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Yesterday, the XAU/USD exchange rate tried to surpass the resistance formed by the 55-hour moving average at 1,396.43. During Tuesday's morning, the rate was testing the given resistance.

Note, that the price for gold is facing the support at the 1,387.50 mark. Thus, it is expected, that gold could trade sideways against the US Dollar between the given support and resistance levels in the short run.

However, if the given resistance does not hold, the price for gold could rise to the resistance level formed by the 100– and 200-hour SMAs, currently located circa 1,403.00.

Market calm ahead of Powell testimony

On Wednesday, the US dollar consolidated recent gains ahead of a speech by Fed Chair Powell before the House of Representatives. The dollar index stabilised around 97.48, trading flat on the session. The single currency stayed above the 1.12 psychological support, while the Aussie and the Kiwi fell the most amongst G10 currencies, thanks to disappointing Chinese inflations figures and lower rate outlook. NZD/USD eased as low as 0.6590, down 0.17% on the session. AUD/USD fell to 0.6910, down 0.25% on the day. Further lows are expected, thanks to a slowing Chinese economy.

The recovery in US treasury yields helped to prop up the greenback as investors scale down their dovish rate expectations. Market participants now expects the US central bank to trim the fund rate target band by 25bps to 2%-2.25%, compared to an expected cut of 50bps a week ago. Despite optimist words from Donald Trump following the G20 meeting, trade talks between China and US remain at centre stage. Surprisingly, news released yesterday that Donald Trump last month promised president Xi Jinping that the US government would soften the tone regarding the massive protest in Hong Kong in order to rekindle negotiations failed to boost the equity market. S&P 500 futures are back below the 1,980 threshold, while the EuroSTOXX 600 is stuck below the 388 level.

Given the high level of uncertainty regarding Powell’s next move, traders would most likely remain on the sidelines ahead of Powell testimony. Indeed, it would be one of the last chance for Powell, together with Thursday testimony, to polish its communication before the July 31 FOMC meeting.

CAD should maintain course against G10 currencies

It seems that Canada is well positioned to stay the top performing G10 currency this year. Although the Canadian manufacturing sector continues to see decreasing production amid subdued demand from domestic and export markets, inflation continues to overshoot inflation target of 2% while the labor market stays firm, thus encouraging the Bank of Canada to follow the Fed’s footsteps. Meanwhile, relations with the US on the front of trade appears on good track as the US Commerce Department recently confirmed it will not impose tariffs on Canadian steel and aluminum exports ahead of a ratification of the US-Mexico-Canada trade agreement by fall 2019. Furthermore, the decision taken by OPEC+ to extend supply cuts by 1.2 million bpd until March 2020 in an attempt to stabilize crude oil prices should also benefit the loonie.

Untouched since last October at 1.75%, the BoC overnight rate is likely to stay unchanged as the central bank will maintain its dovish stance due to continued downside risks on the global economy and adopt a wait-and-see, data-dependent approach, monitoring inflation and manufacturing activities. We see limited downward potential for the CAD, which is expected to stand up against USD despite today’s Fed Chair Powell speech (USD/CAD: -3.75% year-to-date).

EUR/USD

Current level - 1.1206

Still bearish below 1.1250 and a rebound above that area is needed in order to confirm failure at 1.1180 support.

USD/JPY

Current level - 108.89

The uptrend is intact heading towards 109.80 hurdle. Crucial on the downside is 108.25 low. Initial intraday support lies at 108.60.

GBP/USD

Current level - 1.2445

The pair has reached the target area at 1.2440 and there is still no sign of a reversal, so only a violation of the initial resistance  at 1.2480 and mostly at the crucial 1.2540 will signal a completion of the downtrend.

Will Powell satisfy investors craving for cuts?

It's shaping up to be a relatively slow morning in European trade, as investors await the first testimony from Fed Chairman Jerome Powell.

Powell is due to appear before the House Financial Services Committee to testify on the semi-annual monetary policy report, an appearance that comes at a time when the Fed's policy direction is both crucial and unclear.

This year, the Fed has effectively become the only game in town, as far as investors are concerned. Growing trade tensions between the US and China, a murkier global economic outlook and more modest performances from corporate America have left investors feeling anxious. The economy alone can no longer support the stock market which has forced the Fed to play a more active role and likely reverse some of its tightening of last year.

The Fed has reluctantly opened the door to doing so but market pricing is quite aggressive and the central bank is yet to either catch up or better manage expectations, perhaps out of fear of the market repercussions and backlash that would inevitably follow from the White House.

Either way, all eyes will now be on Powell who will likely be heavily grilled on the central banks intentions. I'm sure we can also expect the odd dose of harsh criticism from certain politicians loyal to Trump.

Euro is lifted broadly today as following rebound in German yields. 10-year bund yield is currently back above -0.3 handle, comparing to historical low at -0.407 made earlier this month.

Though, for now, EUR/USD is kept well below 1.1268 minor resistance. Fall from 1.1412 is still in progress. More importantly, another decline and break of 1.1181 support should pave the way to retest 1.1107 low.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.12141
Open: 1.12069
% chg. over the last day: -0.09
Day's range: 1.12019 – 1.12106
52 wk range: 1.1111 - 1.2009

EUR/USD continues to consolidate. There is no defined trend. Local levels of support and resistance are: 1.11950 and 1.12300. At the moment, participants in financial markets have taken a wait-and-see attitude before publishing the FOMC Minutes, which may indicate further rates for adjusting the monetary policy of the regulator. We also recommend to pay attention to the speech of the Fed. Positions must be opened from key levels.

At 21:00 (GMT+3:00) the US will publish the FOMC protocols.

Indicators do not give accurate signals: the price is testing 50 MA, which at the moment is a strong dynamic resistance.

The MACD histogram is in the negative zone, but above the signal line, which gives a weak signal to sell EUR / USD.

The Stochastic Oscillator is in the neutral zone, the% K line crossed the% D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.11950, 1.11600
Resistance levels: 1.12300, 1.12750, 1.13100

If the price consolidates below the local support of 1.11950 the quotes may fall toward 1.11600-1.11400.

Alternatively, the quotes may recover toward 1.12600-1.12800.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.25164
Open: 1.24577
% chg. over the last day: -0.44
Day's range: 1.24479 - 1.24642
52 wk range: 1.2438 - 1.3631

On the GBP / USD currency pair, bearish sentiment still prevails. The trading instrument again updated local minima. At the moment, the key support and resistance levels are: 1.24400 and 1.24900, respectively. The pound remains under pressure due to the uncertainty around Brexit. The main contenders for the post of leader of the Conservative Party have announced that they are ready for the UK to leave the block on a “tough” Brexit basis. Today, investors will be evaluating important economic releases from the UK. We recommend to open positions from key levels.

The Economic News Feed for 10.07.2019:

GDP report - 11:30 (GMT+3:00);

The volume of production in the UK manufacturing industry - 11:30 (GMT+3:00).

The price has fixed below 50 MA and 100 MA, which indicates the strength of the sellers.

The MACD histogram is in the negative zone, but above the signal line, which gives a weak signal to sell GBP / USD.

The Stochastic Oscillator is in the neutral zone, the %K line crossed the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.24400, 1.24000
Resistance levels: 1.24900, 1.25350, 1.25600

If the price consolidates below 1.24400, the quotes can fall toward 1.24000.

Alternatively, the quotes can correct to 1.25200-1.25400.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.30888
Open: 1.31232
% chg. over the last day: +0.26
Day's range: 1.31232 - 1.31362
52 wk range: 1.2727 - 1.3664

The USD/CAD continues to recover after a prolonged fall. CAD has reached key extremums and .is consolidating in the range of 1.31150-1.31400. The quotes can correct further. Today the focus is on the meeting o the Bank of Canada. It is expected that the regulator will keep the basic parameters of monetary policy at the same level. We recommend to pay attention to the comments and rhetoric of the representatives of the Central Bank. Positions must be opened from key levels.

At 17:00 (GMT+3: 00), the Bank of Canada will announce its decision on a key interest rate.

The price has fixed above 50 MA and 100 MA, which indicates the power of buyers.

The MACD histogram is in the positive zone and continues to rise, indicating bullish sentiments.

The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which also indicates bullish moods.

Trading recommendations

Support levels: 1.31150, 1.30850, 1.30550
Resistance levels: 1.31400, 1.32000

If the price consolidates above the level of 1.31400, the quotes can rise to 1.32000.

Alternatively, the quotes can fall toward 1.30900-1.30700.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 108.720
Open: 108.856
% chg. over the last day: +0.20
Day's range: 108.829 - 108.991
52 wk range: 104.97 - 114.56

On the USD/JPY currency pair the buyers still prevail. At the moment, the trading instrument is consolidating near the round level of 109.000. Local support is at the 108.700 mark. In the near future, technical correction of the USD/JPY quotes is expected. Investors are awaiting the publication of FOMC protocols. We also recommend paying attention to the dynamics of US government bond yields. Positions must be opened from key levels.

The Economic News Feed for 10.07.2019 is calm.

The price has fixed above 50 MA and 100 MA, which indicates the strength of buyers.

The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy USD/JPY.

The Stochastic Oscillator is in the oversold zone, the% K line crossed the% D line. There are no signals at the moment.

Trading recommendations

Support levels: 108.700, 108.500, 108.300
Resistance levels: 109.000, 109.400, 109.600

If the price consolidates above the round level of 109.000, the quotes can grow to 109.300-109.500.

Alternatively, the quotes can decline to 108.500-108.300.

EURJPY is testing the 23.6% Fibonacci region from the high on 126.80 to the low on 120.77, around 122.20 as it seems ready to continue the very short-term upside tendency. The 20- and 40-simple moving averages (SMAs) posted a bullish crossover confirming the recent bullish run. The RSI is sloping up approaching the 70 level, while the MACD has been rising over the last week.

A successful climb above the immediate level of 23.6% Fibo would increase positive speculation towards the 122.50 minor resistance and then until the 123.10 – 123.15 area, which encapsulates the 38.2% Fibonacci of 123.10.

A possible pullback to the downside may meet support at the short-term moving averages currently at 121.90 ahead of the 121.50 barrier, taken from the latest lows.

In brief, EURJPY has been developing within an ascending triangle pattern over the last month and only a close above the significant area of 123.15 could change the long-term outlook to bullish.

EURGBP is flirting with the 0.90 level for the second day in a row, keeping its uptrend above its simple moving averages (SMAs) and near six-month highs. The RSI is a shy below its 70 overbought mark, while the MACD seems to be regaining momentum under its red signal line, suggesting a positive but cautious trading in the short-term.

On the upside, the bulls could rest around a former resistance around 0.9032 before heading towards the 0.9060 key level. Slightly higher, a more challenging battle could start near 0.9100, which if broken the way would potentially open towards the 0.9150 barrier.

In case of a price reversal, the 20-day SMA currently around 0.8935 could prove a tough obstacle as in previous sessions. If the line fails to halt downside corrections, the spotlight will turn to the 0.8875-0.8828 area, while deeper and under the 0.8800 number, traders would lose confidence on the upward pattern started in early May.

Meanwhile, in the medium-term picture, the golden cross between the 50- and the 200-day SMA keeps hopes for a brighter outlook alive.

In brief, EURGBP could trade cautiously bullish in the short-term, while in the medium-term timeframe the positive outlook is likely to stay in place for now.

• Powell's testimony awaited as investors seek clues on rates following mixed data
• US dollar continues to advance higher as odds of 50 basis points cut are erased
• Pound and aussie extend declines on rising rate cut expectations

Markets are praying for a dovish Powell

Fed Chairman Jerome Powell's testimony will be today's and the week's focal point as investors attempt to gauge how dovish policymakers will be when they meet for their next policy meeting on July 30-31. Expectations that the Federal Reserve will begin an aggressive easing cycle had been running high until last Friday's stronger-than-expected jobs reports, which dashed hopes of a 50bps cut at the July meeting.

Nevertheless, traders think a 25-bps rate reduction is a certainty in July, though recent remarks from some Federal Open Market Committee (FOMC) members have been on the cautious side. Philadelphia Fed President Patrick Harker yesterday said there was no “immediate need” for a rate cut in an interview with the Wall Street Journal.

Powell's hearing before the House Financial Services Committee will start at 14:00 GMT and investors expect to get clearer signals from the Fed chief on the extent and pace of rate reductions in the coming months. If Powell indicates the Fed is likely to only make an “insurance” cut in July in a pre-emptive move to soften the impact of a potential sharp slowdown in the US economy, this would lead to further unwinding of bets that there will be at least a 75 bps rate cut over the next 12 months.

The minutes of the Fed's June's policy meeting, due at 18:00 GMT, should provide investors additional clues on whether a majority of FOMC members are likely to vote for a rate cut at this month's meeting.

Dollar inches higher ahead of Powell

US Treasury yields extended their recovery on Wednesday, with the 10-year yield climbing to a three-week high of 2.098% on ebbing expectations of large rate cuts by the Fed. The rebound in yields has been helping the greenback to pull back from the lows it plumbed at the end of June when it fell below the 107-yen level. It has since reclaimed the 108 level and is on the verge of breaking above the 109 handle.

The dollar's quick turnaround has been crushing, however, for other majors. The euro briefly dipped below the $1.12 yesterday as investors bet that the incoming ECB President, Christine Lagarde, will push for looser monetary policy in the Eurozone.

Stocks have also come under pressure but signs of some progress in US-China trade talks capped losses in Asia today. The White House's chief economic advisor, Larry Kudlow, said the phone conversation between US and Chinese negotiators was “constructive” and that a face-to-face meeting could be arranged soon.

Aussie extends slide, pound struggles to halt decline

The Australian dollar slid to near three-week lows, approaching the key $0.69 level, as data out of China and Australia disappointed. Chinese producer prices missed expectations of an annual 0.3% gain, to stay unchanged in June, raising concerns about a further deterioration in demand for factory goods. Meanwhile, a closely watched barometer for consumer confidence in Australia fell to a two-year low, suggesting the RBA will need to cut rates again in the coming months to support the economy.

There's also growing expectations that the Bank of England could soon join others in cutting rates and UK data due later today could confirm that the economy is weakening. The pound has fallen sharply on these expectations, tumbling to six-month lows.

Brexit uncertainty has also been weighing on the pound with little support from recent potentially positive developments. The UK's opposition Labour party said on Tuesday they now formally back a second referendum, while MPs voted in favour of a bill that would complicate any attempt by the next prime minister to suspend Parliament in a bid to force through a no-deal Brexit.

Bank of Canada to stand pat

The Bank of Canada will announce its latest policy decision at 14:00 GMT today, and while the announcement could get overshadowed by Powell's testimony, the decision could prove crucial for the loonie. The Canadian dollar recently scaled 8-month highs against the greenback but whether the rally resumes will depend on what the BoC signals about future policy. Should the BoC provide any indication that it is worried enough about the global growth picture to consider cutting rates in the future, it will be difficult for the loonie to resume its uptrend.

AUDUSD downside pressure remains towards 0.6850 level as we expect more weakness to occur. On the upside, resistance lies at the 1.6950 level. A cut through here will turn attention to the 0.7000 level and then the 0.7150 level where a violation will set the stage for a retarget of the 0.7200 level. Support resides at the 0.6850 level where a breach will aim at the 0.6800 level. Below here will set the stage for a run at the 0.6750 level with a cut through here targeting further downside pressure towards the 0.6700 level. On the whole, AUDUSD faces further downside threats medium term.