
• (SG) Singapore Jun CPI M/M: -0.2% v -0.1%e; Y/Y: 0.6% v 0.8%e

North America

• INTC Apple reportedly in late stage discussions to buy Intel smartphone modem chip assets for $1B – press
• (US) Pres Trump: Debt ceiling deal has been reached – tweet; Trump, Pelosi and other congressional leaders agree to raise spending on both defense and non-defense programs over the next 2-years

Europe

• (GR) New Greece conservative government won confidence vote related to economic policy – press
• SAN.ES Reports Q2 Net €1.39B v €1.3Be, Rev €12.4B v €12.0B y/y
• UBSG.CH Reports Q2 Net $1.39B v $1.38B y/y, Adj Pretax $1.79B v $1.82B y/y, Rev $7.53B v $7.64B y/y

Levels as of 01:20ET

• Hang Seng +0.1%; Shanghai Composite -0.0%; Kospi +0.4%; Nikkei225 +1.1%; ASX 200 +0.5%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.0%, Dax +0.4%; FTSE100 +0.4%
• EUR 1.1190-1.1211; JPY 107.83-108.19; AUD 0.7018-0.7037; NZD 0.6729-0.6761
• Commodity Futures: Gold -0.7% at $1,417/oz; Crude Oil 0.0% at $56.21/brl; Copper +0.2% at $2.72/lb

Daily Pivots: (S1) 134.30; (P) 134.70; (R1) 134.98; More...

GBP/JPY is staying in consolidation from 133.85 and intraday bias remains neutral. In case of another recovery, upside should be limited by 136.05 resistance to bring fall resumption. Break of 133.85 will extend the decline from 148.87 to retest 131.51 low. Though, break of 136.05 will indicate short term bottoming and bring stronger rebound to 137.78 resistance.

In the bigger picture, medium term fall from 156.59 (2018 high) is still in progress. Break of 131.51 will target 122.36 (2016 low). Structure of such decline is corrective looking so far, arguing that it's just the second leg of consolidation from 122.36. Thus, we'd expect strong support from 122.36 to contain downside to bring reversal.

Market movers today

Today's main even is the announcement around midday of the next UK Conservative Party leader, who is also going to succeed Theresa May as Prime Minister. Everyone expects it to be Boris Johnson. While Boris Johnson is more pro-Brexit than Theresa May, the arithmetic in the House of Commons is unchanged making it difficult for him to force a no-deal Brexit despite it being the default option from a legal point of view. Noticeably, pragmatic Conservative Philip Hammond has said he will step down as Chancellor if Boris Johnson wins and has not ruled out he will bring down his own government if necessary to prevent a no-deal Brexit.

In terms of economic data releases it is a quiet day. To highlight a few, the preliminary euro area consumer confidence indicator for July, the US Richmond Fed manufacturing index for July and US existing home sales are due today at 16:00.

Today IMF is releasing an update to its World Economic Outlook.

The US corporate earnings season continues today .

This week's main event is the ECB meeting, where we expect tweaks to the forwarding guidance setting the scene for a comprehensive easing package to be unveiled in September, see ECB preview: Warming up for Draghi's Grande Finale, 22 July.

Selected market news

Late yesterday, US President Trump announced a bipartisan budget deal was finalised. This makes it possible for the House to pass the necessary legislation before its summer recess starts on Friday while the Senate will vote on it next week. As it is bipartisan, we think it would make it through congress despite some concerns among both Republicans and Democrats. The deal includes two important things. First, the debt limit will be suspended until 31 July 2021 (i.e. after the presidential election), which means the US Treasury can soon start issuing bonds in a normal fashion again and also rebuild its cash buffer. Second, the automatic reduction of the so-called spending caps, which should have kicked in on 1 October and would have reduced total government spending by more than USD100bn, has been cancelled. This means fiscal policy will not go from being very expansionary to very contractionary but instead become neutral. Despite the agreement on overall funding, there is still a risk of a government shutdown by 1 October if Congress has not passed spending bills.

In Europe, risk is increasing that the river Rhine must close for sea transport in a few weeks , Bloomberg reports. The combination of little rainfall and soon a heatwave means that the water level risks falling below 50cm (already fallen to around 150cm). Last year, the low water level in the Rhine was viewed by many as a contributing factor to the economic slowdown in Europe despite companies' attempt to activate contingency plans by transporting goods by train or trucks (which, however, is much more expensive) and stockpiling.

Daily Pivots: (S1) 120.75; (P) 120.96; (R1) 121.12; More....

EUR/JPY is staying in consolidation above 120.78 and intraday bias remains neutral first. Larger decline from 127.50 could be ready to resume. Firm break of 120.78 will confirm and target 118.62 low. On the upside, break of 122.32 resistance will extend the consolidation from 120.78 with another rise towards 123.35 resistance instead.

In the bigger picture, down trend from 137.49 is still in progress with the cross staying inside long term falling channel. Break of 118.62 will extend the fall to 109.48 (2016 low). On the upside, break of 127.50 resistance is needed to be the first sign of medium term reversal. Otherwise, outlook will remain bearish in case of strong rebound.