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During the past two weeks, the common European currency versus the Canadian Dollar has depreciated about 2.50% in value. The currency pair hit a new 2019 low at 1.4682 during the morning hours of today's session.

As for the near future, it is likely that the EUR/CAD exchange rate will continue its downhill movement during the following trading sessions. The potential target for bearish traders will be near the weekly S2 at 1.4537.

However, the currency exchange rate might reverse from the current price level at 1.4682 and aim for the 50– hour simple moving average and the weekly R1 at 1.4820 in the short term.

The US dollar has started the new trading week fairly subdued against the Japanese yen currency, following another false technical breakout above the 108.45 resistance. A range break is now needed for 108.10 to 108.45 price range for clarity on the pairs intraday direction. FED Chair Jerome Powell’s comments this week are also likely to be another major driving force for the USDJPY pair.

The USDJPY pair is only bullish while trading above the 107.45 level, key technical resistance is found at the 108.60 and 108.80 levels.

If the USDJPY pair trades below the 108.10 level, key technical support is found at the 107.80 and 107.30 levels.

The euro has made minor gains against the US dollar during the European trading session as bulls hold the pair above key intraday support. Bulls now need to move price above the resistance confluence on the four-hour time frame, around the 1.1255 level. The MACD indicator on the four-hour time is still turning down and has yet to issue a clear short-term buy signal for the EURUSD pair.

The EURUSD pair is only bullish while trading above the 1.1255 level, key technical resistance is found at the 1.1280 and 1.1310 levels.

If the EURUSD pair trades below the 1.1220 level, key support is found at the 1.1205 and 1.1170 levels.

At the end of previous week, the EUR/USD currency pair dropped to the support level formed by the monthly S1 at 1.1220. During Monday's morning, the pair was testing the given support.

If the given level holds, it is expected, that a reversal north could occur within the following hours. In this case, it is unlikely, that the Euro could exceed the 1.1259/1.1273 range against the Greenback due to the resistance cluster formed by the 55– and 100-hour SMAs, as well the weekly PP.

If the given support level does not hold, it is likely, that the exchange rate could maintain its decline. Note, that the rate could face the support of the Fibonacci 38.20% retracement located at the 1.1200 mark.

During Friday, the GBP/USD exchange rate reversed north from the 2018/2019 minimum located at 1.2488. During today's morning, the rate was trading near the 1.2540 level.

It is unlikely, that the currency pair could surpass the 1.2545/1.2574 range due to the resistance cluster formed by the 55– and 100-hour SMAs, as well the monthly S1 and the weekly PP.

If the given cluster holds, it is expected, that the pair could reverse south on the nearest future to re-test the given minimum.

Also, it is unlikely, that the British Pound could exceed the 1.2600 mark against the US Dollar due to the upper boundary of the short-term descending channel

During the previous trading session, the USD/JPY currency pair breached the medium-term descending channel north. During today's morning, the pair was trading near the upper boundary of the short-term ascending channel at 108.60.

From a theoretical point of view, it is expected, that the exchange rate could reverse south from the given line in the nearest future. A possible downside target could be the support level—the weekly PP at 108.22.

On the other hand, the rate could trade sideways around the Fibonacci 38.20% retracement located at the 108.44 mark in the short term.

It is unlikely, that some upside potential could prevail in the market, and the pair could breach the given channel north.

On Friday, the XAU/USD exchange rate tested the psychological level at 1,390.00. During Monday's morning, the rate was testing the resistance formed by the 55-, 100– and 200-hour SMAs, currently located circa 1,410.00.

If the given resistance holds, it is likely, that gold could depreciate against the US Dollar in the short term. In this case, the rate most likely to be supported by the monthly PP at the 1,385.30 mark.

Otherwise, it is expected, that the price for gold could surpass the given resistance and continue to increase. A possible upside target is the psychological level at 1,425.00.

On Friday, the US dollar updated monthly highs against the publication of optimistic statistics on the labor market for June. Thus, the number of people employed in the nonfarm sector increased by 224K in June, while experts forecasted growth by 160K. The average hourly earnings growth did not meet market expectations and counted to 0.2%. At the same time, the previous figure was revised upwards to 0.3%. The unemployment rate rose from 3.6% to 3.7%. Traders suggest that the Fed will not sharply reduce the interest rate after such fairly positive data. On Friday, the US dollar index (#DX) closed in the positive zone (+0.58%).

On Friday, weak economic releases from Canada were also published. Thus, the employment rate fell by 2.2K in June, while investors expected an increase by 10.0K. Ivey PMI counted to 52.4 in June instead of the expected 55.0.

Boris Johnson, a front-runner to replace British Prime Minister, said that the country would most likely exit from the EU without a deal by October 31. "We were pretty much ready on March 29. And we will be ready by October 31," he told the Sunday Telegraph. The official believes that the UK partners should understand that the country is ready for no-deal Brexit and should be worried about this. We recommend following the current information on the Brexit issue.

The "black gold" prices show positive dynamics. At the moment, futures for the WTI crude oil are testing the mark of $57.70 per barrel.

Market Indicators

• On Friday, there was the bearish sentiment in the US stock markets: #SPY (-0.11%), #DIA (-0.11%), #QQQ (-0.20%).
• The 10-year US government bonds yield has been recovering. Currently, the indicator is at the level of 2.02-2.03%.

The News Feed on 2019.07.08:

• Today the publication of important economic news is not expected.

Weak Signals on a Summer Monday

European markets have walked into Asian equity markets in the red. Fridays strong, US labor reports has put speculation of a 50bp Fed cut in July on hold. The market had fully priced in a 25bp cut this month but talk of additional easing has slowed. With nearly 100bp cut pricing in for 2019, a resilient US economy will put this forecast in jeopardy. Bond yields rebounded marginally on the back of the unexpected strong US job market data. While the US job growth has slowed, it remains robust to consider ten years of economic expansion. US 10-year treasury yields climbed 8bp to 2.03% giving the USD a boost against g10 currencies. This week Trade uncertainties have reappeared as a primary driver. Trade talks between China and the US are expected to begin as soon as this week. News flow indicates that Huawei will be the key theme in the next few rounds of trade discussion.

Last week’s goodwill generated by the G20 statement, condemning protectionism and promise that central banks would support economic expansion, has faded (since nothing had fundamentally changed). What is left is the negative effect of trade worries. Incoming data from Germany, indicates the engine of economic growth for Europe, continues to falter. Germany’s auto sectors specifically have been damaged by a lack of demand from China. At this point, even ECB stimulus will be inadequate to support Germany’s elevated economic forecasts. Even the expectation of easing monetary policy has not materially de-escalation in trade tensions. Which is weighing on confidence and investment. Sentiment around European equities has improved in anticipation of looser monetary policy. However, a deeper repricing will have to be accompanied by economic recovery, which prospected has weakened. Summer trading and lack of real news flow suggest that rogue volatility is likely rather than pure directional trading.

TRY old demons resurface

Market participants will likely take some time to consider the global impact of Saturday’s headline relating to the dismissal of Turkish Central Bank Governor Murat Cetinkaya, in office since April 2016. The constructive discussions at the G20 summit between Turkish President Tayyip Erdogan and US President Donald Trump had given Turkish lira a relief for the past few weeks. Yet the trend is likely to reverse as the timing for a change in Turkish Central Bank (TCMB) forward guidance is worst amid a significant loss of TRY carry advantage and a stronger dollar as expectations of Fed rate cuts is on the sideline following upbeat labor data.

Investors are therefore questioning again the independence of the TCMB, which cost TRY a major depreciation against major currencies (USD/TRY: +40%) last year and put pressures on the Turkish banking sector. This scenario could well recur as a quick U-turn of monetary policy towards rate cuts at its next monetary policy committee on 25 July 2019 will likely corroborate the statement and put upward pressures on Turkey’s inflation. Furthermore, the June assessment made by Moody’s on Turkey’s sovereign credit, whose credit rating has been cut deeper into junk territory (from Ba3 to B1), and a group of 18 banks among which two state-owned banks Ziraat Bank and Vakifbank have been notified as having deteriorating credit profiles, confirms the vulnerability of Turkish financial sector to extreme monetary policy measures. A sustained rally in USD/TRY is therefore expected looking forward.

USD/TRY is currently trading at 5.7260, bouncing from 5.5967 (04/07/2019 low) 2-months low and heading along 5.80 short-term.

Notes/Observations

• Euro Zone data remains on soft footing (session saw Germany Industrial Production, miss; France Industrial Confidence miss and Euro Zone Investor Confidence miss)
• Turkey fires it central bank chief after President was frustrated by lack of rate cuts
• Greece's centre-right New Democracy party led by Kyriakos Mitsotakis has regained power
• Focus turns to Fed Chair Powell's mid-week testimony following better Jun jobs report

Asia:

• China Jun Forex Reserves hit $3.12T to rise to highest level since Apr 2018 as gold holding rose for the 8th straight month
• China Jun retail car sales 1.8M units, +4.9% y/y (first rise in 13 months)

Europe/Mideast:

• Turkey Central Bank Gov Cetinkaya removed from office. Deputy Gov Murat Uysal appointed as the new Governor
• Greece election results saw the: Center right opposition party New Democracy (ND) secure power (as speculated)
• UK Lawmakers from ruling Conservatives and opposition Labour both indicated they are looking for ways to prevent the next PM from doing a no deal Brexit\. Tory MP Grieve said to be planning to amend a Bill today that would ensure the House was sitting in Oct so that the next PM could not suspend parliament to get a no deal Brexit through
• ECB's Villeroy (France) reiterated Council stance that would act as necessary to support the Euro Area economy
• Deutsche Bank to cut18k jobs by 2022; to focus on serving its European companies and retail banking clients. To report Q2 loss of €2.8B and suspend 2019 an 2020 dividends

Energy:

• Iran official confirmed it will scale back commitment to the 2015 nuclear deal with world powers and would continue reducing its commitments every 60 days, unless signatories of the pact moved to protect it from US sanctions;

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.07% at 389.82, FTSE -0.05% at 7,549.53, DAX -0.20% at 12,542.54, CAC-40 -0.18% at 5,583.68, IBEX-35 -0.25% at 9,312.00, FTSE MIB +0.01% at 21,987.50, SMI -0.08% at 9,971.50, S&P 500 Futures -0.15%]

Market Focal Points/Key Themes:

• European Indices trade slightly lower across the board, following a mixed session in Asia and lower US Index futures.
• On the corporate front shares of Deutsche Bank reverse early gains after confirming their restructuring plan, in which they will exit the Global Equities and significantly reduce its Corporate and Investment Banking risk weighted assets.
• Sodexo is a notable decliner after subdued guidance following higher Revenues for the first 9 Months of the year; Bam Groep also sharply declines after cutting full year margin guidance, while Wastec, Photo-me and Fuchs Petrolub are among other declines on earnings.
• Meanwhile TGS-NOPEC gains after Revenue which came ahead of forecasts, SPectrum gains after guiding Q2 Rev ahead of consensus, while Xaar and Exmar also gain on earnings.
• In other news SIF Holdings gain sharply after an order win, while Lundin Petroleum gains following Equinor's divestiture of 16% holding for a direct interest of 2.6% in the Johan Sverdrup field and a cash consideration of ~$650M.
• Looking ahead notable earners include AZZ Inc.

Equities

• Consumer discretionary: IAG [IAG.UK] -1% (fee on data theft), Sodexo [SW.FR] -3% (earnings)
• Consumer staples: Imperial Brands [IMB.UK] +2.5% (share buyback), Scottish Salmon [SSC.NO] +13% (strategic options)
• Energy: Fuchs Petrolub [FPE.DE] -3% (profit warning)
• Financials: Deutsche Bank [DBK.DE] -1% (radical transformation program; job cuts)
• Industrials: Koninklijke BAM Groep [BAMNB.NL] -20.5% (profit warning), Washtec [WSU.DE] -16% (prelim earnings; profit warning), Pirelli [PIRC.IT] +4% (analyst action)
• Technology: Xaar [XAR.UK] +2% (trading update)

Speakers

• EU official stated ahead of a Eurogroup meeting that Greece might not meet its 2019 budget target as spending measures adopted by previous Greek govt might not meet its target. European countries were working on an European candidate to replace Largarde at the IMF
• South Korea President Moon urged Japan to withdraw export curbs; concerned over production setbacks from curbs. Added that Japan export curbs had political purpose and could not rule out countermeasures
• Iran Foreign Ministry spokesperson: Next step in reducing commitments under nuclear deal within 60 days would be within the framework but 3rd phase to be stronger. To only discuss issues included in current nuclear treaty ant not take part in any negotiations for a new deal
• China Foreign Ministry spokesperson Geng Shuang: Iran nuclear issue should be resolved diplomatically

Currencies/ Fixed Income

• Main highlight for markets will likely be Fed Chair Powell's testimony before the House Financial Services Committee (Wednesday) and the Senate (Thursday) on monetary policy and the state of the US economy.
• Turkey TRY currency (lira) was approx 2% weaker against the Euro and USD after President Erdogan dismissed the central bank governor Cetinkaya. Erdogan was said to be frustrated that the central bank has kept its benchmark interest rate at 24% since last September

Economic Data

• (DE) Germany May Industrial Production M/M: 0.3% v 0.4%e; Y/Y: -3.7% v -3.2%e
• (DE) Germany May Current Account Balance: €16.5B v €12.6Be; Trade Balance: €20.6B v €17.0Be; Exports M/M: 1.1% v 0.9%e; Imports M/M: -0.5% v +0.3%e
• (RO) Romania Q1 Final GDP (3rd reading): Q/Q: 1.3% v 1.3%e; Y/Y: 5.0% v 5.0%e
• (FI) Finland May Preliminary Trade Balance: €0.0B v -€0.3B prior
• (FR) Bank of France Jun Industrial (Business) Sentiment: 95 v 99e
• (CZ) Czech May Industrial Output Y/Y: 3.2% v 1.1%e; Construction Output Y/Y: 0.2% v 8.9% prior
• (CZ) Czech May National Trade Balance (CZK): 24.4B v 11.3Be
• (CH) Swiss Weekly Total Sight Deposits (CHF): 579.0B v 579.3B prior; Domestic Sight Deposits: 476.1B v 466.7B prior
• (TW) Taiwan Jun Trade Balance: $3.9B v $4.5Be; Exports Y/Y: +0.5% v -4.8%e; Imports Y/Y: +6.6% v -1.5%e
• (EU) Euro Zone July Sentix Investor Confidence: -5.8 v +0.1e (lowest since Nov 2014)

Fixed Income Issuance

• (SI) Slovenia to sell €250M in 1.1875% 2029 bond; guidance seen +10bps to mid-swaps

Looking Ahead

• (EU) European Finance Ministers (Eurogroup) meets (ECB's Draghi in attendance)
• (IT) Italy Debt Agency (Tesoro) announces upcoming BTP bond auction for Thursday, July 11th
• (IE) Ireland Debt Agency (NTMA) announces upcoming auction for Thursday, July 11th
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 05:30 (DE) Germany to sell €2.0B in 6-month BuBills
• 06:00 (TR) Turkey to sell Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (IL) Israel to sell 2022, 2023, 2028 and 2047 bonds
• 07:00 (MX) Mexico Jun Vehicle Production: No est v 349.6K prior; Vehicle Exports: No est v 304.9K prior
• 07:00 (BR) Brazil Jun FGV Inflation IGP-DI M/M: 0.8%e v 0.4% prior; Y/Y: 6.2%e v 6.9% prior
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (CL) Chile Jun CPI M/M: 0.0%e v 0.6% prior; Y/Y: 2.2%e v 2.3% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (CL) Chile Jun Trade Balance: $0.6Be v $0.4B prior; Total Exports: $5.6Be v $6.4B prior; Total Imports: 5.0Be v 6.0B prior; Copper Exports: No est v $3.1B prior
• 08:30 (CL) Chile Jun International Reserves: No est v $38.2B prior
• 09:00 (FR) France Debt Agency (AFT) to sell combined €B in 3-month, 6-month and 12-month Bills
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: expected to leave Base Rate unchanged at 0.25%
• 09:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 15:00 (US) May Consumer Credit: $17.0Be v $17.5B prior