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Daily Pivots: (S1) 1.2499; (P) 1.2519; (R1) 1.2539; More....

With 1.2587 minor resistance intact, intraday bias in GBPUSD stays on the downside. Current decline from 1.3381 is in progress for 1.2391 low. Firm break there will resume larger down trend. On the upside, above 1.2587 minor resistance will turn intraday bias neutral first. But near term outlook will stay bearish as long as 1.2783 resistance holds.

In the bigger picture, down trend from 1.4376 (2018 high) is still in progress. Break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don't expect a firm break there yet. Hence, focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 0.9910; (P) 0.9928; (R1) 0.9958; More...

USD/CHF's rebound from 0.9695 is still in progress and intraday bias remains on the upside. Current rebound from 0.9695 would target 1.0014 resistance. Upside could be limited by 61.8% retracement of 1.0237 to 0.9695 at 1.0030. On the downside, below 0.9842 minor support will turn bias back to the downside for retesting 0.9695 low instead. However, sustained break of 1.0030 will pave the way back to retest 1.0237 high.

In the bigger picture, current development suggests that up trend from 0.9186 (2018 low) has 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.

Daily Pivots: (S1) 108.40; (P) 108.61; (R1) 108.93; More...

USD/JPY's rebound from 106.78 extended higher and breached 108.80 resistance. Sustained trading above there will confirm short term bottoming at 106.78. Further rise should then been seen to 110.67 resistance next. However, on the downside, break of 108.28 minor support will turn bias back to the downside for 107.53 support and then 106.78 low.

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) 1.3062; (P) 1.3083; (R1) 1.3116; More...

USD/CAD is staying in tight range and intraday bias remains neutral for the moment. Focus stays on 1.3052/68 cluster support. Sustained trading below there will carry larger bearish implication, and bring further fall to 1.2673 fibonacci level next. However, break of 1.3145 resistance, will indicate short term bottoming, with bullish convergence condition in 4 hour MACD. Further rise should then be seen to 1.3239 support turned resistance.

In the bigger picture, medium term outlook stays neutral for now even though the case of bearish reversal is building up. Decisive break of 1.3068 cluster support (38.2% retracement of 1.2061 to 1.3664 at 1.3052) will confirm completion of up trend from 1.2061 (2017 low). Further fall should be seen to 61.8% retracement at 1.2673 next. On the upside, sustained break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685, is needed to confirm resumption of up trend from 1.2061 (2017 low). Otherwise, risk will stay on the downside.

According to the CFTC Commitments of Traders report for the week ended July 2, NET LENGTH for crude oil futures rose +14 007 contracts to 392 810 for the week. Speculative long positions jumped +16 239 contracts and shorts added +2 232 contracts. Crude oil prices continued recently ahead of OPEC+ meeting. Prices retreated after the deal to extend output cut towards 1Q19.  For refined oil products, NET LENGTH for gasoline fell -3 720 contracts to 78 552, while NET SHORT for heating oil dropped -3 051 contracts to 9 284 for the week. NET SHORT for natural gas futures dropped -4 017 contracts to 159 145 contracts for the week.NET LENGTH of gold and silver futures jumped again last week. NET LENGTH for gold futures surged +22 392 contracts to 258 946. Speculative long positions rose +14 594 contracts, while shorts declined -7 798. For silver futures, speculative long positions added +2 166 contracts while shorts gained +2 276. NET LENGTH for silver futures slipped -110 contracts to 30 455. For PGMs, NET LENGTH of Nymex platinum futures rose +7 311 contracts to 9 297 while that for palladium increased +1 168 contracts to 12 017.

General Trend:

• Financials rise in Japan, chip-related shares decline amid focus on South Korea
• Geely declines in Hong Kong on reduction in sales forecast
• ANTA Sports’ shares volatile in HK after report by Muddy Waters
• South Korea and Japan trade concerns persist; The two countries may soon hold talks (Japanese press)
• South Korea’s LG Chemical is conducting scenario planning regarding restrictions proposed by Japan
• Australia APRA eases bank capital proposal
• Monthly wages continue to decline in Japan
• Japan’s Mizuho cut long-term prime rates (last cut rates in 2016)
• Markets still awaiting specific date for face-to-face US/China trade talks

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• (AU) AUSTRALIA JUN NAB CONFIDENCE: 2 V 7 PRIOR; BUSINESS CONDITIONS: 3 V 1 PRIOR
• (AU) APRA responds to submissions for plans to support loss-absorbing capacity of major Australia banks: To require big banks to raise capital by 3 ppts of risk weighed assets (RWAs) by Jan 1 2024 vs 4-5 ppts under initial proposal
• (NZ) New Zealand Deputy PM Peters: Govt can take credit for lower NZ$, confidence levels are low even though the government’s performance rating is “so much higher” than its predecessor - NZ interview
• (AU) Australia Treasurer Frydenberg expressed opposition to additional economic stimulus following tax cuts - Press

Japan

• Nikkei 225 opened +0.3%
• (JP) Japan safety standards for nuclear power are proving cost prohibited at ~¥4.8T per site to bring up to new code; which may dampen Japan's push to promote nuclear energy – Nikkei
• (KR) Japan Trade Min Seko: Not thinking of withdrawing export restrictions on South Korea; Whether we take additional export restrictions is depending on South Korea's response
• NTDOY Plans to shift Switch console production to Vietnam from China; affirms FY19 Switch sales at 18M units – Nikkei
• 6178.JP Seeking to raise postal prices, due to sales tax increase planned for Oct – press
• (JP) JAPAN MAY LABOR CASH EARNINGS Y/Y: -0.2% V -0.6%E; REAL CASH EARNINGS Y/Y: -1.0% V -1.5%E
• (JP) Japan Cabinet Sec Suga: South Korea did request Japan to provide explanation over export curbs; reiterates not considering backing down on export restrictions
• (JP) Japan Fin Min Aso reiterates will raise sales tax unless there is a Lehman level crisis, not considering raising sales tax beyond 10% at this point
• (JP) Japan MoF sells ¥1.9T v ¥1.9T prior in 0.1% coupon 5-year JGB: avg yield: -0.233% v -0.228% prior, bid to cover: 4.34x v 4.51x prior

Korea

• Kospi opened +0.3%
• (KR) South Korea President Moon: Urges Japan to withdraw export curbs; concerned over production setbacks from curbs
• 005930.KR Recently Apple paid KRW800B for unfilled OLED orders it was guaranteed - Korean press
• (JP) Japan and South Korea planning to talk about exports as soon as this week - Japan press
• 051910.KR Not yet impacted by Japan export controls, but planning for it, Targeting 20204 Rev KRW59.0T v KRW30.0T 2019 target

China/Hong Kong

• Hang Seng opened -0.1%; Shanghai Composite opened -0.2%
• (CN) China Jun retail car sales 1.8M units, +4.9% y/y (first rise in 13 months) – PCA
• (CN) Former PBoC official Sheng Songcheng: 'weak' US dollar to help stabilize yuan; yuan will rise over the long term due to economic growth potential – China press
• 175.HK Reports June Sales Volume +1% m/m, -29% y/y; Cuts FY19 Sales volume target 10% 1.4M units (prior 1.5M units)
• (CN) Nikkei analysts see China Q2 GDP at 6.2% y/y, which would be the weakest pace since 1992, due to impact of US trade war
• (CN) China PBoC Open Market Operation (OMO): Skips for the 12th consecutive; Net nil injection/drain
• (CN) China PBOC sets yuan reference rate: 6.8853 v 6.8881 prior
• (HK) Hong Kong Chief Exec Lam: Reiterates work on China extradition bill has stopped
• (CN) China Intellectual Property (IP) Regulator: H1 Foreign patent applications in China +8.6% y/y; applications of chip design +45.7% y/y

Other Asia

• (TW) US approves $2.0B in arms sales to Taiwan including Abrams tanks

North America

• (US) The Bipartisan Policy Center (think tank) said the 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 - Press
• (US) Trump Administration rule requiring drug prices to be shown in TV ads halted by US judge - financial press
• (UK) Pres Trump: We will no longer deal with UK Ambassador to the US (after critical comments made by the ambassador of Trump leaked)

Europe

• (DE) German Christian Democrats (CDU) leader Annegret Kramp-Karrenbauer (AKK): ECB low interest rate policy is causing problems for savers and thought should be given to curbing its duration - financial press
• (UK) More than 50% 0f UK businesses with non-British staff say they would be harmed by post-Brexit immigration plans – BBC
• (UK) Jun BRC Sales LFL Y/Y: -1.6% v -1.1%e
• (UK) Prime Min May spokesperson: Ambassador Darroch retains the full support as UK Ambassador to the US

Levels as of 1:20 ET

• Nikkei 225, flat, ASX 200 -0.2%, Hang Seng -0.8%; Shanghai Composite -0.4%; Kospi -0.1%
• Equity Futures: S&P500 -0.3%; Nasdaq100 -0.5%, Dax -0.2%; FTSE100 -0.2%
• EUR 1.1220-1.1209; JPY 108.89-108.67 ; AUD 0.6977-0.6953 ;NZD 0.6632-0.6621
• Gold -0.3% at $1,396/oz; Crude Oil -0.4% at $57.45/brl; Copper -0.4% $2.648/lb

Daily Pivots: (S1) 0.6963; (P) 0.6978; (R1) 0.6990; More...

Intraday bias in AUD/USD remains neutral with focus on 0.6956 minor support. Firm break there will indicate completion of the rebound from 0.6831. Intraday bias will be turned back to the downside for retesting 0.6831 low. On the upside, above 0.7047 will resume the rebound to 61.8% retracement of 0.7295 to 0.6831 at 0.7118.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Following mild pull back in US equities overnight, Asian markets are mixed. Though, apparent weakness in China and Hong Kong stocks are dragging down Australian Dollar, which is the weakest one for today so far. Sterling is the next weakest as data showed retail sales suffered the worst June in decades. Dollar, Euro and Yen are the firmer ones. Trading in the currency markets are generally muted as focus remain on Fed Chair Jerome Powell's testimony, which starts tomorrow. He comments will, hopefully, clear the picture on whether Fed will cut interest rates this month.

Technically, USD/JPY's breach of 108.80 suggests near term bullish reversal. But sustained trading above this resistance is needed to confirm. AUD/USD is back pressing 0.6956 support again and firm break will confirm completion of rebound from 0.6831. USD/CAD is still bounded in tight range around 1.3052/68 cluster support. It remains to be seen if such cluster support could be defended successfully.

In Asia, currently, Nikkei is up 0.07%. Hong Kong HSI is down -0.74%. China Shanghai SSE is down -0.52%. Singapore Strait Times is up 0.04%. Japan 10-year JGB yield is up 0.0061 at -0.143. Overnight, DOW dropped -0.43%. S&P 500 dropped -0.48%. NASDAQ dropped -0.78%. 10-year yield dropped -0.014 to 2.034, staying above 2% handle.

Australia NAB Business confidence unwound post election spike

Australia NAB Business Conditions improved from 1 to 3 in June, but remain below average. Business Confidence dropped from 7 to 2, largely unwound the bounce from 0 to 7 in May. NAB said "the recent run of results also suggest that the economy is unlikely to record a significant pickup in growth in Q2." Further, "forward orders also remain below average (and are negative), suggesting a near-term turn around in business activity is unlikely."

According to Alan Oster, NAB Group Chief Economist, "Business confidence appears to have unwound its spike in May, which we think was driven by a short-term election bounce and increased optimism around a renewed interest rate easing cycle by the RBA. While business conditions increased slightly in the month, they remain well below average after trending lower for over a year now. The decrease in conditions has been relatively broad-based across states and industries – suggesting that there has been sector wide loss of momentum over the past year".

UK retail sales picture bleak on Brexit uncertainty

UK BRC like-for-like sales dropped -1.6% yoy in June, below expectation of -1.5% yoy. Total sales dropped -1.3% yoy. The data were worst in record for June since 1995. Helen Dickinson, Chief Executive of BRC, noted, "overall, the picture is bleak: rising real wages have failed to translate into higher spending as ongoing Brexit uncertainty led consumers to put off non-essential purchases."

She added: "Businesses and the public desperately need clarity on Britain's future relationship with the EU. The continued risk of a No Deal Brexit is harming consumer confidence and forcing retailers to spend hundreds of millions of pounds putting in place mitigations – this represents time and resources that would be better spent improving customer experience and prices. It is vital that the next Prime Minister can find a solution that avoids a No Deal Brexit on 31st October, just before the busy Black Friday and Christmas periods."

Elsewhere

Japan labor cash earnings dropped -0.2% yoy in May, better than expectation of -0.6% yoy. Japan M2 rose 2.3% yoy in June, below expectation of 2.6% yoy. Swiss will release unemployment rate in European session. Later in the day, Canada will release housing starts and building permits.

But major focus will firstly be on Fed chair Jerome Powell's opening remarks on "stress testing" at the Federal Reserve Board Conference. Though, it's unsure if he will save the comments on monetary policy for tomorrow's Congressional testimony. Fed Vice Chair Randal Quarles and St. Louis Fed James Bullard will also speak.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6963; (P) 0.6978; (R1) 0.6990; More...

Intraday bias in AUD/USD remains neutral with focus on 0.6956 minor support. Firm break there will indicate completion of the rebound from 0.6831. Intraday bias will be turned back to the downside for retesting 0.6831 low. On the upside, above 0.7047 will resume the rebound to 61.8% retracement of 0.7295 to 0.6831 at 0.7118.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

Market movers today

Today we get mainland GDP out of Norway. The figure will be important when gauging the potential for further rate hikes from Norges Bank. The aggregated output index in Norges Bank's regional survey corresponds to growth in mainland GDP of around 3% over the remainder of the year. The monthly figure is difficult to predict, however, due to the large weather component in power and agriculture.

We also get export figures out of Denmark. Goods export has been looking good lately despite the global downturn, whereas the service sector, on the other hand, has slowed. This is not least due to the shipping fleet as growth in global trade has almost evaporated.

In Sweden, the May household consumption indicator is out. Declining retail sales and plunging car registrations yoy suggest a high risk for a negative print in the indicator. This could possibly be the worst since the great financial crisis.

Finally, Fed's Bullard speaks tomorrow, which is the first in a string of important statements from the Fed this week.

Selected market news

Asian stock markets are generally down this morning, as was broad American indices yesterday, as markets continue to look forward to Powell and the FOMC minutes the coming days shedding light on the Fed's upcoming policy actions. However, Nikkei is slightly up this morning partly due to stronger than expected labour cash earnings (May), which came in at -0.2% yoy (-0.6% expected). Although better than expected, Japanese cash earnings have now been falling for five months in a row; the longest streak since 2013.

In rates markets US treasuries bear flattened as 2y treasuries were up 3bp by close and 30y fells slightly by 1bp. The shorter end thus persisted despite a general risk-off move following the continued focus on Middle East tensions and Erdogan's dismissal of the central bank governor. The NY Fed survey of consumer expectations also showed a pickup in inflation expectations, which further added to the yield advance in the short end of the curve.

The Eurozone yesterday warned Greece not to breach the 3.5% primary budget surplus target set under the terms of Greece's bailout programme. Newly elected Greek Prime Minister Kyriakos Mitsotakis has previously argued that lowering the target would stimulate private sector growth by lowering the tax burden.

The effective fed funds rate is once again seeing large advances (+1bp to 2.42%) as the Fed's balance sheet roll-off continues, though the overnight GC rate did fall substantially, not indicating imminent funding pressures. However, the spread between the interest on excess reserves (2.35%) and the effective fed funds is now at 7bp, which is the largest since 2008. The Fed previously lowered the IOER earlier this year in an attempt to increase the supply of overnight funds.

For the 24 hours to 23:00 GMT, the EUR declined 0.10% against the USD and closed at 1.1215.

On the data front, the Euro-zone's Sentix investor confidence index unexpectedly declined to a level of -5.8 in July, marking its lowest level since November 2014 and compared to market expectations of a rise to 0.1. In the previous month, the index had recorded a reading of -3.3.

Separately, in Germany, the seasonally adjusted trade surplus widened to €18.7 billion in May, more than market expectations for a rise to a level of €17.0 billion. In the prior month, the nation recorded a revised surplus of €16.9 billion. Moreover, the nation's seasonally adjusted industrial production rose 0.3% on a monthly basis in May, less than market anticipations for an advance of 0.4%. In the previous month, industrial production had recorded a revised drop of 2.0%.

In the US, data showed that the consumer credit advanced by $17.1 billion in May, rising for the second consecutive month and more than market expectations for a rise to a level of $16.9 billion. In prior month, the consumer borrowing had recorded a level of $17.5 billion.

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

The pair is expected to find support at 1.1201, and a fall through could take it to the next support level of 1.1191. The pair is expected to find its first resistance at 1.1228, and a rise through could take it to the next resistance level of 1.1245.

Amid lack of macroeconomic releases in the Euro-zone today, traders would await the US NFIB small business optimism for June along with the JOLTS job openings for May, scheduled to release later in the day.

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