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Daily Pivots: (S1) 1.2464; (P) 1.2511; (R1) 1.2596; More....

Intraday bias in GBP/USD remains neutral at this point. Further decline is still in favor with 1.2579 resistance intact. Sustained break of 1.2391 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 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.

Daily Pivots: (S1) 0.9785; (P) 0.9838; (R1) 0.9868; More...

Intraday bias in USD/CHF remains mildly on the downside for retesting 0.9695 low. Firm break there will resume larger fall 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) 107.00; (P) 107.51; (R1) 107.81; More...

No change in USD/JPY's outlook, corrective recovery from 106.78 should have completed at 108.99, after rejection by 55 day EMA. Further fall would be seen to 106.78 first. Decisive break there will resume whole decline from 112.40 and target 104.69 low. On the upside, break of 108.37 will extend the correction from 106.78 with another rise, possibly through 108.99 resistance.

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.

Next week tech earnings pick up speed and expectations are low for results for companies in the S&P 500.  Year-on-year growth is expected to decline 11.2%, quite the contrast to the financial, who reported this week and delivered earnings growth.  The trade war has weighed on tech stocks and multi-nationals, keeping investors nervous we could see drastic cuts in guidance next week.  After yesterday’s close, Microsoft delivered impressive earnings, which emphasized their success with their cloud strategy.  The tech-giant’s results have initially eased some concerns of the effects of the trade-related slowdown.

The key driver however for US stocks and the dollar remain the Fed.  Yesterday, NY Fed President John Williams noted that the Fed should be aggressive when confronting an adverse outlook.  Markets quickly increased the odds for a 50-basis rate cut at the end of the month.  A few hours later, a New York Fed spokesperson had to issue a correction and stated that Fed Williams’s speech was not about potential policy action but a reflection of research.  We are quickly approaching the blackout period and today we could get more clarity from two doves, Bullard and Rosengren.

Italy/Euro

Euro weakness is stemming from a broadly stronger dollar and political concerns that Italy’s government could collapse.  Italy’s de facto leader Salvini signaled he won’t resign immediately.  Tensions are growing between the anti-establishment 5-Star movement and the far-right nationalist.  Fresh elections may not happen over the weekend, but they will most likely happen soon.  A steep decline with the German PPI report, the largest monthly slide since early 2016 did not help the euro.

CAD

The Canadian dollar tumbled after Canadian retailers posted a surprising drop in sales in the month of May.  Consumers reduced expenditures on clothing, alcohol and food.  The Canadian dollar weakened over half a percentage point as markets have been used to a recent string of better than expected Canadian data.  Rate cut bets by the end of the year for the Bank of Canada also popped following the dismal sales reading, with markets now seeing a 60% chance, up from just under 50% before the release.

Oil

President Trump stopped oil’s slide when he reported that the US downed an Iranian drone near the Strait of Hormuz.  Iran refuted Trumps comments and it seems markets got a good reminder that it will be unlikely to see an easy return to the negotiating table for Trump and the Iranians.  Crude prices have been weighed heavily on falling demand concerns and as production returns from both the Gulf of Mexico and the Russian contamination issue, but that could be short-lived once markets solely focus on the beginning of the Fed’s easing cycle.

Oil could see major support from the Fed’s easing cycle, in 1995 oil prices doubled when the Fed lowered interest rates.

Gold

Gold prices rallied after President Trump said the US downed an Iranian drone, bursting the bubble of optimistic banter that we could see Iran return to the negotiating table.  Gold is struggling to breakout from its pennant formation and could see some range trading until we get to the Fed’s rate decision at the end of the month.

Bitcoin

Bitcoin pared yesterday’s gain after the G7 warned of serious risks that are coming from Libra and other digital coins.  Thursday saw a huge $1,000 spike that stemmed from short-seller profit taking.  Volatility will remain in place for Bitcoin, but we could see some stabilization for digital coins as the regulatory process will take years to take form.  Facebook’s grilling earlier in the week showed Congressional leaders don’t have the authority to regulate Libra like the Fed can with banks.

Daily Pivots: (S1) 1.3003; (P) 1.3050; (R1) 1.3073; More....

USD/CAD rebounds notably today but stays below 1.3143 resistance. Intraday bias remains neutral for the moment. With 1.3143 intact, further decline is mildly in favor. Sustained trading below 1.3052/68 cluster support should confirm medium term reversal. Deeper decline should then be seen to 1.2781 support next. Nevertheless, break of 1.3143 resistance will confirm short term bottoming and bring stronger rebound.

In the bigger picture, the case of bearish reversal continues to build up. Decisive break of 1.3068 cluster support (38.2% retracement of 1.2061 to 1.3664 at 1.3052) will confirm completion of up trend from 1.2061 (2017 low). Further fall should be seen to 61.8% retracement at 1.2673 next. On the upside, sustained break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685, is needed to confirm resumption of up trend from 1.2061 (2017 low). Otherwise, risk will stay on the downside.

Canadian Dollar drops sharply in early US session after big disappointment from retail sales data. The Loonie is currently trading as the weakest one for today. Euro is following as the second weakest as markets increases bet on ECB rate cut. Money markets are pricing in around 60% of a -10bps ECB cut next week. On the other hand, Dollar is the strongest one for today, but it's mainly paring some of yesterday's sharp fall. Expectation of Fed cut would cap Dollar's rebound.

Technically, EUR/USD is a major focus in US session. It's staying in range of 1.1193/1285 but could have a breakout before weekly close. Similarly, USD/CAD could also breakout from range of 1.3016/3143. EUR/GBP will be another focus and break of 0.8954 minor support will be an early sign of near term bearish reversal.

In Europe, currently, FTSE is up 0.02%. DAX is up 0.09%. CAC is up 0.14%. German 10-year yield is down -0.0115 at -0.318. Earlier in Asia, Nikkei rose 2.00%. Hong Kong HSI rose 1.07%. China Shanghai SSE rose 0.79%. Singapore Strait Times rose 0.50%. Japan 10-year JGB yield dropped -0.0012 to -0.136.

Canada retail sales dropped -0.1%, ex-auto sales dropped -0.3%

Canada retail sales dropped -0.1% mom in May, much worse than expectation of 0.3% mom. Ex-auto sales dropped -0.3% mom, also much worse than expectation of 0.4% mom. Sales were down in 4 of 11 subsectors, representing 39% of retail trade. Sales also dropped in eight provinces.

Released in European session, UK public sector net borrowing rose to GBP 6.5B in June versus expectation of GBP 3.4B. Eurozone current account surplus widened to EUR 29.7B versus expectation of EUR 21.2B. German PPI slowed to 1.2% yoy in June versus expectation of 1.5% yoy.

Chance of no-deal Brexit jumped to highest since Oct 2017

According to a Reuters July 15-18 poll, the median forecasts of no-deal Brexit happening was 30%, up from 25% in June and 15% in May. That's also the highest number since October 2017. Analysts perceive that Boris Johnson is likely to win the Conservative leadership race and get the job of UK Prime Minister. And his rhetoric during the campaign suggests that no-deal Brexit is more than than before.

According to the same poll, the chance of recession was 30% in the coming year and 35% over the new two years, up from June's 25% and 30%. Also, expectation of BoE rate hike also receded and bank rate is forecast to stay at 0.75% until 2021 at the earliest. Only 27 to 76 economists expected a hike before the end of 2020, down from 36 of 69. 9 of 76 are expecting a cut be end-2020, up from 5 of 69 in June.

Jeremy Hunt and Boris Johnson are the two remaining candidates in the leadership race. Winners will be selected by a postal ballot of around 160k Conservative members. Voting will close on July 22 and new leader would be announced on July 23.

Japan CPI core slowed to 0.6%, lowest since July 2017

Japan CPI core (ex-fresh food) slowed to 0.6% yoy in June, down from 0.8% yoy and matched expectations. All items CPI was unchanged at 0.7% yoy, while CPI core-core (ex-fresh food and energy) was also unchanged at 0.5% yoy.

CPI core was the lowest reading since July 2017. No turnaround is expected in the near term. Instead, CPI core could be further dragged down by policy related factors, including mobile phone charges and education costs.

The dim inflation outlook highlights the pressure for BoJ to ramp up monetary stimulus. In particular, both Fed and ECB are expected to loosen up policy again later this week.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3003; (P) 1.3050; (R1) 1.3073; More....

USD/CAD rebounds notably today but stays below 1.3143 resistance. Intraday bias remains neutral for the moment. With 1.3143 intact, further decline is mildly in favor. Sustained trading below 1.3052/68 cluster support should confirm medium term reversal. Deeper decline should then be seen to 1.2781 support next. Nevertheless, break of 1.3143 resistance will confirm short term bottoming and bring stronger rebound.

In the bigger picture, the case of bearish reversal continues to build up. Decisive break of 1.3068 cluster support (38.2% retracement of 1.2061 to 1.3664 at 1.3052) will confirm completion of up trend from 1.2061 (2017 low). Further fall should be seen to 61.8% retracement at 1.2673 next. On the upside, sustained break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685, is needed to confirm resumption of up trend from 1.2061 (2017 low). Otherwise, risk will stay on the downside.

Economic Indicators Update

Canada retail sales dropped -0.1% mom in May, much worse than expectation of 0.3% mom. Ex-auto sales dropped -0.3% mom, also much worse than expectation of 0.4% mom. Sales were down in 4 of 11 subsectors, representing 39% of retail trade. Sales also dropped in eight provinces.

Full release here.

USD/CAD rebounds strongly after the Canadian data disappointment. Though, upside is limited below 1.3143 resistance. There is no confirmation of short term bottoming yet and another fall remains mildly in favor.

The US dollar is starting turn heavily bearish against the Japanese yen currency, following a strong downmove toward the 107.20 level. The USDJPY pair has staged a minor recovery as the US dollar index attempts to find its composure once again. Selling at a more attractive price is currently the main objective, with the 107.80 to 108.00 region the preffered area for fresh bearish attacks.

The USDJPY pair is bearish while trading below the 108.00 level, key support is found at the 107.20 and 106.80 levels.

The USDJPY pair is only bullish while trading above the 108.00 level, key technical resistance is found at the 108.23 and 108.45 levels.

The British pound has edged back towards critical support against the US dollar after the pair failed to post a new higher high. The GBPUSD pair could slip back towards the 1.2480 level if the 1.2510 level is broken over the upcoming US trading session. Bulls now need to close the daily candle above the 1.2551 level in order to form an extremely bullish weekly reversal candle.

The GBPUSD pair is bullish while trading above the 1.2530 level, key resistance is located at the 1.2560 and 1.2680 levels.

If the GBPUSD pair trades below the 1.2530 level, key support is found at the 1.2510 and 1.2480 levels.

Gold advanced to a more than two-year high of 1,452.87 earlier today, but quickly reversed lower near the previous highs of 1,438. The technical indicators seem to be overstretched in the daily timeframe as the RSI is reversing lower after it touched the 70 level, while the MACD has found obstacle at the trigger line.

If the price successfully surpasses the two-year high (1,452.87), it could prove a trigger point for another bullish round towards the 1,475 mark, registered on July 2011. A stronger move could shift all the attention towards the 1,520 barrier, identified by the inside swing low on December 2011.

The 1,438 level is currently working as an immediate support to downside movements. Falling aggressively below that number, the next stop could be the 23.6% Fibonacci retracement level of the upward movement from 1,266 to 1,452.87 near 1,409 around the 20-day simple moving average (SMA).

Overall, gold is trading in the green both in the medium- and the long-term, eyeing a key resistance around the today’s peak.