Sample Category Title

Daily Pivots: (S1) 0.9800; (P) 0.9824; (R1) 0.9841; More...

Intraday bias in USD/CHF remains mildly on the downside. Fall from 0.9951 should extend to retest 0.9695 low first. Break will resume whole decline from 1.0237. On the upside, break of 0.9908 resistance will likely resume the rebound from 0.9695, through 0.9951, to 1.0014 resistance.

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.

Daily Pivots: (S1) 1.2467; (P) 1.2512; (R1) 1.2548; More....

GBP/USD stays in range of 1.2382/2579 and intraday bias remains neutral for the moment. Further fall is in favor as long as 1.2579 resistance holds. Sustained break of 1.2391 key support will resume larger down trend for 61.8% projection of 1.4376 to 1.2391 from 1.3381 at 1.2154 next. Though, break of 1.2579 will indicate short term bottoming and bring stronger rebound back to 1.2783 resistance. In this case, consolidation from 1.2391 would extend with another rise, towards 1.3381 resistance, before completion.

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.

EURCAD recovered slightly to the upside after it reached a fresh 22-month low around the 1.4600 psychological mark last week. However, the pair dived aggressively from the 1.4880 – 1.5210 trading range, extending bearish actions below the short-term moving averages in the daily timeframe. The RSI and the MACD are lacking direction as both are moving in negative area with weaker momentum than before, suggesting overstretched market.

If the pair drops beneath the multi-month trough could move towards the strong support zone of 1.4440 – 1.4490, taken from the lows on September 2017.

Should an upside reversal take form, immediate resistance would likely come from the 20-SMA, which overlaps with the 1.4750 barrier. A break above this line, the pair could send the pair towards the 1.4880 obstacle and the 40-SMA.

Overall, both the short- and medium-term outlooks are currently looking bearish, though caution is warranted in the near-term as there are signs of an oversold market.

Daily Pivots: (S1) 1.1189; (P) 1.1235; (R1) 1.1268; More...

Intraday bias in EUR/USD remains neutral for the moment as it's staying in range of 1.1193/1285. On the downside, break of 1.1193 will resume the fall from 1.1412 to retest 1.1107 low. On the upside, above 1.1285 resistance will turn bias back to the upside for 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.

The forex markets are generally mixed today in rather quiet trading. Dollar lacks a clear direction despite rumors that US and China trade teams are going finally meet to resume negotiations. Canadian Dollar is currently the weakest one, followed by Sterling, and then Yen. On the other hand, New Zealand Dollar is leading Australian higher. Yet, risk appetite is not too apparent in other financial markets.

Technically, Sterling weakens again today, ahead of near term resistance against both Euro and Dollar. The case of bullish reversal is not happening yet. EUR/USD and USD/CAD are stuck in familiar range for now. Should Dollar strengthens in US session, 1.1193 support in EUR/USD and 1.3143 in USD/CAD will be the focuses.

In other markets, US stocks open mildly higher with DOW up 0.15% at the time of writing. In Europe, FTSE is up 0.21%. DAX is up 0.44%. CAC is up 0.21%. German 10-year yield is down -0.0143 at -0.335. Earlier in Asia, Nikkei dropped -0.23%. Hong Kong HSI dropped -1.37%. China Shanghai SSE dropped -1.27%. Singapore Strait Times dropped -0.61%. Japan 10-year JGB yield rose 0.0005 to -0.135.

US trade delegation said to visit China for negotiations next week

A Hong Kong newspaper SCMP reported today that US trade delegation will likely visit China next week, for the first face-to-face meeting since G20. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will be on the US side as expected. Vice Premier Liu He will lead the Chinese team.

According to unnamed source, the initial arrangements for the meeting would include exemptions to 110 Chinese products, including medical equipment and key electronic components, from import tariffs. on the other hand, several Chinese companies would finally start buying American agricultural products.

EU ready to work with any new UK PM

European Commission spokesperson Natasha Bertaud said that EU is ready to work with "any new prime minister of the United Kingdom". Boris Johnson, who's favorite to take over from Theresa May, has repeatedly said he's prepared for a no-deal Brexit.

Also, the commission reiterated that it's ready to "engage with the member states that would be most affected" by no-deal Brexit. The measures include programs for emergency support. Additionally, contingency plans include a scenario in which "the UK also fails to pay what is envisaged" under the current EU budget.

NIESR: 25% chance UK in technical recession already, 40% chance of no-deal Brexit

According to the latest "prospect for the UK economy", NIESR said there is around a one-in-four chance that the country is already in a "technical recession". The outlook beyond the October 31 Brexit date is "very murky indeed" with possibility of a "severe downturn" in case of a disorderly no-deal Brexit.

The think thank also assign a 40% chance of no-deal Brexit, versus 60% for deal/delay. Even if a no-deal Brexit is avoided, the economy is forecast to growth at around only 1% in 2019 and 2020, as "uncertainty continues to hold back investment and productivity growth remains weak".

Most economists expect RBA to stand pat in August

According to a Reuters' poll, 39 of 40 surveyed economists surveyed over the past week expect RBA to keep interest rate unchanged at 1.00% at the August 6 meeting.

By the end of the year, 13 of 40 expect RBA to be on hold through this year. 25 expect another rate cut to 0.75% by year-end. Only two banks, Standard Chartered and Goldman Sachs, predict two cuts to 0.50%.

RBA delivered two back-to-back cuts in June and July to 1.00%. The central bank's research indicates such rate cut would boost GDP growth by 0.25-0.40% over two years. However, inflation would be lifted by 0.1% only.

Japan Abe pledges to take more aggressive and bold economic measures than ever

Japanese Prime Minister Shinzo Abe's ruling coalition kept a solid majority in the upper house election. He said today that "based on a stable political basis, the Abe cabinet will take more aggressive and bold economic measures than ever."

Abe said "uncertainty remains over the global economic outlook such as trade frictions and Britain's exit from the European Union… We'll respond to downside risks without hesitation and take flexible and all possible steps."

The Japanese government has designated JPY 2T in stimulus measures to offset the impact of the planned sales tax hike, from 8% to 10% in October. Abe also noted "we will underpin domestic consumption which accounts for the bulk of the economy by taking sufficient measures."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1189; (P) 1.1235; (R1) 1.1268; More...

Intraday bias in EUR/USD remains neutral for the moment as it's staying in range of 1.1193/1285. On the downside, break of 1.1193 will resume the fall from 1.1412 to retest 1.1107 low. On the upside, above 1.1285 resistance will turn bias back to the upside for 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.

Economic Indicators Update

A Hong Kong newspaper SCMP reported today that US trade delegation will likely visit China next week, for the first face-to-face meeting since G20. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will be on the US side as expected. Vice Premier Liu He will lead the Chinese team.

According to unnamed source, the initial arrangements for the meeting would include exemptions to 110 Chinese products, including medical equipment and key electronic components, from import tariffs. on the other hand, several Chinese companies would finally start buying American agricultural products.

European Commission spokesperson Natasha Bertaud said that EU is ready to work with "any new prime minister of the United Kingdom". Boris Johnson, who's favorite to take over from Theresa May, has repeatedly said he's prepared for a no-deal Brexit.

Also, the commission reiterated that it's ready to "engage with the member states that would be most affected" by no-deal Brexit. The measures include programs for emergency support. Additionally, contingency plans include a scenario in which "the UK also fails to pay what is envisaged" under the current EU budget.

No summer lull just yet

We may have entered into summer holiday territory but this week is going to be anything but a lull, with earnings, major data, a new UK Prime Minster and a central bank decision guaranteed to spice things up.

That said, Monday is unlikely to be a knockout, with only a few companies due to report and the data calendar looking equally bare. Instead, Monday may be a day for reflection on where we stand and preparation for what lies ahead. We've not been short of headlines recently which has kept investors on their toes.

Much of the attention recently has been on the Fed, with stock markets it seems heavily reliant on the central bank to cut interest rates multiple times this year. Bullard further attempted to pare back expectations for a 50 basis point cut next week, claiming he would like to cut by 25, adding that he sees no need for 50. Given that he's among the most dovish policy makers and possible the most dovish voter on the FOMC currently, it's surprising that a 50 basis point cut is still 20% priced in.

Is gold poised for a correction?

Attempts by the New York Fed to clarify John Williams' comments late last week, combined with those made by Bullard on Friday, have successfully pared back expectations for a 50 basis point cut next week – although they still remain high – which in turn has helped the dollar rebound and pulled gold off its highs.

Gold broke above $1,450 last week for the first time in more than six years, following Williams' initial comments. The question now is how much more is to be priced in and whether in the near-term, gold has had its fun. Longer term, the environment remains bullish for gold but a lot has now been priced in. $1,400 now looks a very interesting level to the downside, with recent highs obviously then notable above.

Gold Daily Chart

GBP back in the red ahead of PM announcement

Sterling is once again in the red ahead of tomorrow's expected announcement that Boris Johnson will replace Theresa May as Prime Minister. Johnson has been the considerable front-runner since day one and there is little doubt in most people's minds that he will be declared the winner and new PM on Tuesday.

Given his views on Brexit and no-deal in particular, this has not been great news for the pound but with much of it now priced in, sterling may see some reprieve in the coming weeks. Although, the closer we get to 31 October, if no-deal looks likely, any gains may quickly unravel.

EURGBP Daily Chart

Further escalation in the gulf pushes oil higher

Oil prices are around 2% higher at the start of the week following another escalation in the Persian Gulf as the Iranian Revolutionary Guard seized a British-flagged tanker, an act clearly linked to the UK's decision to seize a tanker carrying Iranian oil a couple of weeks ago. This is just the latest in a series of acts in recent weeks that have heightened tensions, primarily between the US and Iran, and raised the risk of a larger conflict.

So far, that has managed to be avoided, probably because neither side wants to be the one that dramatically escalates the situation but traders are clearly a little on edge due to the importance of the passage for global oil supplies. Oil prices haven't risen too much yet but if the situation deteriorates further, we should possibly brace for higher prices.

Brent Daily Chart

The Turkish lira remains in defensive mode for the second day as dollar bounced on lowered expectations for Fed's 0.5% rate cut.

The pair dipped to 5.5977 on Friday, to cover the gap from 8 July when lira fell sharply after the CBRT governor was fired and approached key supports at 5.5828 (4 July low), 5.5740 (Fibo 61.8% of 5.1595/6.2445) and 5.5672 (200DMA).

Lira needs clear break here to signal fresh strength and extension of rally from its 2019 low at 6.2445.

Initial resistance lays at 5.6907 (20DMA) but stronger bullish signal can be expected on extension above 100DMA (5.7629).

The Central Bank of Turkey meets on Thursday, with market expectations for 1% - 5% rate cut (2.5% cut is seen as likely scenario) as traders expect rates to fall to 15%-20% levels by the end of the year (from current 24%) to come more in line with inflation (currently at 15.7%).

Res: 5.6907, 5.7337, 5.7629, 5.7845
Sup: 5.6411, 5.5977, 5.5828, 5.5740

Notes/Observations

• Big week for central bank policy meetings (ECB and Turkey as highlights) with markets anticipating how much and how fast they might ease policy (Note: Fed and BOJ decision next week)
• Iran remains in focus as confrontations occur in the Strait of Hormuz; Iranian forces recently seize UK-flagged tanker in Omani territorial waters

Asia:

• Japan Upper House Election saw the ruling LDP-led coalition take 137 of 245 seats but fell short of super majority needed for constitutional reform
• Hong Kong police fired tear gas and rubber bullets as protests against extradition bill entered 7th week; hundreds of armed pro-Beijing men attacked protesters, journalists, and lawmakers in subway stations and cars

Europe/Mideast:

• Italy coalition partners (League and 5-Star) said to be gearing up for a showdown this week to determine if the government will collapse
• Chancellor of the Exchequer Hammond (Fin Min) confirmed that he intended to resign if Boris Johnson became Prime Minister as he would not wait to be sacked by new PM. Justice Sec Gauke confirmed he'll resign from Cabinet on Wednesday (July 24th)
• Fitch affirmed Germany sovereign rating at AAA; outlook stable

Americas:

• Fed officials said to have signaled a 25bps cut is likely at June meeting; officials view 25bps cut as sufficient given US economy. The rate cut viewed as insurance against a sharper slowdown

Energy:

• UK ministers said to be planning to put sanctions on the Iran regime. Foreign ministry to announce it would freeze Iranian assets after tanker was seized

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.10% at 387.64, FTSE +0.39% at 7,538.10, DAX +0.23% at 12,288.23, CAC-40 +0.14% at 5,560.14, IBEX-35 +0.09% at 9,178.75, FTSE MIB +0.11% at 21,665.50, SMI -0.13% at 9,924.50, S&P 500 Futures +0.22%]
• Market Focal Points/Key Themes: Equities European Indices trade mostly higher, following lower Asian Indices and higher US futures. On the corporate front shares of Dutch trade Philips trades higher following a top and bottom line beat and affirmed outlook; Julius Baer also trades higher as profits came in ahead of expectations, with Learning Technologies group, Mensch & Maschine Software, Sthree and Ascential among other gainers following earnings and trading updates. Meanwhile Meyer Burger Tech declines sharply following preliminary earnings which swung to negative territory and the launch of a strategy review, whilst Petra Diamonds also declines as the company provided a revenue update and initiated FY20 guidance. Elsewhere Idox, Modern times Group and Yellow cake are among other names declining on earnings. In other news Ted Baker gains on reports that founder and largest shareholder Ray Kelvin is seeking support for taking the company private, while Clariant trades higher following the divestiture of its Healthcare packaging unit in the US for CHF308M, with Amerisur Resources gaining as Maurel et Prom makes an offer to acquire the company, which was initially rejected on valuation grounds. Looking ahead notable earners include Halliburton, Lennox International, RPM International and GNC Holdings among others.
• Consumer discretionary: Ted Baker [TED.UK] +13.5% (Founder mulling PE buyout support), Ascential [ASCL.UK] +3% (earnings; divestment)
• Financials: Berkeley Group [BKG.UK] -1% (Chairman sells share), Metro Bank [MTRO.UK] +2% (responds to press speculation), Coface [COFA.FR] -3% (Nataxis statement)
• Healthcare: Bayer [BAYN.DE] -1% (supervisory board comments), Koninklijke Philips [PHIA.NL] +4% (earnings)
• Industrials: Meyer Burger Technology [MBTN.CH] -18% (earnings; contract)
• Technology: Learning Technologies [LTG.UK] +16% (trading update)
• Materials: Petra Diamonds [PDL.UK] -4% (earnings)

Speakers

• UK Foreign Office's Duncan resigns
• National Institute of Economic and Social research (NIESR Think Tank): sees 25% change that UK is already in a technical recessio
• Hong Kong Chief Exec Lam: Strongly condemned attacks in Yuen Long; protests around the China Liaison office a challenge to national sovereignty
• China Foreign Ministry spokesperson Geng Shuang: Some radical Hong Kong protesters' behavior violated the bottom line of one country two systems

Currencies/Fixed Income

• USD: Trading was firmer in the USD index as market participants dial back expectations for a 50bps Fed rate cut later this month. The index may get a good break of the inverse head and shoulders that has formed, should the Fed only cut 25 basis points.
• ECB: The Euro will focus on Draghi who could signal more easing before his term ends in Oct. Reports circulated that ECB planned to resume government bond purchases by Nov. EUR/USD softer by 0.1% at 1.1215 area.
• GBP: currency was softer ahead of the Conservative Party leadership ballot closing, with at least two government ministers preparing to resign should Boris Johnson emerge victorious and become prime minister. The week is quiet for economic data, but expect there to be volatility with comments regarding Brexit and new PM.

Economic Data

• (NL) Netherlands July Consumer Confidence Index: 2 v 0 (flat) prior
• (NL) Netherlands Jun House Price Index M/M: 0.4% v 0.4% prior; Y/Y: 6.9%e v 7.2% prior
• (NL) Netherlands May Consumer Spending Y/Y: 2.4% v 1.8% prior
• (CH) Swiss Jun M3 Money Supply Y/Y: 3.7 v 3.4% prior
• (MY) Malaysia Mid-July Foreign Reserves: $103.3B v $102.7B prior
• (JP) Japan Jun Convenience Store Sales Y/Y: 0.0% v 1.7% prior
• (CH) Swiss Weekly Total Sight Deposits (CHF): 579.5B v 579.0B prior; Domestic Sight Deposits: B v 477.5B v 480.1B prior
• (TW) Taiwan Jun Export Orders Y/Y: -4.5% v -2.3%e
• (TW) Taiwan Jun Unemployment Rate: 3.7% v 3.8%e
• (HK) Hong Kong Jun CPI Composite Y/Y: 3.3% v 2.6%e
• (IS) Iceland July CPI M/M: -0.2% v +0.4% prior; Y/Y: 3.1% v 3.3% prior

Fixed Income Issuance

• None seen

Looking Ahea

• (IL) Israel Central bank (BOI) July Minutes
• (IL) Israel Jun Leading "S" Indicator: No est v 0.1% prior
• (AR) Argentina Jun Budget Balance (ARS): No est v 26.0B prior
• (MX) Citibanamex Survey of Economists
• 05:30 (SL) Sri Lanka Jun National CPI (NCPI) Y/Y: No est v 3.5% prior
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 05:30 (DE) Germany to sell €2.0B in 6-month BuBills
• 05:30 (BE) Belgium Debt Agency (BDA) announcement for upcoming OLO auction; to sell €1.6-2.0 in 2029 and 2033 OLO bonds
• 06:00 (IL) Israel May Manufacturing Production M/M: No est v 2.9% prior
• 06:00 (IE) Ireland Jun PPI M/M: No est v 0.3% prior; Y/Y: No est v 6.3% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (IL) Israel to sell bonds
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Jun Chicago Fed National Activity Index: +0.10e v -0.05 prior
• 08:30 (CA) Canada May Wholesale Trade Sales M/M: 0.5%e v 1.7% prior
• 09:00 (FR) France Debt Agency (AFT) to sell combined €3.8-5.0B in 3-month, 6-month and 12-month Bills
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 15:00 (CO) Colombia May Economic Activity Index (Monthly GDP) Y/Y: 3.2%e v 2.1% prior