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AUD/USD's break of 0.6977 support turned resistance confirms short term bottoming at 0.6864, ahead of 0.6832 key structural support. Intraday bias is back on the upside for 38.2% retracement of 0.7277 to 0.6864 at 0.7022. Sustained break there will target 61.8% retracement at 0.7119 next. On the downside, however, below 0.6912 minor support will turn bias back to the downside for 0.6864 low.

In the bigger picture, considering bearish divergence condition in D MACD, a medium term top could be formed at 0.7277 after failing to sustain above 61.8% retracement of 0.8006 (2021 high) to 0.5913 (2024 low) at 0.7206. Deeper fall could be seen to 38.2% retracement of 0.5913 to 0.7277 at 0.6756 as a correction. But strong support should be seen there to bring rebound. Consolidations would continue below 0.7277 for a while.

While the pullback from 1.4247 extended, outlook is unchanged in USD/CAD. It's now in a correction to rally from 1.3480. Downside should be contained by 1.3965 cluster support (38.2% retracement of 1.3480 to 1.4247 at 1.3954 to bring rebound. On the upside, above 1.4159 minor resistance will bring retest of 1.4247 high. Firm break there will target 61.8% retracement of 1.4791 to 1.3480 at 1.4290.

In the bigger picture, current development suggests that fall from 1.4791 has completed as a three wave correction to 1.3480. It's still early to judge if rise from there a corrective bounce, or resumption of the larger up trend from 1.2005 (2021 low). But in either case, retest of 1.4791 high should be seen next.

GBP/JPY is staying in consolidations below 217.99 temporary top and intraday bias remains neutral. Deeper pullback cannot be ruled out, but downside should be contained above 214.69 support to bring another rally. On the upside, above 217.99 will target 220.90 fibonacci projection level next.

In the bigger picture, the long term up trend is in progress. Next target is 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90. For now, outlook will remain bullish as long as 55 W EMA (now at 208.22) holds, in case of pullback.

EUR/JPY is still bounded in sideway trading in range of 183.14/186.30 and intraday bias remains neutral for the moment. While the price actions from 182.10 are looking corrective, stronger rebound cannot be ruled out. On the upside, firm break of 186.30 will resume the rebound from 182.10 towards 187.93 high. On the downside, break of 183.14 will bring deeper fall to retest 182.10.

In the bigger picture, there is no sign of reversal yet. Uptrend from 114.42 (2020 low) is still expected to resume at a later stage to 78.6% projection of 124.37 (2022 low) to 175.41 (2025 high) from 154.77 at 194.88. However, sustained break of 55 W EMA (now at 179.93) will argue that it's already in a medium term down trend to 175.41 resistance turned support and below.

EUR/GBP is staying in consolidations above 0.8507 and intraday bias remains neutral. Stronger recovery cannot be ruled out, but upside should be limited below 0.8610 support turned resistance to bring another fall. Below 0.8507 will resume larger down trend to 61.8% retracement of 0.8221 to 0.8863 at 0.8466.

In the bigger picture, current development suggests that rise from 0.8221 (2024 low) has completed at 0.8863, just ahead of 38.2% retracement of 0.8221 (2024 low) to 0.8863 (2025 high) at 0.8618. Deeper fall would be seen back to 0.8201 (2022 low). For now, outlook will be neutral at best as long as 0.8863 hold.

Focus is now on 1.6306 support as EUR/AUD's fall from 1.6617 accelerates lower. Firm break there will indicate that rebound from 1.6108 has completed. Deeper decline should the be seen to retest this low. On the upside, break of 1.6506 will turn bias back to the upside for 1.6617.

In the bigger picture, outlook will stay bearish as long as 1.6842 resistance holds. Fall from 1.8554 (2025 high) is expected to continue to 61.8% retracement of 1.4281 to 1.8554 at 1.5913. Decisive break there will pave the way back to 1.4281 (2022 low). However, firm break of 1.6842 should confirm medium term bottoming, and bring stronger rally.

Intraday bias in EUR/CHF is turned neutral with current retreat, and some consolidations would be seen below 0.9278 temporary top. Downside should be contained by 0.9210 support to bring another rise. Above 0.9278 will resume whole rally from 0.8979 to 100% projection of 0.8979 to 0.9264 from 0.9094 at 0.9379. However, break of 0.9210 will bring deeper fall back to 0.9176 support instead.

In the bigger picture, the break of medium term falling trend line resistance indicates that 0.8979 is already a medium term bottom. Considering bullish convergence condition in W MACD, rise from there should at least be reversing the fall from 0.9928, with prospect of developing into a medium term up trend. Firm break of 0.9394 resistance will add more credence to this case. For now risk will remain on the upside as long as 0.9094 support holds, in case of retreat.

China’s economy grew at its slowest rate in more than three years during the second quarter, falling short of expectations as weak household consumption overshadowed resilient manufacturing and export performance. The slowdown has renewed concerns about the long-term sustainability of China’s export- and investment-led growth model.

Gross domestic product (GDP) expanded by 4.3% year-on-year in the April–June period, down from 5.0% in the first quarter and below the government’s full-year growth target range of 4.5% to 5.0%.

The weaker-than-expected data increases pressure on Beijing to introduce additional economic stimulus. However, many analysts believe the Communist Party’s Politburo is unlikely to announce significant policy measures at its closely watched meeting later this month, citing concerns over rising debt levels.

Other economic indicators painted a mixed picture. Retail sales increased by 1.0% in June after declining 0.6% in May, while industrial production accelerated to 5.3% from 4.5% in the previous month. The figures underscore China’s continued dependence on external demand to support growth, even as trading partners raise concerns about persistent trade imbalances and geopolitical tensions, including the conflict involving Iran, weigh on the global economy.

Trade data released on Tuesday reinforced this trend, showing that strong overseas demand continues to offset weak domestic consumption. Exports surged 27% year-on-year in June, up from 19.4% in May and well above market expectations, while the trade surplus widened significantly. The strength in exports was driven largely by robust demand linked to the global artificial intelligence boom, highlighting the sector’s growing role as the primary engine of China’s economic growth.

• Fear is driving the Crude oil market again.
• The decline in global stocks is making the ‘black gold’ market more vulnerable.

The US dollar retreated as consumer price inflation slowed from 4.2% to 3.5% and core inflation fell from 2.8% to 2.6% in June. The chances of a Fed rate hike in July have fallen from 40% to 17%, while the probability of two rounds of monetary tightening in 2026 has dropped from 58% to 35%. Investors believe that the CPI figures for May marked a peak and that disinflationary trends will continue. Therefore, there is no need for the Fed to raise rates.

Kevin Warsh is sceptical of this view. In his testimony before Congress, he accused the Fed of failing to fulfil its primary mandate. The central bank has failed to bring inflation back to its 2% target for five years, and the new chair intends to rectify this. He advises against focusing on a single inflation report. The escalation of the conflict in the Middle East suggests that it is still too early to speak of a trend.

Brent has risen over four of the last six trading days and has managed to recoup all its June losses during this period. Investors believe that the sharp decline in global stocks is making the market more vulnerable than it was at the start of the conflict in the Middle East. The resumption of the US blockade of the Strait of Hormuz, new sanctions against Tehran and threats to bomb energy infrastructure are heightening the risks of retaliatory action by Iran.

Markets fear the closure of the Bab el-Mandeb Strait, another key global chokepoint, by the Houthis, who are controlled by Tehran. This would further undermine exports from the Gulf states and push Brent above $100 per barrel in the very near future. The Yemeni group is even threatening that oil prices could soar above $200.

Just as at the start of the conflict in the Middle East, Brent is rising on the back of market sentiment. Fears of worsening supply disruptions are outweighing bearish factors, including a decline in global demand led by China, the availability of alternative routes, still substantial global oil reserves and the US’s readiness to boost exports.

Meanwhile, according to API data, US oil stocks have fallen for the 13th consecutive week, albeit at a slower pace than expected. Investors are awaiting figures from the US Energy Information Administration.

The FxPro Analyst Team

Eurozone industrial production unexpectedly declined in May, falling -0.2% month-on-month after rising 0.3% in April and confounding expectations for a 0.3% increase. The weaker-than-expected reading suggests the region's manufacturing recovery remains uneven, with strength in some sectors continuing to be offset by weakness elsewhere. Across the broader European Union, industrial production also slipped, edging down -0.1% after a 0.2% gain in April.

The sector breakdown highlighted a mixed picture. Energy output rose 2.2% and capital goods production increased 0.3%, pointing to continued resilience in investment-related activity. Non-durable consumer goods also advanced 0.8%. However, those gains were outweighed by a -0.3% decline in intermediate goods production and a sharper -1.1% fall in durable consumer goods, indicating that manufacturing supply chains and consumer-related industries continue to face subdued demand.

Performance also varied considerably across member states. Ireland posted the largest monthly decline at -5.2%, followed by Malta and Lithuania, while Luxembourg, Hungary and Poland recorded the strongest gains. The data reinforce the view that the Eurozone's industrial recovery remains fragmented rather than broad-based.

Economic Data

Market Takeaways

• Eurozone industrial production unexpectedly contracted, missing expectations and indicating that the manufacturing recovery remains uneven.
• Growth in energy output and capital goods was outweighed by declines in intermediate goods and durable consumer goods.
• The weakness points to continued softness in manufacturing supply chains and discretionary consumer demand.
• Country-level performance remained highly divergent, highlighting the fragmented nature of the Eurozone's industrial recovery.

Full Eurozone industrial production release here.