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Notes/Observations

• Focus on US Jun Nonfarm payrolls for Fed policy clues
• Germany May Factory Orders registered a bigger-than-expected fall
• India Budget speech well accepted; maintained its FY gross borrowing outlook and to begin raising part of borrowing in external currencies

Asia:

• BOJ Dep Gov Amamiya reiterated stance that will take a long time to hit price target; will not rule out any policy options
• Japan May Household Spending Y/Y: 4.0% v 1.5%e (fastest increase since May 2015). Reminder: Japan's sales tax is currently at 8% and planned to be raised to 10% in Oct
• Japan FSA said to consider tougher rules for life insurance companies, notes low interest rate environment. Rules could require these companies to hold higher levels of capital against the policies they underwrite.
• China Govt said to seek clarity on Huawei situation before making agricultural purchases from US
• China and the US could reach a preliminary trade agreement as soon as this September but  everyone said to be optimistic about the chances of a quick deal

Europe/Mideast:

• Bundesbank Spokesman said ECB member/Bundesbank President Weidman was not applying for job elsewhere; says Weidmann is 'happy' in current role as Bundesbank President
• UK Royal Marines seized Iran oil tanker in Gibraltar on Thursday, July 4th

Americas:

• Magnitude 6.5 earthquake reported on July 4th in central/southern California (said to be the largest quake in over 20 years), Reports of fires and damaged buildings after the quake but only 'minor' injuries have been reported thus far.
• Brazil Econ Min Guedes: Pension reform proposal could create savings of BRL3.0T in 20-years; reform expected to be approved next week

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.36% at 391.52, FTSE -0.34% at 7,578.08, DAX -0.19% at 12,606.26, CAC-40 -0.28% at 5,604.97, IBEX-35 -0.18% at 9,384.25, FTSE MIB -0.08% at 22,102.50, SMI -0.35% at 10,031.50, S&P 500 Futures -0.16%]

Market Focal Points/Key Themes:

• European Indices trade slightly lower across the board in quiet trade ahead of June Non Farm Payroll report out of the US. Asian Indices were mostly higher while US Index futures trade slightly lower.
• On the corporate front shares of John Menzies declines sharply after H1 results are to forecasted to be below expectations; Hexagon also declines as earnings and Revenue missed forecasts, while SIG Plc is another notable decliner as LFL sales fall 3.8%.
• Dios Fastfigheter meanwhile gains on earnings with Kid ASA also gaining on earnings.
• In other news Global Ports Holding gains on a strategic review including the sale of some assets; Ferrexpo declines on production data, while Rio Tinto leads the decliners among miners following a Chinese probe investigating the rise of iron ore prices.

Equities

• Consumer discretionary: John Menzies [MNZS.UK] -16% (profit warning), Takkt [TTK.DE] +2% (analyst action), Norwegian Air [NAS.NO] +6% (IAG deal speculation)
• Financials: VMP [VMP.FI] +10% (acquisition)
• Industrials: Hexagon [HEXAB.SE] -13% (prelim earnings; job cuts), OSRAM Licht [OSR.DE] +2% (accepts offer)
• Materials: SIG [SHI.UK] -6% (trading update), Ferrexpo [FXPO.UK] -3% (production data)

Speakers

• Italy Stats Agency (Istat) Monthly Economic Note: Jun Leading Indicator points to continued economic weakness
• India Finance Ministry FY20 Budget Presentation to maintain FY19/20 gross borrowing at INR7.1T. To set budget deficit to GDP target at 3.3% vs. 3.4% Feb forecast .Announced to begin raising part of borrowing in external currencies as it sought sell sovereign bonds overseas

Currencies/ Fixed Income

• FX markets were basically in a holding pattern as market participants awaited the US Jun jobs report for outlook for Federal Reserve monetary policy. The USD did manage to have a slight bid ahead of the data after Germany May Factory Orders registered a bigger-than-expected fall. More analysts saw a potential ECB move as soon as his month, Commerzbank analyst revised its ECB rate call and saw a 20bps cut in Deposit Rate in July from prior 10bps cut
• INR currency (Rupee) strengthened with the Indian bond yields moved lower in the aftermath of the Finance Ministry’s current fiscal year outlook. India Budget’s speech was well accepted as it maintained its FY gross borrowing outlook and to announced it would begin raising part of borrowing in external currencies

Economic Data

• (SE) Sweden Maklarstatistik Jun Housing Prices Y/Y 1% v 4% prior; Apartments Y/Y: 3% v 3% prior
• (DE) Germany May Factory Orders M/M: -2.2% v -0.2%e; Y/Y: -8.6% v -6.2%e
• (NO) Norway May Industrial Production M/M: 0.6% v 0.5% prior; Y/Y: -2.5% v -4.2% prior
• (NO) Norway May Manufacture Production M /M: +0.3% v -0.8%e; Y/Y: 5.0% v 4.3% prior
• (DK) Denmark May Industrial Production M/M: 3.5% v 1.0% prior
• (ZA) South Africa Jun Gross Reserves: $B49.8 v $48.3B prior; Net Reserves: $43.9B v $43.2B prior
• (AU) Australia Jun Foreign Reserves: A$77.5B v A$79.1B prior
• (FR) France May Trade Balance: -€3.3B v -€4.9Be
• (FR) France May Current Account Balance: +€0.3B v -€1.2B prior
• (ES) Spain May Industrial Output NSA Y/Y: +1.4% v -2.0% prior; Industrial Output SA Y/Y: 1.4% v 0.6%e; Industrial Production M/M: +0.3% v -0.5%e
• (CH) Swiss Jun Foreign Currency Reserves (CHF): 759.1B v 759.1B prior
• (HU) Hungary May Industrial Production M/M: +1.4% v -1.1% prior; Y/Y: 6.1% v 4.9%e
• (MY) Malaysia end-Jun Foreign Reserves: $102.7B v $102.6B prior
• (AT) Austria Jun Wholesale Price Index M/M: -1.6% v +0.4% prior; Y/Y: -0.7% v +1.1% prior
• (UK) Jun Halifax House Prices M/M: -0.3% v -0.4%e; 3M/Y: 5.7% v 5.7%e
• (SE) Sweden May Private Sector Production M/M: -0.1% v 0.0%e; Y/Y: 2.3% v 2.7%e
• (SE) Sweden May Industrial Orders M/M: 1.1% v 8.9% prior; Y/Y: +3.2% v -0.1% prior
• (SE) Sweden May Industry Production Value Y/Y: 1.6% v 3.3% prior; Y/Y: 1.8% v 3.4% prior
• (SE) Sweden Jun Budget Balance (SEK): -24.8B v +64.2B prior
• (RU) Russia Narrow Money Supply w/e Jun 21st (RUB): 10.33T v 10.43T prior
• (TW) Taiwan Jun CPI Y/Y: 0.9% v 0.9%e; CPI Core Y/Y: 0.5% v 0.5%e; WPI Y/Y: -1.9% v -0.8%e
• (TW) Taiwan Jun Foreign Reserves: $467.0B v $464.4B prior
• (UK) Q1 Unit Labor Costs Y/Y: 2.1% v 3.1% prior

Fixed Income Issuance

• (IN) India sold total INR170B vs. INR170B indicated in 2024, 2029, 2043, and 2049 bonds

Looking Ahead

• (ZA) South Africa sells total ZAR vs. ZAR760M indicated in I/ L 2025, 2038 and 2050 bonds
• (IT) Bank of Italy (BOI) Jun Balance sheet aggregates Target2 Liabilities: No est v €486.5B prior
• 06:00 (IE) Ireland May Industrial Production M/M: No est v 3.7% prior; Y/Y: No est v 7.5% prior
• 06:00 (UK) DMO to sell €5.0B in 1-month, 3-month and 6-month bills £0.5B, £2.0B and £2.5B respectively)
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Apr Gross Fixed Investment: -5.6%e -2.4% prior
• 08:00 (PL) Poland Jun Official Reserves: No est v $118.6B prior
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:30 (US) Jun Change in Nonfarm Payrolls: +160Ke v +75K;prior Change in Private Payrolls: +150Ke v +90K prior; Change in Manufacturing Payrolls: +3Ke v +3K prior
• 08:30 (US) Jun Unemployment Rate: 3.6%e v 3.6% prior; Underemployment Rat: No est v 7.1% prior; Labor Force Participation Rate: 62.8%e v 62.8% prior
• 08:30 (US) Jun Average Hourly Earnings M/M: 0.3%e v 0.2% prior; Y/Y: 3.2%e v 3.1% prior; Average Weekly Hours: 34.4e v 34.4 prior
• 08:30 (CA) Canada Jun Net Change in Employment: +9.9Ke v +27.7K prior; Unemployment Rate: 5.5%e v 5.4% prior; Full Time Employment Change: No est v +27.7K prior; Part Time Employment Change: No est v 0.0K prior; Participation Rate: 65.7%e v 65.7% prior; Hourly Wage Rate Y/Y: 2.7%e v 2.6% prior
• 08:30 (CL) Chile May Economic Activity Index (Monthly GDP) M/M: 0.4%e v 0.3% prior; Y/Y: 2.3%e v 2.1% prior; Economic Activity Y/Y: No est v 2.1% prior
• 09:00 (CL) Chile May Nominal Wage M/M: No est v 0.6% prior; Y/Y: No est v 5.1% prior
• 09:00 (RU) Russia Jun Official Reserve Assets: $510.0Be v $495.2B prior
• 10:00 (CA) Canada Jun Ivey Purchasing Managers Index (Seasonally Adj): No est v 55.9 prior; PMI (unadj): No est v 61.8 prior
• 10:30 (TR) Turkey Jun Cash Budget Balance (TRY): No est v -14.7b prior
• 11:00 (EU) Potential sovereign ratings after European close
• 15:00 (MX) Citibanamex Survey of Economists
• 20:00 (CO) Colombia Jun CPI M/M: 0.2%e v 0.3% prior; Y/Y: 3.4%e v 3.3% prior

Weekend:

• Greece holds first election since the country exited its international bailout

The Australian dollar stands at the back foot on Friday, following previous day’s strong upside rejection and repeated failure to close above cracked key barriers at 0.7030/35 (100DMA / daily cloud top).

Strong bullish momentum keeps the pair afloat just under pivotal resistance zone which continues to produce strong headwinds to larger bulls.

US jobs data are in focus and expected to generate direction signal upon release.

Stronger than expected figures may hurt Aussie dollar and send it through psychological 0.70 support (reinforced by rising 10DMA) towards strong support zone at 0.6965/50 (Fibo 38.2% of 0.6831/0.7047 / 55DMA / converged 20/30DMA’s).

Conversely, the pair may make eventual clear break through 0.7030/35 pivots and shift focus towards 200DMA (0.7096) if US jobs data disappoint.

Res: 0.7030, 0.7035, 0.7068, 0.7096
Sup: 0.7005, 0.6996, 0.6965, 0.6950

When it comes to trading potential reversals in the market, you will want to keep an eye on ending diagonal patterns. It is a five wave, but overlapping structure in the direction of a trend, but because of lower momentum and volume it suggests that this trend is coming to an end. Ideally this is what is going on on EURGBP right now, but we still see an incomplete pattern. We see wave 5) that may cause another pop-up and then a drop from 0.9 level. Invalidation level for this pattern is at 0.9040; that is where wave three would be the shortest.

EURGBP, 1h

GBPCHF is moving sideways in the very short-term, above the downward channel’s upper boundary as momentum failed to continue the down move, when the pair met the obstacle supports of 1.2378 and 1.2417. Temporarily breaking the lows in previous weeks, the price is currently hovering between the 1.2378 and 1.2417 awaiting the move to give the definitive direction.

Momentum indicators are showing that a bullish bias could be in play, as the MACD has crossed to the upside of the red trigger line, whereas the RSI has broken the downtrend line, before heading for the 50 level. The short-term 7-day simple moving average (SMA) has crossed above the 14-day SMA, also suggesting the bullish outlook.

Should price break above the 1.2417 resistance, and adopt the bullish bias, the first test would be at 1.2495 before the 23.6% Fibonacci retracement level of the downleg from 1.3399 to 1.2339 around 1.2588 comes into view.

However, a break below the 1.2378 support level, would see the six-month trough of 1.2339, before the bottom of 1.2292 attract attention.

To summarize, a neutral outlook still exists in the very short-term, awaiting the directional break. Although for a more cemented bullish approach, a definitive move above 1.2675 would need to be seen.

The US dollar changed slightly against a basket of major currencies. Yesterday, US financial markets were closed due to Independence Day. Investors have taken a wait-and-see position before the publication of the report on the US labor market for June. Experts expect improvement in key indicators. These statistics may have a significant impact on the Fed's views on the future rate of monetary policy adjustments. According to the CME FedWatch Tool, more than 70% of financial market participants expect the Fed to reduce the range of key interest rates by 25 basis points to 2.00% -2.25% at a meeting in July. Today we also recommend paying attention to economic releases from the US.

The US currency is under pressure due to the regular statements by US President Donald Trump. The President accused China and Europe of currency manipulations again. “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA,” Trump said on Twitter.

The "black gold" prices show negative dynamics. At the moment, futures for the WTI crude oil are testing the mark of $56.50 per barrel.

Market Indicators

• Yesterday, the US stock markets were closed due to Independence Day.
• The 10-year US government bonds yield is consolidating. At the moment, the indicator is at the level of 1.95-1.96%.

The News Feed on 2019.07.05:

• Data on the US labor market at 15:30 (GMT+3:00);
• Employment change in Canada at 15:30 (GMT+3:00);
• Ivey PMI in Canada at 17:00 pm (GMT+3:00).

NFPs are back in the game

Investors woke up with a little hangover from 4th July holidays with European equities easing moderately and the greenback rising across the board. The Eurostoxx 50 edged down 0.20% to 3,535 points while the broader Eurostoxx 600 slid 0.25%. During the European morning, US futures edged down 0.10%, despite a solid session in Asia.

In the FX market, the buck extended gains against all of its G10 peers, gaining the most against the Swedish krona and safe-haven currencies. The Swedish krona gave up 0.30% as the rally is running of juice. Investors are not convinced that the Riksbank would maintain its hawkish bias anymore. It is difficult to go against the tide especially when central banks across the globe are moving in the other direction. Against such a backdrop, it is reasonable to expect future weakness of the krona.

However, today is NFPs day and unlike the past few months, when market participants lost interest in the report, investors are impatiently awaiting the release. Indeed, Non-Farm payrolls came took centre stage again lately as investors are trying their best to time the next rate cut from the Federal Reserve. Against a backdrop of uncertainty due to lack of significant progress on trade talks between China and the US, and escalating tensions with partners such as the EU, a sluggish report would sealed the fate of the Fed. Jerome Powell would have no choice but to deliver what Trump has been asking for months.

Market expectations are far too high. If Powell doesn’t deliver, it would trigger an equity sell-off and substantial dollar appreciation. In light of the events of the last few months, such a scenario would provoke the ire of President Donal Trump as well as several sharp tweets. NFPs are expected to come in at 160k, compared to 75k in May. Unemployment rate and participation rare are expected to remain stable at 3.6% and 62.8%, respectively. Average hourly earnings should print slightly higher, at 3.2% versus 3.1% previously.

GBP hammered by BoE, poor data

It seems that nothing can stop the British pound from collapsing after BoE Governor Mark Carney expressed concerns about global growth on Tuesday and following a series of weak data releases. Meanwhile, Brexit risk is also weighing on the currency, as favorite Conservative party candidate Boris Johnson hard Brexit stance may reinforce the Scottish National Party position regarding an independence referendum of Scotland, a situation that tends to challenge the BoE's optimistic scenario and support a dovish U-turn.

GBP also faces the consequence of negative data as the release of June PMIs disappointed, starting with both manufacturing and construction, down 48 (prior:49.4) and 43.1 (prior: 48.6) and digging further into contraction territory while services PMI came at 50.2 (prior: 51), confirming stagnation in the UK strongest activity sector.

Cable is now trading at its lowest range since mid-June 2019, ignoring negative US ISM and ADP data due to Independence Day and decisive job data released on Friday. We expect GBP to remain under pressure following publication of US figures.

The EUR/JPY currency pair has continued to trade sideways during the morning hours of Friday's trading session. The 50-hour simple moving average provided support for the exchange rate at 121.63.

As for the near future, it is likely that the Eurozone single currency could continue to trade south during the following trading sessions. The potential target will be at the psychological level at 121.00.

However, a support cluster formed by the combination of the weekly and the monthly PPs at 121.28 could provide support for the currency exchange rate within this session.

The AUD/USD currency pair depreciated about 31 base points during yesterday's trading session. The decline was temporary stopped by the 50-hour simple moving average.

However, during the morning hours of today's session, the exchange rate breached the 50-hour SMA. The pair is gradually moving towards the lower boundary of an ascending channel pattern at 0.7005.

Technical indicators demonstrate that the currency exchange rate might reverse from the given support level at 0.7005.

Meanwhile, today's macroeconomic data releases might play a significant role in the movement of the Aussie within this session.

During the previous trading session, the US Dollar depreciated about 40 base points against the Canadian Dollar. The currency pair was pressured south by the 50-hour simple moving average.

The exchange rate breached a resistance level formed by the downtrend line at 1.3061 during the first half of Friday's trading session.

By and large, it is likely that the USD/CAD currency exchange rate will aim for the 200– hour SMA at 1.3112 today.

However, the US Non-Farm payroll data releases scheduled at 12:30GMT could influence the positioning of the pair in the coming hours.

The New Zealand Dollar depreciated about 40 base points against the US Dollar on Thursday. A breakout occurred through the lower boundary of an ascending channel pattern at 0.6694.

The decline of the currency pair continues during Friday's session, as a result, the pair breached both the 50-, 100– and 200-hour SMAs.

Today's macroeconomic data releases scheduled at 12:30 GMT could change the overall positioning of the currency exchange rate today.

Most likely, the NZD/USD pair could make an upside movement at the time of the macro data releases.