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Crude oil prices posted a modest rally on Friday, gaining over 1.50% on the day. The gains came after reports showed that OPEC oil production dropped in June to 2014 lows.

OPEC production was recorded at 30 million bpd, down 170,000 bpd from May. This was the lowest output since April 2014 despite higher production from Saudi Arabia.

Crude Oil Maintains the Bearish Flag Pattern

Despite the gains on Friday, oil prices failed to clear the resistance level of 57.50. This has kept the bias to the downside. A breakdown off recent lows could validate the bearish flag pattern. This will see oil prices targeting the 50.00 handle. To the upside, if oil breaks past the 57.50 handle, we could expect to see prices settling back within the 60 and 57.50 range that was previously established.

Germany's manufacturing orders showed a 2.2% decline on a month over month basis in May. Economists forecast a 0.1% decline. On a yearly basis, German manufacturing is down 8.6%.

The euro remained weak on the data besides the stronger USD. Traders will be closely watching the data out of the eurozone ahead of the ECB meeting due later in July. ECB President Draghi has promised to lower interest rates if the economy continues to deteriorate.

EURUSD Breaks the 1.1250 Support

The currency pair broke past the support level at 1.1250 level on Friday. This pushed the EURUSD to test a two-week low at 1.1206 before pulling back slightly. In the near term, we expect the currency pair to test the 1.1250 level to establish resistance. If resistance forms, then we expect the downside bias to push the EURUSD to lower lows. The next main target is seen at 1.1190.

A strong Nonfarm Payrolls caused pressure on the stock markets, reducing the chances of the interest rates lowering by the Fed in the upcoming months. The increase employment numbers (224K) has surprised investors due to strong warning signals about the labour market cooling. As a result, this news caused demand for the dollar, which in turn put pressure on stocks, ignoring the recent growth based on the expectations of aggressive Fed policy easing.

Positive news on the latest round of US-China trade negotiations has so far failed to return the risky assets appetite to the markets this week. Now, the chances of Fed mitigation – to support the dollar and suppress demand for stocks – are fading.

Stocks

S&P500 futures retreated 0.8% down from the peak levels reached on Friday morning. Investors have taken profits from the previous rally, overestimating the chances of the interest rates lowering. In addition, market players have become noticeably more cautious in their actions, realising that an impressive pullback often follows historical highs.

EURUSD

The dollar purchases strengthening led to a EURUSD decline to 1.1220 on Friday. This confirmed the downward trend which has remained since the end of last month. As a result, the pair returned under MA(50): from the side of technical analysis, it could be considered as an additional signal to Sell. In the absence of other significant drivers up to Tuesday evening, EURUSD can be guided by technical indicators only.

GBPUSD

The British pound fell below 1.2500 on a wave of Friday's dollar purchases. On Monday morning, GBPUSD has returned to the area slightly above this level. Behind last week’s decline was staying ahead of Bank of England Governor Mark Carney's rhetoric easing and the overall demand for the dollar. Still, buyers' interest in the British currency is noticeable on a decline below 1.25. Without an increase in the odds of Brexit ending erratically, the pound looks significantly oversold at current levels and is attractive for purchases during downtrends.

USDTRY

Turkish lira was hit in the morning, losing 2.3% at the opening of trading day. The Bank of Turkey's independence has returned to the agenda as the President Recep Tayyip Erdogan suddenly removed the Head of the Central Bank from his post who after he refused to reduce the interest rate, despite repeated calls for it by the government. The influence of this event can go beyond the limits of the Turkish lira course. That could be an unpleasant precedent both in the context of pressure on the Central Bank's heads and the relatively new wave of currency war fears.

Pivot (invalidation): 108.20

Our preference Long positions above 108.20 with targets at 108.65 & 108.80 in extension.

Alternative scenario Below 108.20 look for further downside with 108.05 & 107.90 as targets.

Comment A support base at 108.20 has formed and has allowed for a temporary stabilisation.

Pivot (invalidation): 1.2540

Our preference Short positions below 1.2540 with targets at 1.2505 & 1.2480 in extension.

Alternative scenario Above 1.2540 look for further upside with 1.2560 & 1.2590 as targets.

Comment The RSI calls for a drop.

Pivot (invalidation): 1.1240

Our preference Short positions below 1.1240 with targets at 1.1205 & 1.1180 in extension.

Alternative scenario Above 1.1240 look for further upside with 1.1255 & 1.1270 as targets.

Comment The RSI calls for a new downleg.

Pivot (invalidation): 5.6990

Our preference Long positions above 5.6990 with targets at 5.7900 & 5.8330 in extension.

Alternative scenario Below 5.6990 look for further downside with 5.6640 & 5.6380 as targets.

Comment The RSI is bullish and calls for further upside.

Pivot (invalidation): 0.6995

Our preference Short positions below 0.6995 with targets at 0.6970 & 0.6955 in extension.

Alternative scenario Above 0.6995 look for further upside with 0.7010 & 0.7025 as targets.

Comment A break below 0.6970 would trigger a drop towards 0.6955.

Pivot (invalidation): 1.3060

Our preference Long positions above 1.3060 with targets at 1.3090 & 1.3105 in extension.

Alternative scenario Below 1.3060 look for further downside with 1.3045 & 1.3030 as targets.

Comment The RSI lacks downward momentum.

Daily Pivots: (S1) 1.1193; (P) 1.1240; (R1) 1.1274; More...

Intraday bias in EUR/USD remains on the downside at this point. Corrective recovery from 1.1107 should have completed way earlier than expected at 1.1412. Firm break of 1.1181 support will confirm this bearish case and target retest of 1.1107 low. On the upside, above 1.1287 minor resistance will turn intraday bias back to the upside for 1.1412 instead.

In the bigger picture, bullish convergence condition in daily and weekly MACD suggests that 1.1107 is a medium term bottom. However, rejection by 55 EMA retains medium term bearish. Outlook will be neutral for now. On the downside, break of 1.1107 will resume the down trend from 1.2555 (2018 high) to 78.6% retracement of 1.0339 to 1.2555 at 1.0813. Meanwhile, break of 1.1412 will resume the rebound to 38.2% retracement of 1.2555 to 1.1107 at 1.1660