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The US dollar is probing the downside against the Japanese yen currency after being strongly rejected from its key weekly pivot point. A sustained bearish breakdown below the 107.80 level is likely to see the USDJPY pair testing towards at least the 107.50 support level. The USDJPY pair also appears vulnerable to risk-off trading sentiment and a steep decline in global equity markets.

The USDJPY pair is bearish while trading below the 108.23 level, sellers may test back towards the 107.50 and 107.10 levels.

The USDJPY pair is only bullish while trading above the 108.23 level, key technical resistance remains at the 108.45 and 108.60 levels.

The British pound continues to recovery against the greenback after the pair found solid technical support from the key 1.2380 level. Sterling traders are now awaiting UK retail sales data, with better than expected numbers likely to provoke a strong test of the 1.2480 area. Worse than expect UK retail sales data may see the GBPUSD pair sold back towards the 1.2415 support level.

If the GBPUSD trades below the 1.2440 level, key support is located at the 1.2415 and 1.2380 levels.

If the GBPUSD pair holds above the 1.2440 level, key resistance is found at the 1.2480 and 1.2510 levels.

Bitcoin has staged a minor recovery from the $9,100 support level, following the early breakout below the July 2nd trading low. Daily price closes around the $9,600 level are now key and are likely to be the next directional catalyst for the BTCUSD pair. Short-term technical indicators are also have a much-needed bullish correction are reaching extreme oversold conditions on Wednesday.

The BTCUSD pair is only bullish while trading above the $9,600 level, key resistance is located at the $10,000 and $10,400 levels.

If the BTCUSD pair trades under the $9,600 level, sellers may test towards the $9,100 and $8,800 support levels.

The price of crude oil rose slightly in the American and Asian sessions after the Energy Information Administration (EIA) released inventories data. In the previous week, inventories declined by more than 3.1 million barrels. This was a higher decline than the consensus estimate of more than 2.96 million. It was lower than the previous week’s decline of more than 9.4 million barrels. In the past few weeks, the US has seen falling inventories as the driving season of the summer starts. Meanwhile, the gasoline inventories increased by more than 3.56 million barrels while the weekly distillate stocks rose by more than 5.6 million barrels.

The Japanese yen gained against the USD in the Asian session after Japan released important data. In June, the country’s exports declined by -6.7%. This was a worse than the expected decline of -5.6%. In May, exports had declined by more than 7.8%. Imports on the other hand declined by -5.2% in the month. This made the trade surplus increase to Y589 billion. This data came at a time when there is a mini trade war between Japan and South Korea. This happened after Japan started restricting exports of critical materials used in South Korea’s tech industry. Specifically, Japan started restricting sales of components critical in the manufacture of chips and screens.

The Australian dollar rose after Australia released its jobs numbers. In June, the unemployment rate and the participation rate remained unchanged at 5.2% and 66% respectively. The full employment change rose from just 2.4k in May to more than 21.1k in June. At the same time, the NAB quarterly business confidence rose to 6 from the previous decline of -1. Later today, investors will receive the trade data from Switzerland, UK retail sales, US initial jobless claims, and the Philadelphia Fed manufacturing index.

AUD/USD

The AUD/USD pair rose sharply after Australia released employment data for June. The pair is trading at 0.7030, which is the highest level since Tuesday this week. On the hourly chart, the pair is trading above the 50-day and 25-day moving averages while the RSI rose close to the overbought level of 70. The price is along the upper line of the Bollinger Bands. The pair will likely continue the upward trend to test the important resistance level of 0.7043.

EUR/USD

The EUR/USD pair rose to a high of 1.1238, which is higher than the week’s low of 1.1200. On the hourly chart below, this price is along the 23.6% Fibonacci Retracement level. The price is slightly above the 50-day and 25-day moving averages. The RSI has moved from the oversold level of 16 to a high of 62. The pair will likely continue moving higher, to test the important support level of 1.1265.

USD/JPY

The USD/JPY pair declined sharply after Japan released trade data. The pair is now trading at 107.67, which was slightly above the day’s low of 107.63. This was the lowest level since July 3. On the hourly chart, this price is along the lower line of the Bollinger Bands while the RSI has dropped to a low of 24. The momentum indicator has dropped to below the 100 mark. The pair will likely continue moving lower to test the important support of 107.50.

The DAX 30 seems to have completed 5 bullish waves (blue) which could indicate that the index is now ready for a bearish ABC correction. The bearish correction could be part of a wave B (purple) after price seems to have completed a bullish wave A (purple). A key support trend line (blue) of the uptrend channel is still a key factor for the long-term direction of the DAX and whether the price will remain in an uptrend or make a larger bearish correction (as this wave outlook expects).

The DAX 30 broke below the smaller support trend line (dotted blue) which is confirming a new downtrend with lower lows and lower highs. This seems to confirm the expected ABC (blue) correction from the daily chart. The next target is the 23.6% Fibonacci retracement level of wave B vs A but the price could fall lower if the bearish momentum is strong enough.

Gold shows an incomplete sequence from August 16, 2018 low favoring further upside. Near term, pullback to 1385.34 ended wave (4). The yellow metal has resumed higher in wave (5). Internal of wave (5) is unfolding as a 5 waves impulse Elliott Wave structure. Up from 1385.34, wave 1 ended at 1427.16 and wave 2 pullback ended at 1399.70. Internal of wave 1 unfolded also as an impulse in lesser degree. Wave ((i)) of 1 ended at 1400.03, and wave ((ii)) of 1 pullback ended at 1389.82. Rally then resumed in wave ((iii)) of 1 towards 1420.76, wave ((iv)) of 1 ended at 1418.7, and wave ((v)) of 1 ended at 1427.16

Wave 2 pullback ended at 1399.70 as a zigzag Elliott Wave structure. Wave ((a)) of 2 ended at 1400.56, wave ((b)) of 2 ended at 1419.75, and wave ((c)) of 2 ended at 1399.70. Gold has now resumed higher in wave 3 of (5). Up from 1399.70, wave ((i)) of 3 ended at 1430.08. Expect wave ((ii)) of 3 dips to find support in 3, 7, or 11 swing as far as pivot at 1385.34 stays intact. We don’t like selling the yellow metal.

Gold 1 Hour Elliott Wave Chart

Market movers today

The data calendar brings no tier 1 releases in today's session and the primary market focus will remain on the unfolding earnings season amid US President Trump's recent reminder that the truce in the US-China trade war may quickly be called off.

On paper, the most prominent events today are Fed's Williams and Bostic speaking this evening and afternoon, respectively. However, given the recent communication from FOMC board members including Fed Chair Powell we doubt these speeches will have much market impact (see selected market news).

In the US, we get the weekly jobless claims figures that as always will receive attention given the importance of the labour market to the Fed. After a rebound in April, initial jobless claims have since been fluctuating around 220,000. After last week's drop to 209,000, we expect a modest rebound to a level just below these 220,000. If right, this would suggest that the labour market - albeit a lagging indicator - remains healthy.

Selected market news

This morning most Asian equity indices have followed US counterparts into red territory. The souring risk appetite reflects a few poor earnings reports - most notably rail operator CSX - and additional stories that progress in the US-China trade negotiations has stalled. US 10Y treasury yields have moved below 2.04%, while FX havens in JPY and CHF have seen moderate gains overnight. Japanese stocks are the big loser with the negative effect of the stronger JPY further amplified by disappointing Japanese trade data as both exports and imports fell short of analyst estimates.

The Fed Beige Book - based on anecdotal information from the regional Feds up until 8 July - released yesterday painted a 'positive' outlook for the coming months 'with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty' . This underpins the challenge for the Fed, with domestic data staying at least decent but rising downside risks and continued subdued inflation at the same time. We think the downside risk for the Fed of staying on hold is now larger than the risks associated with delivering insurance monetary policy easing. With Donald Trump's recent reminder to markets that the trade truce may quickly end, we think it is fair that markets price a slight probability of a 50bp cut at the end of this month even if we ultimately expect a 25bp cut. Markets fully price 25bp with an additional 30% probability mass of a 50bp cut.

While posting a small rebound this morning oil has traded heavy over the last sessions with Brent crude now back below USD64/bbl. Yesterday, inventory data from the US Energy Information Administration (EIA) showed an unexpected large build in inventories of gasoline and distillate fuels of 9.25 m/bbl. As we are in the middle of the driving season, the inventory figures have contributed to the bearish oil momentum initiated Tuesday when Secretary of State Mike Pompeo raised the possibility of easing Iran sanctions.

In Sweden, Valueguard/HOX house prices this morning showed a roughly flat housing market m/m when adjusting for seasonality (no market impact). Looking ahead, we pencil in a housing market that at best will develop in line with disposable income growth (3-4% per year).

General Trend:

• Japanese equities underperform amid continued uncertainty related to Korea/Japan relations; Earnings-related concerns weigh on Canon Inc and AGC
• Trade-sensitive TOPIX Marine Transportation index drops over 2%; US/China trade talks said to have stalled amid Huawei uncertainty (press)
• IT and Telecom Services sectors weigh on equities in China amid lingering trade concerns
• Netflix declines over 11% following earning/guidance
• Australian energy names Santos and Woodside decline following their respective production updates
• Lend Lease rises in Australia on development agreement with Google
• Bank of Korea cuts rates for first time since 2016; noted risks related to Japan’s export curbs, delayed recovery in exports
• Some analysts say Aussie jobs data supports RBA’s on hold position
• Japanese exports decline for 7th straight month in June, shipments to China worsen
• China expects current account surplus for Q2, ‘small’ current account surplus seen for 2019
• Taiwan Semi expected to report quarterly results later today
• US companies expected to report earnings during the NY morning include Blackstone Group, Honeywell, Morgan Stanley, Nucor, Philip Morris, SunTrust Bank, UnitedHealth and Union Pacific.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%
• (AU) AUSTRALIA JUN EMPLOYMENT CHANGE: +0.5K V +9.0KE; UNEMPLOYMENT RATE: 5.2% V 5.2%E
• (AU) Australia Q2 NAB Business Confidence: 6 v -1 prior
• WPL.AU Reports Q2 Production 17.3MMBOE v 17MMBOEe; Rev A$738M v A$1.1B y/y
• STO.AU Reports Q2 Production 18.6 MMBOE v 18.4 MMBOE y/y; Sales Volume: 22.4 MMBOE v 22.8 MMBOE y/y; Rev A$959M v A$886M y/y
• S32.AU Reports Q4 Met Coal Production: 1.28Mt v 1.2Me; Aluminium Production: 245Kt v 246Kt y/y
• (AU) Australia sells A$500M v A$500M indicated in Oct 2019 notes, avg yield 1.1035%

Japan

• Nikkei 225 opened -0.6%
• (JP) JAPAN JUN TRADE BALANCE: ¥589.5B V +¥403.5BE; ADJUSTED TRADE BALANCE: -¥14.4B V -¥153.2BE; Exports to China -10.1% y/y; US +4.8% y/y; EU -6.7% y/y ; Asia -8.2% y/y
• (JP) Japan to send official to defend export curbs at WTO - Japanese Press
• (JP) Japan Fin Min Aso: trade friction is a large downside risk for the global economy; G7 officials did not debate Trump's comments that China and Europe are intentionally devaluing FX - comments in France
• 5201.JP Confirms press report, H1 results will miss estimates due to larger than expected declines in automotive glass demand in US and Europe
• (JP) Japan to require extra tests on unapproved US GMO wheat imports (contrary to prior reports)
• (JP) US White House NSA Bolton said to be making arrangements to visit Japan next week, the visit may focus on a shipping coaliton - Japanese Press
• (JP) Japan to lead development of international cryptocurrency payment network - Financial Press
• 7238.JP Confirms to sell ¥20B stake to Japan Industrial Solutions via preferred shares; Will record ¥7.8B charge

Korea

• Kospi opened -0.2%
• (KR) BANK OF KOREA (BOK) CUTS 7-DAY REPO RATE BY 25BPS TO 1.50%; NOT EXPECTED; GOV LEE: NOT A LOT OF ROOM FOR POLICY ACTION, SOME ROOM TO A DEGREE; Rate decision was NOT unanimous, 1 member called for rates to remain on hold
• (KR) South Korea said to be considering various scenarios over Japan's deadline for arbitration panel related to the issue of forced labor - Yonhap

China/Hong Kong

• Hang Seng opened -0.7%; Shanghai Composite opened -0.3%
• (CN) US-China trade talks reportedly have stalled while Trump administration figures out way forward on Huawei restrictions - press
• (CN) China to limit coal and steel output based on the company ratings - Local Press
• (CN) China PBoC Open Market Operation (OMO): Injects CNY100B in 7-day reverse repos v injects CNY100B prior; Net CNY100B injected v CNY100B injected prior (3nd consecutive injection)
• (CN) China PBOC sets yuan reference rate: 6.8761 v 6.8827 prior
• (CN) China Jun FX Net Settlement Clients (CNY) -131.4B v +31.8B prior
• (CN) China FX Regulator SAFE spokesperson Wang Chunying: In H1 China's forex market supply, demand was basically balanced; Impact of US/China trade dispute on cross border flows is controllable
• (HK) Hong Kong Monetary Authority (HKMA) will consider increasing China stock connect quota at 'appropriate time' - China financial press

Other

• (TH) Thailand Tourism Chief: Thai baht strength is affecting arrivals, will speak with central bank about strength in baht

North America

• (US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY EXPANDED AT MODEST PACE FROM MID-MAY TO EARLY JULY
• (US) Fed's George (hawk, voter): Prepared to adjust view of appropriate monetary policy should downside risks materialize
• NFLX Reports Q2 $0.60 v $0.56e, Rev $4.92B v $4.93Be; paid domestic memberships decline q/q
• IBM Reports Q2 $3.17 v $3.06e, Rev $19.2B v $19.1Be
• EBAY Reports Q2 $0.68 v $0.63e, Rev $2.70B v $2.67Be; raises FY EPS and cuts Rev guidance
• URI Reports Q2 $4.74 v $4.48e, Rev $2.29B v $2.26Be

Europe

• (UK) PM candidate Johnson: whole Brexit withdrawal agreement is effectively defunct; Brexit backstop for Ireland won't work

Levels as of 1:20 ET

• Nikkei 225, -1.9%, ASX 200 -0.5%, Hang Seng -0.5%; Shanghai Composite -0.8%; Kospi -0.3%
• Equity Futures: S&P500 -0.2%; Nasdaq100 -0.5%, Dax -0.9%%; FTSE100 -0.4%
• EUR 1.1241-1.1223 ; JPY 108.00-107.63 ; AUD 0.7027-0.7005 ;NZD 0.6743-0.6724
• Gold +0.1% at $1,424/oz; Crude Oil +0.1% at $56.82/brl; Copper +0.1% at $2.705/lb

For the 24 hours to 23:00 GMT, the GBP rose 0.19% against the USD and closed at 1.2433.

Data showed that UK's consumer price index (CPI) advanced 2.0% on an annual basis in June, in line with market expectations. In the preceding month, the CPI had recorded a similar rise. Moreover, the nation's retail price index climbed 2.9% on an annual basis in June, meeting market expectations. The index had recorded a rise of 3.0% in the prior month.

Meanwhile, Britain's house price index climbed 1.2% on an annual basis May, undershooting market consensus for a rise of 1.3%. The index had recorded a revised advance of 1.5% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.2439, with the GBP trading 0.05% higher against the USD from yesterday's close.

The pair is expected to find support at 1.2395, and a fall through could take it to the next support level of 1.2351. The pair is expected to find its first resistance at 1.2470, and a rise through could take it to the next resistance level of 1.2501.

Trading trend in the Sterling today, is expected to be determined by UK's retail sales for June, slated to release in a few hours.

The currency pair is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the EUR rose 0.14% against the USD and closed at 1.1227, amid upbeat inflation data in the Eurozone.

On the data front, Eurozone's consumer price index (CPI) rose 0.2% on a monthly basis in June, surpassing market expectations for a rise of 0.1%. In the previous month, the CPI had registered a rise of 0.1%. Meanwhile, the region's seasonally adjusted construction output eased for the third straight month by 0.3% on a monthly basis in May, following a revised drop of 1.7% in the previous month.

In the US, data indicated that the housing starts declined 0.9% on a monthly basis to an annual rate of 1253.0K in June, falling for the second consecutive month and more than market expectations for a drop to a level of 1260.0K. In the prior month, the housing starts recorded revised reading of 1265.0K in the previous month. Additionally, the nation's building permits unexpectedly fell to a 2-year low level of 6.1% on monthly basis, to an annual rate of 1220.0K in June, defying market anticipation for a rise to a level of 1300.0K. The building permit had registered a revised reading of 1299.0K in the prior month. Also, the MBA mortgage applications dropped 1.1% on a weekly basis in the week ended 12 July 2019, following a drop of 2.4% in the previous week.

The Federal Reserve's (Fed) latest Beige Book revealed that the most districts witnessed a modest expansion from mid-May through early June and expects further moderate growth in coming months. However, it also raised concerns over the ongoing trade uncertainties that would adversely affect the current stable inflation growth and mildly improving employment data.

Moreover, the report signalled that the Federal Reserve might slash interest rates later this month.

In the Asian session, at GMT0300, the pair is trading at 1.1238, with the EUR trading 0.10% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1212, and a fall through could take it to the next support level of 1.1185. The pair is expected to find its first resistance at 1.1253, and a rise through could take it to the next resistance level of 1.1267.

Amid lack of macroeconomic releases in the Euro-zone today, traders would keep an eye on the US Philadelphia Fed business outlook for July and the leading index for June along with initial jobless claims, all set to release later in the day.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.