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Microsoft stock has been in a seven-month ascending channel since December but last week ran into a wall near the previous all-time high of 138.34 set two weeks ago. Sellers have picked themselves up and today started to push down.

Although the bullish bias from the 21-, 50- and 100-day simple moving averages (SMAs) is apparent, the MACD seems to suggest a negative divergence causing a fall in momentum as the MACD and trigger line flatten out in the positive area. The RSI is in agreement and has hit the down trendline near the over-bought level and turned lower. The ADX still supports the existing strong trend.

A shift to the downside seems to be unfolding in the very-short term, and if sellers rally down, the 21-SMA would be the first test before the previous swing low of 132.61 on June 25. For a movement further south, the 50-SMA coupled with support of 130.50 would need to be broken initially, before the 61.8% Fibonacci of the up leg of 118.96 to 138.34, of 126.37, and the 100-SMA come into play. Ultimately, for a medium-term bearish bias the low of 118.96 would need to be fractured.

The long-term bullish bias could move the price up to the ascending channel’s upper boundary, if the 21-SMA holds.

Overall, Microsoft long-term bullish bias may see a shift to bearish in the very short- and medium-term if the downward move has potency.

USD is up across the board, while GBP is at new 2019 lows on fears of no-deal Brexit despite the strongest rise in UK earnings/pay in over 11 years. An important US data report is due shortly, followed by several Fed speakers including Powell (see below). Will Powell's speech present new resistance to the US dollar as it did last week (as is Shale doing to oil)? The rise of US shale has changed all the rules for crude oil and trading around hurricanes is no exception. CFTC data showed an increasingly crowded GBP trade.

WTI crude rose to the highest since late-May last week as it climbed above $60. There was some concern heading into the weekend with Hurricane Barry threatening the Gulf coast. It ultimately made landfall as a Category 1 stor and underperformed most forecasts.

The start of hurricane season is a fresh reminder that old rules for US crude may not apply. A decade ago, the US imported roughly 5 million barrels per day of crude via the Gulf coast that meant that any disruption due to storms would leave the market undersupplied and prices would rise.

But due to the shale revolution, Gulf net exports are now roughly zero. That could leave gluts points and drive down prices, especially if refineries are forced to close. At the same time, there will still be offshore production shutdowns so global supply could be curbed, but the mechanics are no longer nearly as straightforward as they once were and the trade is often to fade any storm-related spikes.

Retail Sales, Powell et al

Looking ahead, Tuesday's release of US June retail sales (control group) is expected to show a 0.3% rise from a downward revised 0.4%. Fed Vice chair Bowman speaks 15 mins before retail sales, followed by Fed Chair Powell in Paris at 13:00 Eastern (18:00 London). Chicago Fed's Evans will speak 2.5 hr later.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -36K vs -31K prior GBP -73K vs -64K prior JPY -4K vs -1K prior CHF -10K vs -11K prior CAD +9K vs +6K prior AUD -54K vs -58K prior NZD -22K vs -24K prior

The general theme over the past few weeks is US dollar longs headed to the sidelines but that's not the case in cable as specs bet that whatever is troubling the US will be overshadowed by relentless Brexit uncertainty.

Market movers today

Today the final euro area HICP figures for June will be released. The German figures point to a slight upward revision in the euro area headline figure to 1.3% (from 1.2% in the flash estimate), but core inflation will likely stay at 1.1% in a sign that underlying inflation pressures remain subdued ahead of the ECB's July meeting taking place next week.

In the UK, we also get inflation data for June. Market consensus is for headline inflation to remain steady around the BOE target of 2% while core inflation is expected to increase slightly from 1.7% in May.

Selected market news

Asian equity markets are mixed this morning after US markets retreated slightly yesterday. New sour comments by US President Trump on trade negotiations with China irked markets. Yesterday, he stressed that US could impose tariffs on another USD325bn of imports from China, saying that "we have a long way to go as far as tariffs where China is concerned, if we want." Meanwhile, China brought down their holdings of US treasuries for the third month in a row to the lowest level since May 2017.

On a positive note, US retail sales came out stronger than expected yesterday, growing 0.7% m/m in June, while May was revised up to 0.6% from 0.5%. Even though retail sales are not always a very good indicator of private consumption in the GDP accounts, they nonetheless suggests a strong rebound in consumption growth in Q2 after a weak Q1.

Yesterday Fed officials revealed further their preferences on how to support the US economy. Jerome Powell told a Paris audience that the Fed is "carefully monitoring" downside risks to U.S. growth and "will act as appropriate to sustain the expansion", echoing his Congressional testimony. Chicago President Charles Evans predicted two reductions this year based on the need to lift inflation, although also saying it might not be enough. Dallas chief Robert Kaplan said a "tactical" cut might be warranted, but one should be enough. We are predicting the Fed will cut rates three times this fall, starting with a cut at the July meeting.

Oil extended losses yesterday falling below $58 a barrel after US secretary of state Michael Pompeo said Iran had signalled an openness to talks if some conditions were met. His comments followed similar remarks from Tehran's foreign minister in the first signs of a possible diplomatic breakthrough. Oil prices also retreated as Trump's threat of new tariffs on China prompted fears about the demand outlook.

In Europe, Ursula von der Leyen narrowly won support from the European Parliament. She will now become the first women to head the EU Commission. She received support from 383 parliamentarians, only just exceeding the 374 threshold needed for approval. As many as 327 members voted against her. The weak support gives her, in our view, a fragile mandate. In winning over support from the EU parliament, she made a long list of promises in areas such as climate change and European-wide minimum wage that will be challenging getting through the national parliaments in EU member countries.

Fed Chair Jerome Powell's speech in Paris on Tuesday was largely similar to what he's said recently. He reiterated the pledged to "act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective."

In the baseline outlook, Fed expected growth to "remain solid, labor markets to stay strong, and inflation to move back up and run near 2 percent". However, "uncertainties about this outlook have increased", particularly regarding "trade developments and global growth".

Powell also noted the influences between monetary policies in different countries, "financial markets, trade, and confidence channels". And he noted, "pursuing our domestic mandates in this new world requires that we understand the anticipated effects of these interconnections and incorporate them into our policy decision making.

General Trend:

• BHP rises after Q4 iron ore production beat ests, guided FY20 ore production higher y/y
• Kospi index underperforms, chipmakers decline amid lingering dispute between South Korea and Japan; Bank of Korea (BOK) due to meet on Thursday
• Chinese equities trade flat during morning session, gains in property and IT shares offset by banks
• Chinese iron ore prices decline from record high, shipments from Australia's Port Hedland to China rose m/m in June
• Japanese equities weighed down by declines in Nikkei-weighted Softbank
• US and Japan said to consider ‘small' trade agreement (financial press)
• Singapore's export decline worsens in June; Electronics exports -31.9% y/y, shipments to Europe -22.1% y/y
• Australia June labor market data due on Thursday, Aussie bonds trade generally flat ahead of the data
• US companies expected to report earnings during the NY morning include Bank of America, Bank of NY and PNC.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• BHP.AU Reports Q4 Waio Iron Ore Production: 71.0Mt v 72.0Mt y/y; Attributable iron ore production: 62.6Mt v 62.0Me v 63.6Mt y/y
• AXP.AU To reduce employees from 35 to 8; Plan to Cease Operations
• (AU) Australia Port Hedland Jun Iron Ore exports 48.9Mt v 47.2Mt y/y; Exports to China 42Mt v 37.8M m/m
• (AU) Australia sells A$1.6B v A$1.6B indicated in 1.50% June 2031 bonds, avg yield 1.4845%, bid to cover 1.93x

Japan

• Nikkei 225 opened -0.3%
• (KR) South Korea has rejected Japan's arbitration process offer, South Korea Finance Min urges Japan to join negotiations - Korean press
• (JP) US and Japan said to consider possible 'small' trade agreement by Sept – financial press
• 2264.JP Denies report that a merger with Morinaga UK is being considering
• (JP) Fitch affirms Japan sovereign rating at A; Outlook stable
• (JP) Japan Deputy Chief Cabinet Sec Nishimura: Strongly urges South Korea to take appropriate steps over wartime labor issue; Japan will firmly respond, considering various options
• 2678.JP Said to have asked Yahoo Japan to end tie-up agreement, in talks with other companies/funds on partnerships - Japanese Press (later confirms this report)
• (JP) Japan MoF sells ¥900B v ¥900B indicated in 0.3% (prior 0.40%) 20-year bonds; avg yield 0.2490% v 0.2080% prior; bid to cover 4.89x v 4.08x prior

Korea

• Kospi opened -0.6%
• 005930.KR Samsung is reportedly testing supplies of hydrogen fluoride etching gas from companies outside of Japan including China and Taiwan – Nikkei
• (KR) South Korea raises extra budget sought to deal with Japan curbs to KRW760B (prior KRW300B) - Korean press
• (KR) South Korea Fin Min Hong: Will announce plans soon to reduce dependence on Japan's industries
• (KR) South Korea PM has hinted there may be an envoy sent to Japan over dispute - Korean press
• (KR) South Korea and US preparing for joint military exercises despite warnings from North Korea - Yonhap

China/Hong Kong

• Hang Seng opened -0.5%; Shanghai Composite opened -0.2%
• (CN) China sovereign wealth fund (CIC) and Hana Financial Group to establish a KRW1.0T industrial cooperation fund - South Korean Press
• (CN) China PBOC sets yuan reference rate: 6.8827 v 6.8710 prior
• (CN) China PBoC Open Market Operation (OMO): Injects CNY100B in 7-day reverse repos v injects CNY160B prior; Net CNY100B injected v CNY160B injected prior (2nd consecutive injection)
• (CN) China Agriculture Ministry: Pork prices may continue to rise
• (CN) Growth in Shandong, China's third largest provincial economy, saw growth slow in Q1 due to cuts in inefficient industrial capacity – SCMP
• (CN) China newly appointed to the US trade negotiations team, Zhong Shan, is seen as very hawkish and an indication that China is in no hurry to wrap up trade talks and may be waiting to see outcome of 2020 election results – SCMP
• 1929.HK Reports Q1 SSS -14%, impacted by tough base comparison year, cautious consumer sentiment and uncertain macro environment

Other Asia

• (SG) SINGAPORE JUN NON-OIL DOMESTIC EXPORTS M/M: -7.6% V -3.5%E; Y/Y: -17.3% V -9.6%E; Electronic Exports Y/Y: -31.9% v -22.0%e; Exports to US +1.5% y/y; Europe -22.1% y/y; China -15.8% y/y
• (TH) Thailand Central Bank: Real interest rates low, cutting policy rate may not have much impact

North America

• (US) Fed's Daly (dove, non-voter): Not leaning one way or the other on July rate decision, too early to tell if the economy needs additional stimulus to get to above trend growth
• (US) US House Leader Pelosi: To speak with US Treasury Sec Mnuchin again on Wed regarding debt ceiling; debt ceiling-related announcement will come 'soon'
• (US) MAY NET LONG-TERM TIC FLOWS: $3.5B V $46.9B PRIOR; TOTAL NET TIC FLOWS: $32.9B V -$9.0B PRIOR; China Total holding of US Treasuries: $1.110T v $1.113T prior (falls for third month in a row)
• (US) Pres Trump: could impose tariffs on another $325B of China goods if we want - Cabinet meeting
• (US) Fed Evans (dove, voter): given the nervousness I think that a little more accommodation would be appropriate; we should only do what is necessary, but at the moment it seems like a little more is necessary - CNBC interview
• (US) Fed's Kaplan (dove, non-voter): rate cut could be warranted based on bond market signals; cut should be limited and restrained - press interview

Europe

• (EU) Germany's Ursula Von Der Leyen confirmed as EU Commission President with 383 votes (needed 374 votes to be confirmed)
• (UK) BOE's Cunliffe: UK is not heading into a recession
• (UK) UK prospective PM Johnson could send MPs home in October if he wins PM role to stop them hindering a possible No deal Brexit - sky

Levels as of 1:20 ET

• Nikkei 225, -0.3%, ASX 200 +0.4%, Hang Seng -0.4%; Shanghai Composite flat; Kospi -1.1%
• Equity Futures: S&P500 +0.1%; Nasdaq100 flat, Dax flat; FTSE100 -0.2%
• EUR 1.1216-1.1206 ; JPY 108.32-108.11 ; AUD 0.7021-0.7001 ;NZD 0.6716-0.6697
• Gold -0.4% at $1,406/oz; Crude Oil flat at $57.62/brl; Copper +0.3 % at $2.702/lb

GBPUSD shows a bearish sequence from June 25 high (1.2784) favoring further downside. Near term, the decline from 1.2784 to 1.2438 ended wave ((i)) as an impulsive Elliott Wave structure. Down from 1.2784, wave (i) ended at 1.266 and wave (ii) bounce ended at 1.2735. Pair then resumed lower in wave (iii) towards 1.248 with internal subdivision also as an impulse structure of lesser degree. Wave (iv) bounce ended at 1.2513 as a triangle and wave (v) of ((i)) ended at 1.2438.

Wave ((ii)) bounce ended at 1.2581 as a zigzag Elliott Wave structure where wave (a) ended at 1.257, wave (b) ended at 1.2507, and wave (c) ended at 1.257. Pair has resumed lower in wave ((iii)) and broken below wave ((i)) confirming the next move lower has started. The move lower from 1.2581 also appears impulsive. Near term, expect wave (i) of ((iii)) to end soon, then pair should bounce in wave (ii) of ((iii)) to correct cycle from July 13, 2019 high before the decline resumes. We don’t like buying the pair and expect wave (ii) bounce to fail in 3, 7, or 11 swing for further downside as far as pivot at 1.258 stays intact in the first degree.

GBPUSD 1 Hour Elliott Wave Chart

For the 24 hours to 23:00 GMT, the EUR declined 0.45% against the USD and closed at 1.1211.

On the macro front, Euro-zone's seasonally adjusted trade surplus widened to €20.2 billion in May, surpassing market expectations for a surplus of €17.8 billion. The nation had posted a revised surplus of €15.7 billion in the prior month. Meanwhile, the region's economic sentiment index fell to a level of -20.3 in July, following a level of -20.2 in the previous month.

Separately, in Germany, the ZEW economic sentiment index dropped to an 8-month low level of -24.5 in July, compared to a revised reading of -21.1 in the previous month. Market participants had envisaged the index to fall to a level of -22.0. Moreover, the nation's current situation index declined to a level of -1.1 in July, more than market consensus for a drop to a level of 5.0. In the prior month, the index had recorded a level of 7.8.

The US dollar gained ground against its peers, amid upbeat US retail sales data.

In the US, data showed that advance retail sales rose 0.4% on a monthly basis in June, compared to a revised similar rise in the prior month. Markets had anticipated advance retail sales to record a gain of 0.1%. Also, the nation's manufacturing (SIC) production climbed 0.4% on a monthly basis in June, rising for the second consecutive month and higher than market expectations for a rise of 0.3%. In the prior month, manufacturing production had recorded an advance of 0.2%. Additionally, the NAHB housing market index unexpectedly jumped to a level of 65.0 in July, defying market expectations for a steady reading. In the preceding month, the index had recorded a level of 64.0. Meanwhile, the US industrial production remained flat on a monthly basis in June, compared to an advance of 0.4% in the previous month. Market participants had anticipated the industrial production to register a rise of 0.1%.

In the Asian session, at GMT0300, the pair is trading at 1.1212, with the EUR trading a tad higher against the USD from yesterday's close.

The pair is expected to find support at 1.1188, and a fall through could take it to the next support level of 1.1165. The pair is expected to find its first resistance at 1.1249, and a rise through could take it to the next resistance level of 1.1287.

Going forward, traders would await Euro-zone's consumer price index for June and construction output for May, slated to release in a few hours. Later in the day, the US housing starts and building permits, both for June, along with the MBA mortgage applications, will garner significant amount of investors' attention. Also, the US Federal Reserve's Beige Book report will be on traders' radar.

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

For the 24 hours to 23:00 GMT, the GBP declined 0.88% against the USD and closed at 1.2409, amid growing concerns of a no-deal Brexit.

On the data front, UK's ILO unemployment rate remained unchanged at a 44-year low rate of 3.8% in the three months ended May 2019 period, in line with market expectations. Meanwhile, the nation's average earnings including bonus climbed 3.4% on an annual basis in the March-May 2019 period, surpassing market consensus for a gain of 3.1%. In the February-April 2019 period, average earnings including bonus had recorded a revised increase of 3.2%.

In the Asian session, at GMT0300, the pair is trading at 1.2410, with the GBP trading marginally higher against the USD from yesterday's close.

The pair is expected to find support at 1.2365, and a fall through could take it to the next support level of 1.2321. The pair is expected to find its first resistance at 1.2486, and a rise through could take it to the next resistance level of 1.2563.

Looking ahead, traders would closely monitor UK's consumer price index, producer price index and retail price index, all for June along with the house price index for May, set to release in a few hours.

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

In an interview with Newcastle Journal yesterday, BoE Deputy Governor Jon Cunliffe said "I haven't picked up a strong sense that the economy is contracting and people are seeing big drops in demand".

Q2 will likely be weak due to unwinding of stocks. But he added "with Q1 and the second quarter of this year, you won't get a very accurate read on the underlying nature of the economy".

Additionally, there is a Brexit "decision point" coming up on October 31. And, "we don't know whether we'll leave, or stay, or whether there'll be an extension". He added "we could see that stockpiling cycle build up again".

For the 24 hours to 23:00 GMT, the USD rose 0.37% against the JPY and closed at 108.25.

In the Asian session, at GMT0300, the pair is trading at 108.17, with the USD trading 0.07% lower against the JPY from yesterday’s close.

The pair is expected to find support at 107.92, and a fall through could take it to the next support level of 107.67. The pair is expected to find its first resistance at 108.40, and a rise through could take it to the next resistance level of 108.63.

Looking forward, traders would closely monitor Japan’s trade balance for June, scheduled to release overnight.

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