Sample Category Title

Daily Pivots: (S1) 107.91; (P) 108.14; (R1) 108.47; More...

USD/JPY is staying in range of 107.79/108.99 and intraday bias remains neutral first. On the downside, below 107.79 will resume the fall from 108.99 to retest 106.78 low first. Break will resume larger decline from 112.40. On the upside, break of 108.99 will resume the rebound from 106.78 to 110.67 resistance next.

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.

Daily Pivots: (S1) 0.9845; (P) 0.9870; (R1) 0.9903; More...

USD/CHF is staying in range of 0.9817/9951 and intraday bias remains neutral first. On the downside, below 0.9817 will resume the decline from 0.9951 to retest 0.9695 low first. On the upside, above 0.9951 will extend the rebound from 0.9695. In that case, upside should be limited by 61.8% retracement of 1.0237 to 0.9695 at 1.0030.

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.

The forex markets are generally locked in tight range today. Canadian Dollar is supported by largely expected consumer inflation data. While Loonie is the second strongest for today so far, USD/CAD is stuck in familiar range. The markets are indeed rather mixed, as seen in New Zealand Dollar being the strongest and Australian being weakest. Euro is mixed after upward revision in June's CPI reading. Sterling continues to shrug off economic data, but stays pressured on no-deal Brexit fear.

Technically, GBP/USD breached 1.2391 low but recovered quickly sustained break will confirm medium term down trend resumption. 0.6983 minor support in AUD/USD will be watched and break will confirm rejection by 0.7047 resistance. USD/CAD could finally breakout from range of 1.3018/3143 with today's oil inventory data.

In other markets, DOW opens nearly flat while 10-year yield is down -0.0114 at 2.093. In Europe, FTSE is down -0.18%. DAX is down -0.18%. CAC is down -0.17%. German 10-year yield is down -0.042 at -0.289, staying comfortably above -0.3 handle. Earlier in Asia, Nikkei dropped -0.31%. Hong Kong HSI dropped -0.09%. China Shanghai SSE dropped -0.20%. Singapore Strait Times rose 0.14%. Japan 10-year JGB yield dropped -0.0052 to -0.125.

Canada CPI slowed to 2.0%, manufacturing sales rose 1.6%

In June, Canada headline CPI slowed to 2.0% yoy, down from 2.4% and matched expectations. CPI core -common was unchanged at 1.8% yoy, matched expectations. CPI core -median was unchanged at 2.2% yoy, above expectation of 2.1% yoy. CPI core - trim slowed to 2.1% yoy, down from 2.3% yoy , miss expectation of 2.2% yoy.

Manufacturing sales rose 1.6% mom to CAD 58.9B in May, missed expectation of 2.0% mom. The increase was mainly due to higher sales in the transportation equipment industry. Sales were up in 12 of 21 industries, representing 66.2% of total Canadian manufacturing.

From US, housing starts dropped to 1.25m annualized in June. Building permits dropped to 1.22m annualized.

UK Barclay: No-deal Brexit underpriced, House won't approve current deal

UK Brexit Minister Stephen Barclay warned today that no-deal Brexit is underpriced. He also told EU chief Brexit negotiator Michel Barnier that the current withdrawal agreement would not be approved by the UK parliament without any change.

Barclay said "I think a no deal is underpriced. It is still this government's intention and both leadership candidates' intention to seek a deal and I think it is the will of many members of parliament for there to be a deal". However, "the question then will be is there a deal that is palatable to parliament and if not will parliament vote to revoke or will we leave with no deal?"

Regarding his conversation with Barnier, Barclay clarified "What I said was the House had rejected it three times ... that the European election results in my view had further hardened attitudes across the House and that the text unchanged, I did not envisage going through the House."

UK CPI unchanged at 2.0%, core CPI rose to 1.8%

In June, UK headline CPI was unchanged at 2.0% yoy, matched expectations. Core CPI accelerated to 1.8% yoy, up from 1.7% yoy, matched expectations. RPI slowed to 2.9% yoy, down from 3.0% yoy, matched expectations. PPI input was at -1.4% mom, -0.3% yoy, versus expectation of -0.5% mom, 0.3% yoy. PPI output was at -0.1% mom, 1.6% yoy, versus expectation of 0.1% mom, 1.7% yoy. PPI output core was at 0.1% mom, 1.7% yoy, matched expectations. In May, house price index rose 1.2% yoy, slowed from 1.5% yoy, versus expectation of 1.3% yoy.

ECB Coeure: Determined to act in case of adverse contingencies

ECB Executive Board member Benoit Coeure said the central banks "determined to act in case of adverse contingencies and also stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move toward the Governing Council's inflation aim in a sustained manner".

He said today that Eurozone economy was showing signs of "somewhat weaker growth" in Q2 and Q3. Risks are also tilted to the downside. Underlying inflation remained generally muted even though it's seen increasing over the medium term.

Eurozone CPI finalized at 1.3%, revised up, core CPI at 1.1%

Eurozone CPI was finalized at 1.3% yoy in June, revised up from 1.2%, up from May's 1.2% yoy. Core CPI was finalized at 1.1% yoy, unrevised, up from May's 0.8% yoy. EU 28 CPI was finalized at 1.6% yoy, stable compared to May.

The lowest annual rates were registered in Greece (0.2%), Cyprus (0.3%), Denmark and Croatia (both 0.5%). The highest annual rates were recorded in Romania (3.9%), Hungary (3.4%) and Latvia (3.1%). Compared with May, annual inflation fell in seventeen Member States, remained stable in one and rose in nine.

In June, the highest contribution to the annual euro area inflation rate came from services (0.73%), followed by food, alcohol & tobacco (0.30%), energy (0.17%) and non-energy industrial goods (0.07%).

BoJ Kuroda: Economy growing moderately despite some weakness in exports and output

BoJ Governor Haruhiko Kuroda reiterated his view that the economy is "growing moderately" even though policymakers were "seeing some weakness in exports and output". He said today in France that capital expenditure remained "very firm" and the global economy was still sustaining moderate growth despite various risks.

He added, "the board will debate policy this month based on this view". But he also emphasized we will swiftly consider additional monetary easing steps if the economy loses momentum for hitting our inflation target."

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9845; (P) 0.9870; (R1) 0.9903; More...

USD/CHF is staying in range of 0.9817/9951 and intraday bias remains neutral first. On the downside, below 0.9817 will resume the decline from 0.9951 to retest 0.9695 low first. On the upside, above 0.9951 will extend the rebound from 0.9695. In that case, upside should be limited by 61.8% retracement of 1.0237 to 0.9695 at 1.0030.

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.

Economic Indicators Update

WTI oil price moved higher and probes above $58 level on Wednesday, after falling 3% Tuesday on news that US President Trump is considering talks with Iran.

Oil price was also under pressure from API report, released late on Tuesday which showed fall in US crude stocks by 1.4 mln bls in the week to 12 July, disappointing forecast for 2.7 mln bls draw and falling well below last week's – 8.1 mln bls figure.

Two day dip from a double-top at $60.90 (which was left after the price repeatedly failed to clearly break above important Fibo barrier at $60.47) accelerated on Tuesday, penetrating thick daily cloud (cloud top lays at $58.59) and ending day below 200DMA ($57.73), but faced strong headwinds from pivotal Fibo support at $56.96 (38.2% of $50.59/$60.90).

Bounce above 200DMA eases negative pressure, however, recovery attempts would require more evidence for generating reversal signal and formation of higher low.

Immediate barriers lay at $58.35/64 (converging 20/10DMA's), break of which would provide relief, but lift above 100DMA ($59.31) is needed to neutralize bears and open way for renewed attempts at key $60.47/90 barriers.

Daily studies are in mixed mode and traders focus release of US crude inventories report for fresh signals.

Forecast is for 2.6 mln bls draw, which is well below last week's fall of 9.4 mln bls and oil price is expected react negatively if today's release disappoints forecast. Firm break below Fibo support at $56.96 would risk test of $56.03 trough (3 July) and $55.75 (50% retracement of $50.59/$60.90 ascend).

Res: 58.35; 58.64; 59.31; 60.00
Sup: 57.65; 56.96; 56.60; 56.03

• Headline CPI fell back to 2.0% from 2.4% in May
• Energy prices (gasoline, natural gas) fell sharply
• BoC core measures averaged 2.0%

Headline CPI fell back to 2.0% in June with falling energy prices providing more offset against stronger food price inflation (particularly for fresh vegetables, which StatCan has attributed to inclement weather and supply disruptions in some regions). The average of the BoC’s core measures ticked slightly lower but remained in the middle of the 1.9-2.1% range seen since early last year. The longest period of near-target core inflation since the recession continues.

The Bank of Canada’s dovish tone last week had nothing to do with current inflation trends and everything to do with global growth concerns and trade tensions. In fact, 2% core inflation is one of the key reasons the BoC doesn’t appear to be in any rush to follow the Fed in lowering interest rates. The BoC sees some scope for core readings to dip below target in the coming quarters (the lagged effect of the economy’s recent slowdown) but thinks inflation will be sustainably at 2% by the middle of next year. That is contingent on the economy returning to near-2% growth—which is where the BoC’s concerns about the global backdrop enter the picture. But for now, inflation is sitting pretty at the BoC’s target, giving it time to be patient and see how activity is impacted by uncertainty and global headwinds.

• Manufacturing sales increased 1.6% in May
• Gains concentrated in the transportation sector
• Increase extends recent string of Canadian manufacturing outperformance relative to US

The increase in manufacturing sales in May was, as expected, largely concentrated in the transportation sector. Still, sales edged up 0.2% excluding transportation components, and have yet to decline on that basis in any month of this year. To be sure, growth in the Canadian manufacturing sector has not exactly been spectacular – but sales volumes (i.e. excluding price impacts) were still up 3.5% from a year ago in May and 2.0% year-to-date in 2019. Production (as opposed to sales) in the sector is on track to increase for a second straight quarter in Q2 – better than the US where manufacturing output has now declined for two straight quarters alongside an escalation in US-China trade tensions.

To be sure, tight integration of cross-border US-Canada production chains means Canada will not be immune to any broader trade-related global industrial sector slowdown. For now, though, the domestic economic data continues to look a little better. And, with inflation also holding around 2%, is another reason the Bank of Canada won’t likely need to rush to follow the US Fed with a widely expected rate cut later this month.

GBPAUD extended its losses towards a new six-month low of 1.7630 on Tuesday, recording five straight red days. The selling interest started after the pullback on the almost three-year high of 1.8880, pushing the pair beneath the short-term moving averages and the Ichimoku cloud. The RSI indicator is hovering in the oversold zone; however, the stochastic oscillator is in process to post a bullish crossover within its lines, indicating weaker bearish movement than before.

Further declines may meet support at the 1.7610 area, taken from the low on January 11, before posting a more aggressive rally until the December 2018 low of 1.7290.

On the upside, resistance could occur around 1.7860 that may be a strong barrier for the bulls to surpass. Higher still, the 23.6% Fibonacci retracement level of the downward wave from 1.8880 to 1.7630 around 1.7925 would increasingly come into scope, while not far above, the 20-day simple moving average is standing near 1.8015.

The short-term picture continues to look predominantly negative, with trading activity continuing the sell-off.

In June, Canada headline CPI slowed to 2.0% yoy, down from 2.4% and matched expectations. CPI core -common was unchanged at 1.8% yoy, matched expectations. CPI core -median was unchanged at 2.2% yoy, above expectation of 2.1% yoy. CPI core - trim slowed to 2.1% yoy, down from 2.3% yoy , miss expectation of 2.2% yoy.

Manufacturing sales rose 1.6% mom to CAD 58.9B in May, missed expectation of 2.0% mom. The increase was mainly due to higher sales in the transportation equipment industry. Sales were up in 12 of 21 industries, representing 66.2% of total Canadian manufacturing.

USD/CAD has little reaction to the releases. It's staying in range of 1.3143/3018.

Markets flat as we await more earnings

It's been a pretty flat start to trading on Wednesday as we continue to make our way through the early stages of earnings season.

It feels like we're entering into holiday mode now, with markets positioned for multiple rate cuts this year and the Fed not yet making any real effort to lower expectations. Any strong data from the US is doing little to dramatically shift expectations, with retail sales yesterday easily topping forecasts but traders remaining convinced that we'll probably see three cuts.

Earnings season has got off to an okay start but concerns that existed prior to the few releases we've had still very much exist. Expectations for the second quarter remain pretty weak, with another period of negative earnings growth expected which only helps the cause for rate cuts this year. Nothing we've seen so far suggests we're heading for a surprisingly positive season, which makes the outlooks all the more important.

Sterling struggling to cope with Brexit fears

The pound came under significant pressure on Tuesday, despite the UK jobs report showing a solid labour market with strong wage growth. This morning's CPI inflation data was in line with expectations and suggests there's little pressure on the BoE on that side to consider cutting interest rates. Still, traders view a cut at the end of the year as a coin toss leaving little doubt that the threat of no-deal Brexit is what's driving the currency right now. Interestingly, reports that Boris Johnson would consider an election in 2020 is not adding to the pressure given that some view a Corbyn government as an even greater threat than Brexit.

GBPUSD Daily Chart

Bitcoin hanging on in there

Bitcoin is back below $10,000 but it's not quite spiralling out of control just yet, clinging on in the $9,000-$10,000 region. The latest dip came after Libra was discussed and questioned by Senators in Washington and let's just say there wasn't much of a positive vibe. Safe to say there's a lot of scepticism around Libra and other cryptocurrencies and there's still a long way to go until those in charge are satisfied and get fully on board, if they ever do. Given the reaction we've seen over the last week or so from US officials, it's no surprise there's been some nervousness in the space and that may continue as these attacks, particularly from the President, don't tend to be temporary.

Gold under pressure as retail sales lift the dollar

Gold prices slipped a little on Tuesday, following the release of the US retail sales report which comfortably exceeded expectations to lift the dollar. The yellow metal is trading back around $1,400 now and remains in consolidation mode. A break below $1,380 may change this but we're still a little away from that yet and given the current environment, gold bulls may put up quite a fight around that level.

Gold Daily Chart

Oil pares losses after slipping on Trump Iran comments

Oil prices dipped on Tuesday after Trump and Pompeo struck a softer tone towards negotiations with Iran in what could be an important first step towards the nuclear deal being saved. There's still a very long way to go, with both sides making demands of the other which have until this point been rejected but it's a start. Today we'll get inventory data from EIA which is expected to be broadly in line with API, who reported a small drawdown last week.

Brent Daily Chart

ECB Executive Board member Benoit Coeure said the central bank is "determined to act in case of adverse contingencies and also stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move toward the Governing Council's inflation aim in a sustained manner".

He said today that Eurozone economy was showing signs of "somewhat weaker growth" in Q2 and Q3. Risks are also tilted to the downside. Underlying inflation remained generally muted even though it's seen increasing over the medium term.