Sample Category Title

On Monday, the EUR/USD currency pair surpassed the monthly S1 at 1.1220. During today's morning, the pair tested the support formed by the Fibonacci 38.20% retracement at 1.1200.

If the given support level holds, it is likely, that the exchange rate could reverse north in the nearest future. However, note, that the rate has to surpass the 55-hour moving average, currently located at 1.1227.

On the other hand, the pair could trade sideways within the cluster formed by the given Fibonacci retracement and the monthly S1.

From a theoretical point of view, it is unlikely, that the pair could drop lower than 1.1190 due to the support of the lower line of the short-term descending trend.

Yesterday, the GBP/USD exchange rate traded sideways around the psychological level at 1.2600. During Tuesday's morning, the rate renewed 2018/2019 minimum at 1.2462.

If the given minimum holds, it is expected, that a reversal north could occur. In this case, the currency pair could target the resistance formed by the 55-hour moving average, currently located at 1.2522.

Otherwise, it is expected, that some downside potential could continue to prevail in the market in the short term. Note, that the pair could be supported by the Fibonacci 0.00% retracement and the weekly S1 at 1.2441.

During Monday, the USD/JPY currency pair skyrocketed to the resistance level formed by the weekly and monthly R1 at 108.91. During today's morning, the pair was testing the given resistance.

From the one hand, it is expected, that the given level holds, and the exchange rate reverses south in the nearest future. It is unlikely, that the rate could drop lower than 108.44 due to the support of the 55-hour SMA and the Fibonacci 38.20% retracement.

On the other hand, the pair could surpass the given resistance and maintain its advance. Note, that in this the nearest possible resistance could be the weekly R2 at 109.32.

Markets off highs ahead of Powell testimonies

The rally in stock markets has stalled again at the start of the trading week, as last week’s jobs report continues to worry investors relying on rate cuts to sustain the rally.

Interestingly, expectations for rate cuts remain bullish, even if the odds of a 50 basis point cut this month have been dramatically pared back. We’ll have plenty of opportunity to see whether they’re justified this week, as Fed Chair Powell makes numerous appearances – along with his colleagues – and we get the minutes from the June meeting.

Fed Interest Rate Probability

I’m not convinced that investors will get the message they’re after this week, with Powell in the past having been very conservative in his interest rate rhetoric. The central bank has left the door open to cuts without committing to anything and I expect to get more of the same.

A cut in July will be difficult to dodge given current market pricing but Powell may use the opportunity to manage expectations beyond the meeting. How successful he’ll be is another thing as investors don’t appear to want to hear it and may instead continue to apply the pressure going into the September meeting.

UK data will dominate Wednesday's economic releases as the latest indicators on GDP growth, industrial output and trade are due to be published. The numbers, out at 08:30 GMT, will be watched for a possible rebound in growth during May following a dismal April. But even if economic output did bounce back in May, the latest PMI data suggest more pain is on the way for the British economy, casting a shadow over the pound's near-term outlook.

UK output expected to recover in May

Britain's gross domestic product (GDP) contracted by 0.4% month-on-month in April as industrial output slumped in a reversal of the temporary boost enjoyed in March when firms stockpiled in preparation of a possible no-deal Brexit on the UK's original departure date from the EU. But industrial production and broader output probably returned to growth in May, along with an expected improvement in the euro area – Britain's largest trading partner.

GDP is forecast to have expanded by 0.3% m/m in May, with the annual rate holding steady at 1.3%. Industrial production is expected to have recovered by 1.5% m/m, led by an anticipated 2.1% rebound in the manufacturing sub-sector, after tumbling by 2.7% in April. On a yearly basis, industrial and manufacturing output are forecast to have risen by 1.1% and 1.0%, respectively.

Positive data could temporarily support pound

Other releases on Wednesday will include the May trade balance. If the figures are broadly positive, they could help put a floor under sterling's recent slide, which would probably form around the January low of $1.2436. But with mounting worries about the global growth outlook from what is increasingly looking like a long-term trade war, and the ongoing Brexit uncertainty, any rebound is likely to be short-lived.

The pound could advance towards the $1.25 handle, near the June swing low, if the data ease fears about a sharp slowdown in British growth, before eying the $1.2590 resistance. An upside correction is probable if a positive set of figures coincide with a dollar sell-off as a number Fed officials will be speaking in the coming days and could signal a rate cut.

Downside risks are rising for pound

But given the growing worries recently that the UK economy could be headed for a technical recession if there is a contraction in the second quarter, the risks to the downside are currently greater for sterling. UK PMI numbers for June were far weaker than estimates and the only bright spot in the outlook for the global economy at the moment is the expectations of policy easing by major central banks.

Hence, worse-than-expected numbers on Wednesday would only deepen the bearish bets against the pound and could prompt the Bank of England to abandon its tightening bias and join its global peers by switching to a dovish stance. Under such circumstances, the pound could breach the nearest support at the 123.6% Fibonacci extension of the June upleg at $1.2438, opening the way for the 161.8% Fibonacci at $1.2332.

Notes/Observations

• Fed Chair Powell upcoming Congressional testimony remains in focus as bets on aggressive US rate cuts fade

Asia:

• Japan May Labor Cash Earnings Y/Y: -0.2% v -0.6%e; Real Cash Earnings Y/Y: -1.0% v -1.5%e
• Japan Trade Min Seko: Not thinking of withdrawing export restrictions on South Korea; Whether we take additional export restrictions depended on South Korea's response

Europe/Mideast:

• German Christian Democrats (CDU) leader Annegret Kramp-Karrenbauer (AKK): ECB low interest rate policy was causing problems for savers and thought should be given to curbing its duration
• The five largest Labour affiliated UK trade unions said to have reached a common position on Brexit after meeting Labour leader Corbyn

Americas:

• Commerce Dept to impose duties on Chinese and Mexican structural steel; won't impose duties on Canadian structural steel
• Bipartisan Policy Center (think tank) stated that US government could breach debt ceiling by the first half of Sept 2019 (earlier than prior projections); debt ceiling still seen as mostly likely to be hit in early Oct 2019

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.74% at 387.02, FTSE -0.30% at 7,526.47, DAX -1.27% at 12,384.61, CAC-40 -0.67% at 5,551.74, IBEX-35 -0.45% at 9,243.25, FTSE MIB -0.55% at 21,855.50, SMI -0.61% at 9,933.50, S&P 500 Futures -0.42%]

Market Focal Points/Key Themes:

Equities

• European Indices trade lower across the board tracking mostly lower Asian Indices and lower US index futures, with a profit warning from Chemical giant BASF setting the negative tone.
• BASF shares trade over 5% lower after guiding Q2 significantly below expectations as well as cutting their full year outlook, amid trade tensions and a weaker auto sector.
• Danske Bank shares also decline after cutting its full year outlook on financial market conditions and margin pressures, elsewhere Microfocus declines on in line results.
• Ocado share are a notable riser after affirming its full year outlook, with Orange Belgium another notable gainer on earnings; Bovis Home, SiS and Begbies Traynor are among other names gaining on earnings.
• In other news Nicox gains on receiving a $3M milestone payment, Deutz declines sharply after an analyst downgrade, while Renold declines sharply as it will be revising financial statements following disclosure of overstatement of certain asset values and profits.
• Looking ahead notable earners include PepsiCo, Lindsay Manufacturing and Northern Technologies.
• Consumer discretionary: Ocado [OCDO.UK] +7% (earnings), Bovis Homes Group [BVS.UK] 1% (trading update), SiS Science in Sport [SIS.UK] +2.5% (trading update)
• Financials: Danske Bank [DANSKE.DK] -3% (profit warning)
• Healthcare: Nicox [COX.FR] +3.5% (milestone)
• Industrials: Deutz [DEZ.DE] -12% (analyst action), Renold [RNO.UK] -20% (found historical accounting issues)
• Materials: BASF [BAS.DE] -6% (profit warning)

Speakers

• Ireland Fin Min Donohoe: stated that prospects of a disorderly Brexit is now a significant risk
• South Korea Foreign Ministry spokesperson: To raise issue on Japan export curbs at WTO meeting
• South Korea Industry Min urged Japan to immediately stop making groundless claims. Considering every possible measure against Japan’s export curbs and could hold talks on trade with South Korea on Friday, July 12t
• Malaysia Central Bank Policy Statement reiterated that its that policy stance remained accommodative and supportive of economic activity. Inflation projected to rise in the coming months while baseline GDP growth projections remained within 4.3-4.8% range but subject to downside risks

Currencies/ Fixed Income

• USD: The USD was at multi-week highs against the major pairs with focus on the upcoming Fed Chair Powell Congressional testimony later this week. Greenback was getting some tailwinds as bets on any aggressive US rate cuts this month fade. Analysts continue to see other G7 central bank with the foot on the stimulus pedal. We look to the next level in the USD index futures at last month’s high of 97.265.
• EUR: The Euro continued its slide lower as it approaches the 1.118 level set last month. Not much on the calendar for the Euro so we will look to the USD to control market movements against the Euro.
• GBP: The cable trades lower below the 1.25 handle as it approaches it’s 2 year low of 1.2420. For the rest of the week we have GDP on Wednesday which could increase volatility and potentially break that level.

Economic Data

• (CH) Swiss Jun Unemployment Rate: 2.1% v 2.2%e; Unemployment Rate (Seasonally Adj): 2.3% v 2.4%e
• (NO) Norway May Overall GDP M/M: 0.4% v 0.3% prior; GDP Mainland M/M: 0.3% v 0.1%e
• (DK) Denmark May Current Account Balance (DKK): 17.1B v 16.5B prior; Trade balance: 9.1B v 7.3B prior
• (JP) Japan Jun Preliminary Machine Tool Orders Y/Y: -38.0% v -27.3% prior
• (CZ) Czech May Retail Sales Y/Y: 2.3% v 4.0%e; Retail Sales (ex-auto) Y/Y: 2.7% v 5.1%e
• (CZ) Czech Jun Unemployment Rate: 2.6% v 2.6%e
• (HU) Hungary Jun CPI M/M: -0.2% v 0.0%e; Y/Y: 3.4% v 3.7%e
• (HU) Hungary May Preliminary Trade Balance: €0.7B v €0.4Be
• (MY) Malaysia Central Bank (BNM) left the Overnight Policy Rate unchanged at 3.00%; as expected
• (SE) Sweden May Household Consumption M/M: -0.9% v -0.1% prior; Y/Y: -1.0% v 0.2% prior
• (IT) Italy May Retail Sales M/M: -0.7% v 0.0% prior; Y/Y: -1.8% v -0.6%e

Fixed Income Issuance

• (NL) NETHERLANDS DEBT AGENCY (DSTA) SELLS €1.43B VS. €1.5-2.0B INDICATED RANGE IN 0.25% JULY 2029 DSL BONDS; AVG YIELD: -0.205% V +0.238% PRIOR
• (ES) Spain Debt Agency (Tesoro) sells total €4.93B vs. €4.5-5.5B indicated range in 6-month and 12-month bills
• (ID) Indonesia sells total IDR8.0T vs. IDRT indicated in 6-month Islamic Bills and 2-year, 4-year, 15-year, and 30-year Sukuk Bonds
• (ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2030, 2032 and 2037 bonds

Looking Ahead

• (UR) Ukraine Jun CPI M/M: -0.1%e v +0.7% prior; Y/Y: 9.6%e v 9.6% prior
• 05:30 (UK) Weekly John Lewis LFL Sales data
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.8B in 3-month and 12-month Bills
• 05:30 (DE) Germany to sell combined €750M in 2023 and 2030 I/L Bonds
• 06:00 (US) Jun NFIB Small Business Optimism: 103.3e v 105.0 prior
• 06:00 (TR) Turkey to sell Bonds
• 07:00 (MX) Mexico Jun CPI M/M: 0.1%e v 0.3% prior; Y/Y: 4.0%e v 4.3% prior; CPI Core M/M: 0.3%e v 0.2% prior
• 07:45 (US) Goldman Economist Chain Store Sales w/ July 6th w/w: %; Y/Y: %
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (RU) Russia announces upcoming OFZ Bond issuance
• 08:15 (CA) Canada Jun Annualized Housing Starts: 208.6Ke v 202.3K prior
• 08:30 (CA) Canada May Building Permits M/M: -10.0%e v +14.7% prior
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 10:00 (US) May JOLTS Job Openings: 7.465Me v 7.449M prior
• 10:00 (MX) Mexico Weekly International Reserve data
• 10:10 (US) Fed’s Bullard (dove, voter) in St Louis
• 10:15 (IE) ECB’s Lane (Ireland, chief economist) on twitter
• 08:00 (RU) Russia announces upcoming OFZ Bond issuance
• 14:00 (US) Fed's Bostic (dove, non-voter) at Washington University in St. Louis
• 16:30 (US) Weekly API Oil Inventories

The British pound continues its recent bearish breakdown against the US dollar, with sellers probing the important 1.2480 support level. A sustained move below the 1.2480 level could prompt GBPUSD technical selling towards at least the 1.2460 and 1.2435 levels. Overall, the US dollar is extremely strong across the board today, ahead of a key speech by Federal Reserve Chair Jerome Powell later today.

The GBPUSD pair is heavily bearish while trading below the 1.2505 level, key support is found at the 1.2480 and 1.2435 levels.

The GBPUSD pair is only bullish while trading above the 1.2530 level, key resistance is found at the 1.2570 and 1.2610 levels.

The US dollar has continued to advance against the Japanese yen, with the pair trading at its highest level since May 31st this year. USDJPY bulls are expected to test the 109.00 level, although the 110.00 level remains the larger medium-term upside target. Selling is currently not advised until a daily price closes below the 108.45 level has occurred or the price reaches 110.00.

The USDJPY pair is bullish while trading above the 107.60 level, key technical resistance is found at the 109.00 and 110.00 levels.

If the USDJPY pair trades below the 108.60 level, key technical support is found at the 108.45 and 108.10 levels.

The rally in stock markets has stalled again at the start of the trading week, as last week's jobs report continues to worry investors relying on rate cuts to sustain the rally.

Interestingly, expectations for rate cuts remain bullish, even if the odds of a 50 basis point cut this month have been dramatically pared back. We'll have plenty of opportunity to see whether they're justified this week, as Fed Chair Powell makes numerous appearances - along with his colleagues - and we get the minutes from the June meeting.

I'm not convinced that investors will get the message they're after this week, with Powell in the past having been very conservative in his interest rate rhetoric. The central bank has left the door open to cuts without committing to anything and I expect to get more of the same.

A cut in July will be difficult to dodge given current market pricing but Powell may use the opportunity to manage expectations beyond the meeting. How successful he'll be is another thing as investors don't appear to want to hear it and may instead continue to apply the pressure going into the September meeting.

Bitcoin extends gains as FOMO trade resumes

Bitcoin is continuing to make strides higher on Tuesday, building on the momentum the rally gathered over the weekend at at the start of the week. As ever, we're seeing numerous explanations for the latest gains in the cryptocurrency space but there looks to be very little of actual substance to them.

Rather, this is just another example of a FOMO rally. We saw a correction in bitcoin but the good feeling remains following the launch of Facebook's Libra coin and as we've seen before, if people think it can continue to rise - justified or not - it will do so. Irrationality is nothing new in the space and the days of very volatile trading is well and truly back.

Gold pares gains on dollar rebound

The dollar is continuing to enjoy a post-jobs report bounce today, up around 0.2%, as Fed interest rate cuts continue to dominate investors' mindsets. With global economic prospects increasingly in doubt as we head into another important earnings season, the Fed is quickly becoming the only game in town as far as markets are concerned.

The belief that numerous cuts are coming has been very beneficial for gold prices, although this rally has since stalled just shy of $1,450. A break below $1,380 may signal more pain to come for the yellow metal, which would hardly be disastrous given that it was trading below $1,300 in late May. The rally that followed was very significant, rising almost 13% over the next few weeks.

Inventory data eyed for oil

Oil prices have stabilized in recent days, with the aftermath of the G20 and OPEC meeting now priced in. It may be spurred back to life again though with the release of more inventory data as API releases its latest report. We've seen some big drawdowns in recent weeks which has helped to support prices but with them now being elevated again, a reverse of this trend could encourage some profit taking.

The US dollar continues to hold positions against a basket of major currencies. Yesterday, the US dollar index (#DX) closed trading session with a slight increase (+0.10%). After the publication of positive data on the US labor market last week, investors expect the Fed to be less aggressive concerning further interest rate lowering. Today, the speech by the Fed Chairman J. Powell on monetary policy in the House Committee on Financial Services is in the focus of attention. According to the monetary policy report, the regulator is open to lowering the base interest rate to stimulate economic growth. According to CME FedWatch Tool, more than 95% of financial market participants believe that the Central Bank will reduce the range of key interest rate by 25 basis points to 2.00% -2.25% at a meeting in July.

UK Brexit Minister Stephen Barclay said that in order to avoid the “hard” Brexit, the withdrawal agreement should be renegotiated. The official believes that Brexit will be disruptive, first of all, not for the UK, but for the whole European Union, especially for Ireland.

The 'black gold' prices are moving in different directions. At the moment, futures for the WTI crude oil are testing $57.80 per barrel. At 23:30 (GMT+3:00) API weekly crude oil stock will be published.

Market Indicators

• Yesterday, there was the bearish sentiment in the US stock markets: #SPY (-0.55%), #DIA (-0.45%), #QQQ (-0.70%).
• The 10-year US government bonds yield has been recovering. Currently, the indicator is at the level of 2.04-2.05%.

The News Feed on 2019.07.09:

• JOLTS job openings at 17:00 (GMT+3:00).