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WTI Crude oil prices posted declines early on Friday. The declines came on investor concerns about slowing demand. The futures markets saw crude oil falling 1.1% while Brent futures were down 0.1%, extending declines from the day before. The declines come after OPEC and Russia agreed to extend the current production cuts for the next six to nine months.

WTI Crude Oil Forms a Bearish Flag

Following the recent declines off the highs near the 60.00 handle, oil prices have been consolidating sideways. This has led to a bearish flag pattern being formed just below the resistance area of 57.50. A breakdown below the previous lows of 56.25 could confirm the downside bias. This will validate the bearish flag pattern which puts the downside target to 54.42 where support level exists.

The euro traded flat on Thursday. Economic data from the eurozone saw the release of the monthly retail sales report. The report showed that sales in the eurozone fell 0.3% in June. This was below the forecasts of a 0.4% increase and down from June’s revised print of a 0.1% decline.

EURUSD Edges Closer to 1.1250

Price action in the currency pair has been somewhat flat over the past few days after the initial decline earlier. This has kept the currency pair trading within the range of the 1.1400 and 1.1250 levels. The current declines could potentially push the EURUSD lower to test the 1.1250 level of support. However, in case of a reversal, we could expect to see the 1.1400 resistance level being tested once again.

The dollar firmed in early European trading on Friday after holding within narrow range in Asia, sending Euro lower for repeated test of key supports at 1.1280/60 zone (daily cloud top / Fibo 38.2% of 1.1181/1.1412, reinforced by 30DMA and 100DMA), which contained the action in past three days.

Daily MA’s are in mixed setup, bullish momentum eases, stochastic is deeply oversold and RSI neutral, lacking clearer direction signal.

Daily cloud starts steep fall today and will twist next week that may attract bears.
The pair is looking for a catalyst that could be provided from US jobs data, due later today.
Non-Farm Payrolls are forecasted at 160K in June, compared to strong fall to 75K previous month and earnings are also expected to rise (June 0.3% f/c vs 0.2% prev), however, negative dollar’s sentiment on low inflation and expectations for rate cut, is unlikely to be significantly improved by positive US jobs data.

Pivotal levels lay at 1.1260 (100DMA) and 1.1299 (20DMA) with break of either side to generate initial direction signal.

Res: 1.1287, 1.1299, 1.1322, 1.1333
Sup: 1.1260, 1.1232, 1.1200, 1.1181

German factory orders dropped sharply by -2.2% mom in May, much worse than expectation of -0.1% mom. Looking at some details, domestic orders increased by 0.7% mom but foreign orders plunged -4.3% mom. New orders from Eurozone dropped -1.7% mom while orders from other countries dropped -5.7% mom.

The contraction was also broad-based. Intermediate goods orders dropped -1.5% mom. Capital goods orders dropped -2.8% mom. Consumer goods orders dropped -0.7%.

EUR/USD trades mildly lower in European session today but that's mainly due to Dollar's pre-NFP recovery. German 10-year bund yield breached ECB's deposit rate (-0.4%) for the first time yesterday. It's recovering mildly today, at -0.394 for the moment. But -0.4 level remains vulnerable.

• Rates: Payrolls to nudge the Fed towards a July rate cut?
  The German 10-yr yield tested the ECB's -0.40% deposit rate during a subdued (US closed) trading session yesterday. Focus turns to the US today with the June payrolls due. If the expected downside risks materialize, we might witness further pressure on (core bond) yields, in particular on the longer end of the curve.
• Currencies: Will payrolls break recent stalemate in USD trading?
  Major US cross rates held tight range ahead of today's payrolls yesterday. The payrolls are expected to rebound, but the figure might not be good enough to ease market expectations on aggressive Fed cut. In theory, this scenario might be EUR/USD supportive, but the euro isn't in good shape either. So, the 1.11/1.14 trading range might remain intact.

The Sunrise Headlines

• US stock markets were closed in observance of Independency Day on Thursday. Asian-Pacific trading is muted and shows little direction ahead of US payrolls due later today. Australia(+0.7%) outperforms.
• German factory orders disappointed strongly this morning, printing at -2.2% MoM (-0.2% expected) and -8.6% YoY (-6.2%). The automotive (-3.9% MoM) and chemical sector (-3.6% MoM) were the major culprits.
• A latest YouGov voting poll showed UK's Labour would fall to the 4th place for the first time ever with just 18% of the votes. The Conservatives (24%) would again take lead over the Brexit Party (23%) and the Libdems (20%).
• India's finance ministry projects growth to rebound to 7% in the current fiscal year while sticking to the fiscal path. Growth reached a 5-yr low in the previous fiscal year as weak consumption and rising US/Sino trade tensions weighed.
• The Australian regulator has eased mortgage lending rules on Friday in an attempt to boost the economy. The move comes after the central bank cut rates to 1% and the government approved a $110 bn tax cut.
• Italian Finance minister Tria in a hearing said he expects growth to remain close to zero this year. He declined to give an indication about the deficit target for 2020, saying it will depend on growth in the rest of the year.
• In today's economic calendar it's all about the June payrolls in the US. We'll also watch for the Canadian job report to be released. ECB's vice-president de Guindos is scheduled to speak

Currencies: Will payrolls break recent stalemate in USD trading?

Payrolls to break USD stalemate?

USD trading developed in tight ranges yesterday. The US markets were closed. Disappointing May EMU retail sales and soft comments of ECB's Rehn kept European yields under downward pressure, but the impact on the euro was limited. EUR/USD closed at 1.1185 (from 1.1278). USD/JPY (107.82) ended little changed.

Asian equities are trading mixed holding close to yesterday's levels. Markets await guidance from the US, with the US payrolls a potential decisive factor for the next move on US (and global) markets. EUR/USD (1.1280 area) and USD/JPY (107.85 area) are also little changed.

This morning, German May factory orders (-2.2% MoM) confirmed the poor performance of this part of the economy. Still the focus for global (FX) trading is on the US June payrolls and its consequences for Fed policy. US job growth is expected to rebound from a poor 75k to 160k. This level is well below recent averages So, even an in-line outcome can be seen as confirming the need for pre-emptive Fed action. Average hourly earnings are expected at 0.3% MoM (from 0.2% MoM) and 3.2% YoY. The unemployment rate is expected stable at 3.6%. We assume that a real positive surprise is needed to ease rate cut speculation and to change to trend of declining yields. This scenario in theory should also cap USD gains, even as the dollar performed rather well this week. We assume USD gains to be modest, except in case of a big positive surprise. Earlier this week, EUR/USD returned to the middle of the 1.11/1.14 range, making the EUR/USD picture again neutral. We look out whether the today's US payrolls will provide any clear directional guidance, but trading might be confined to recent ranges. First EUR/USD support comes in at 1.1260 ahead of 1.1181 (correction low). A return above 1.1350 would suggest that a new upside test is possible.

EUR/GBP was still locked in the upper half of the 0.89 figure yesterday as there was no political or eco news important enough to adapt sterling positions in a profound way. Today, UK eco data (including house prices) are probably second tier for sterling trading and we also don't expect breaking news for the leaderships battle in the Conservative party. So, more erratic EUR/GBP trading near recent levels is likely

EUR/USD: holding in the middle of the 1.11/1.14 range ahead of US payrolls

EUR/USD

Current level - 1.1279

I favor a reversal at 1.1250, for an upswing towards 1.1350, en route to 1.1450.

USD/JPY

Current level - 107.84

Intraday expect a test of 108.70 hurdle to provoke a reversal, for another downswing to 107.50.

GBP/USD

Current level - 1.2579

There is still a downward pressure below 1.2600, for a test of 1.2503 low. Crucial on the upside is 1.2660 area.

Pivot (invalidation): 56.55

Our preference Long positions above 56.55 with targets at 57.15 & 57.55 in extension.

Alternative scenario Below 56.55 look for further downside with 56.05 & 55.35 as targets.

Comment A support base at 56.55 has formed and has allowed for a temporary stabilisation.

Pivot (invalidation): 15.2300

Our preference Long positions above 15.2300 with targets at 15.3400 & 15.4200 in extension.

Alternative scenario Below 15.2300 look for further downside with 15.1800 & 15.1000 as targets.

Comment The RSI is mixed and calls for caution.

Pivot (invalidation): 1415.00

Our preference Long positions above 1415.00 with targets at 1423.00 & 1427.00 in extension.

Alternative scenario Below 1415.00 look for further downside with 1410.00 & 1403.00 as targets.

Comment The RSI is mixed to bullish.

Daily Pivots: (S1) 135.48; (P) 135.60; (R1) 135.76; More...

GBP/JPY's decline from 148.87 is still in progress. Further decline should be seen to 131.51 low next. On the upside, break of 137.78 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, current development suggests that GBP/JPY's medium term fall from 156.59 (2018 high) is still in progress. Break of 131.51 will target 122.36 (2016 low). Structure of such decline is corrective looking so far, arguing that it's just the second leg of consolidation from 122.36. Thus, we'd expect strong support from 122.36 to contain downside to bring reversal.