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The euro has remained trapped in a limited trading range against the US dollar during the European trading session, although bears are still probing major intraday support. A break below the 1.1280 level exposes further downside towards the 1.1255 support region. The foreign exchange market is extremely quiet due to the observation of Independence Day in the United States.

The EURUSD pair is only bullish while trading above the 1.1310 level, key technical resistance is found at the 1.1355 and 1.1400 levels.

If the EURUSD pair trades below the 1.1280 level, key support is found at the 1.1255 and 1.1222 levels.

Notes/Observations

• US markets closed for July 4th holiday
• Spain and France issue bonds at record low yields

Asia:

• China PBoC Open Market Operation (OMO) skipped the operation for the 9th consecutive; Net drains CNY30B v drain CNY40B prior
• China State Council: China to support the pilot free trade zones in undertaking more experiments with reform and opening up, and refine policy incentives for cross-border e-commerce to facilitate more innovative models in foreign trade
• South Korea Fin Min Hong stated that economic conditions had changed, Japan's curbs were obvious economic retaliation; BoK to make appropriate rate decision while considering changes in economic conditions Australia May M/M: 0.1% v 0.2%e

Europe/Mideast:

• Former UK Chancellor George Osborne said to be considering putting himself forward to replace Christine Lagarde at IMF

Americas:

• USTR Official: Trump Admin is scheduling 'principal-level' call between US and China trade negotiators for week of July 8th
• White House Econ Adviser Kudlow: next round of face-to-face China-US trade talks will take place 'soon'. Would not lift existing tariffs during China trade talks

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.01% at 392.54, FTSE -0.07% at 7,603.75, DAX +0.06% at 12,624.16, CAC-40 -0.08% at 5,614.15, IBEX-35 -0.37% at 9,359.80, FTSE MIB +0.42% at 21,996.50, SMI -0.24% at 10,049.50, S&P 500 Futures -0.07%]
• Market Focal Points/Key Themes: Equities European Indices trade roughly flat following a slightly stronger session in Asia. U.S. stock exchanges to be closed on Thursday due to Independence Day celebrations, while S&P 500 September'19 futures currently trade few points below remarkable 3,000 mark. On the corporate front shares of retail giant Associated British Foods trade 1% higher on revenue growth and maintained outlook. U.K. housebuilding company Persimmon declines 2% on earnings and some H2 insights. European low-cost airlines Norwegian Air trade almost 5% higher after better-than-expected June load factor. On the M&A front, both Metso and Outotec trade sharply higher in Finland on news that companies decided to merge in all-stock transaction, forming new entity 'Metso Outotec' afterwards. Elsewhere, OSRAM Licht rise in Germany after it confirmed binding takeover offer from Bain-Carlyle consortium.
• Consumer discretionary: Persimmon [PSN.UK] -2% (earnings), Associated British Foods [ABF.UK] +1% (sales), Norwegian Air [NOR.NO] +4.5% (load factor)
• Financials: Commerzbank [CBK.DE] -1% (analyst action)
• Healthcare: Curetis [CURE.NL] +15% (patent), Oasmia Pharmaceutical [OMAX.DE] +9% (Business advisory board)
• Industrials: Metso [METSO.FI] +4%, Outotec [OTE1V.FI] +19% (merger), Wacker Neuson [WAC.DE] -1% (major shareholder sold stake), Yit [YTY1V.FI] +2% (divests unit)
• Technology: OSRAM Licht [OSR.DE] +3% (confirms bid)

Speakers

• ECB's Lane (Ireland, chief economist): European productivity had been lackluster
• ECB's De Guindos (Spain): Need yo improve the enhance countercyclical use of macroprudential tools
• India's Economic Survey noted that growth was expected to pick up as macroeconomic conditions continued to be stable; reforms remained on course. Saw both upside and downside risks seen to economy in FY19/20
• India Chief Economic Adviser (CEA) Subramanian: To maintain current fiscal path that was previously laid out
• China Commerce Ministry (MOFCOM) spokesman Gao Feng: confirmed that trade teams from both China and US were in communications. Stressed that tariffs must be removed for a trade deal with US.
• China Foreign Ministry spokesperson Geng Shuang reiterated govt stance that China will not engage in competitive currency devaluation
• Iran Intelligence Min Alavi stated that the country could consider talks with US only if sanctions lifted and Supreme Leader Khamenei permitted it

Currencies/Fixed Income

• The July 4th holiday in the State kept market participation at a low.
• USD was little changed but fractionally lower. Dealers attributed the slight retracement to Trump tweet that US should match China and Europe at their "big currency manipulation game' US non-farm payroll data on Friday was seen as pivotal whether the Fed would shift to rate cuts as soon as it meets later this month.

Economic Data

• (NL) Netherlands Jun CPI M/M: -0.1% v -0.1% prior; Y/Y: 2.7% v 2.4% prior
• (NL) Netherlands Jun CPI EU Harmonized M/M: -0.1% v -0.3% prior; Y/Y: 2.7% v 2.3% prior
• (CH) Swiss Jun CPI M/M: 0.0% v -0.1%e; Y/Y: 0.6% v 0.5%e; CPI Core Y/Y: 0.7% v 0.6% prior
• (CH) Swiss Jun CPI EU Harmonized M/M: +0.2% v -0.2% prior; Y/Y: 0.7% v 0.5% prior
• (HU) Hungary May Retail Sales Y/Y: 2.6% v 7.1% prior
• (DE) Germany Jun Construction PMI: 50.0 v 51.4 prior
• (SE) Sweden Jun Average House Prices (SEK): 3.000M v 2.975M prior
• (UK) Jun New Car Registrations Y/Y: -4.9% v -4.6% prior
• (EU) Euro Zone May Retail Sales M/M: -0.3% v +0.3%e; Y/Y: 1.3% v 1.6%e
• (IS) Iceland Jun Preliminary Trade Balance (ISK): -22.8B v -16.4B prior

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €3.46B vs. €3.0-4.0B indicated range in 2026, 2029 and 2048 bonds
• Sold €480M in 1.95% Apr 2026 SPGB bond; Avg Yield: -0.105% (record low) v +0.848% prior; Bid-to-cover: 3.24x v 2.38x prior
• Sold €1.50B in 0.60% Oct 2029 SPGB; Avg Yield: 0.839% (record low) v 0.936% prior, bid-to-cover: 1.22x v 1.32x prior
• Sold €1.48B in 2.7% Oct 2048 SPGB; Avg Yield: 1.165% (record low) v 2.362% prior; Bid-to-cover: 1.19x v 1.50x prior
• (ES) Spain Debt Agency (Tesoro) sold €400M vs. €250-750M indicated range in 0.15% Nov 2023 inflation-linked bonds (SPGBei;Bonoei); Real Yield: -1.037% v -0.730% prior; Bid-to-cover: 4.00x v 4.85x prior
• (FR) France Debt Agency (AFT) sold total €B vs. €8.5-10.0B indicated range in 2029, 2034 and 2050 bonds
• Sold €4.972B in 0.50% May 2029 Oat; Avg Yield: -0.12% v +0.14% prior; Bid-to-cover: 1.9x v 2.55x prior
• Sold €2.05B in 1.25% May 2034 Oat; Avg Yield: 0.23% v 0.78% prior; Bid-to-cover: 2.22x v 2.29x prior
• Sold €2.974B in 1.50% May 2050 Oat; Avg Yield: 0.80% v 1.16% prior; Bid-to-cover: 1.47x v 1.63x prior

Looking Ahead

• (RO) Romania Central Bank (NBR) Interest Rate Decision: expected to leave Interest Rates unchanged at 2.50%
• (RU) Russia Jun Light Vehicle Car Sales Y/Y: -3.0%e v -6.7% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
• 06:00 (IE) Ireland Jun Live Register Monthly Change: No est v -3.5K prior; Live Register Level: No est v 190.9K prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (ZA) South Africa May Electricity Production Y/Y: No est v 1.8% prior; Electricity Consumption Y/Y: No est v 1.6% prior
• 07:00 (MX) Mexico Jun Consumer Confidence Index: 107.9e v 108.1 prior
• 07:30 (TR) Turkey Jun Real Effective Exchange Rate (REER): No est v 69.79 prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• (BR) Brazil Jun Vehicle Production: No est v 275.8K prior; Vehicle Sales: No est v 245.4K prior; Vehicle Exports: No est v 42.1K prior
• 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 28th: No est v $510.2B prior
• 09:15 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden in Visby
• 11:00 (BR) Brazil to sell LTN 2021 bonds
• 13:00 (SE) Sweden Fin Min Andersson speech
• 15:00 (AR) Argentina May Industrial Production Y/Y: No est v -8.8% prior; Construction Activity Y/Y: No est v -7.5% prior

The USDTRY fell further on Thursday and cracked 200DMA, which marks the upper boundary of key support zone between 5.5893 and 5.5740, consisting of 200DMA and Fibo 61.8% of 5.1595/6.2445 rally. Lira received fresh support from rise in overseas investments and signals that Turkey government plans to double a tax on buying foreign exchange. Daily studies maintain strong bearish momentum that adds to negative near-term outlook. Firm break below 5.5893/5.5740 supports would generate strong bearish signal for extension of downtrend from 6.2445 (2019) towards round-figure 5.50 support, with stronger bearish acceleration to focus next key levels at 5.4156/14 (Fibo 76.4% / weekly cloud base). Falling daily Tenkan-sen (5.7111) should keep the upside protected.

Res: 5.6242, 5.6610, 5.6993, 5.7111
Sup: 5.5893, 5.5740, 5.5000, 5.4709

Thursday July 4: Five things the markets are talking about

Euro stocks have edged a tad higher while U.S stock futures are unchanged following Asia's mixed session one day after new record highs for indexes stateside. Trading remains thin due to July 4th U.S celebrations.

Global equity markets are enjoying a rally driven by the trade truce between the U.S and China and bets on easier monetary policy from central banks. Top representatives from the U.S and China are arranging to resume talks next week to try to resolve this 12-month trade war.

Currently, the ‘big' dollar trades broadly flat due to the U.S. public holiday but could be vulnerable and ruin traders' weekend if tomorrow's U.S non-farm payroll (NFP) data comes in on the weaker side.

Dealers are also keeping an eye on any new comments from President Trump that hints at “devaluing” the dollar – he tweeted Wednesday that China and Europe were manipulating their currencies, and that the U.S should follow suit.

On tap: U.S equity markets are closed today for the Independence Day holiday. U.S and Canada jobs report are due Friday (08:30 am ET).

1. Stocks mixed results

In Japan, stocks rallied overnight, tracking Wall Street's gains on expectations that the Fed will start cutting interest rates after the latest data signalled a slowdown in the U.S economy. Data yesterday showed that the U.S trade deficit jumped to a five-month high in May and activity in the services sector slowed in June – dealers are pricing in three-rate cuts by the end of 2019. The Nikkei share average ended +0.3% higher, while the broader Topix gained +0.7%.

Note: Trading volumes are well below average, as the market awaits tomorrow's key U.S jobs report.

Down-under, Aussie stocks ended atop of their 11-year high overnight as expectations for RBA and Fed interest rate cuts encouraged investors to own riskier assets. The S&P/ASX 200 index rose +0.5%, its fourth consecutive session of gains. The benchmark rose +0.5% on Wednesday. In S. Korea, stocks snapped a four-day losing streak on FOMC rate cut bets. The Kospi index closed up +0.61%.

In China and Hong Kong, stocks closed lower overnight weighed down by a slump in consumer shares, even as investors awaited developments around Sino-U.S trade talks. The blue-chip CSI300 index fell -0.5%, while the Shanghai Composite Index lost -0.3%. In Hong Kong, the Hang Seng index fell -0.2%, while the China Enterprises Index lost -0.1%.

In Europe, regional bourses trade little changed following a slightly stronger session in Asia.

U.S stock exchanges are closed due to Independence Day celebrations.

Indices: Stoxx600 -0.01% at 392.54, FTSE -0.07% at 7,603.75, DAX +0.06% at 12,624.16, CAC-40 -0.08% at 5,614.15, IBEX-35 -0.37% at 9,359.80, FTSE MIB +0.42% at 21,996.50, SMI -0.24% at 10,049.50, S&P 500 Futures -0.07%

2. Oil prices lower, pressured by U.S supply

Oil prices are a tad lower overnight after solid gains yesterday, mostly pressured by data showing a smaller-than-expected decline in U.S crude stockpiles.

This week's API report delivered another drop-in inventory with crude falling by -5M barrels, while the EIA weekly report showed a similar drawdown with crude stock shrinking by -1.1M, less than the expectations of a -3M drawdown.

Front-month Brent crude futures are down -0.4% at +$63.60 per barrel. Brent closed up +2.3% yesterday. U.S West Texas Intermediate (WTI) crude futures are down -0.3% at +$57.18 per barrel. WTI closed up +1.9% on Wednesday.

Oil prices have been caught between the OPEC+ deal and the threat of a global recession as trade wars are on the rise. OPEC+ agreed on Tuesday to extend oil supply cuts until March 2020.

Gold prices are steady after hitting a one-week high in yesterday's session, as gains in equity markets offset support from a ‘weaker' U.S dollar and prospects of an interest rate cut by the Fed. Spot gold is broadly unchanged at +$1,418.60 per ounce – prices touched +$1,435.99 on Wednesday, the highest since June 25. U.S gold futures are up +0.1% at +$1,421.7 an ounce.

3. Eurozone government bond yields stabilize

Eurozone government bond yields appear to have stabilized at low levels after yesterday's significant drops, triggered by expectations that the ECB will continue expansionary policy.

The 10-year German Bund yield is trading unchanged at -0.385%, having printed a new low of -0.397% Tuesday. Investors can expect yields to back up as Government bond supplies are expected to be significant – Spain and France will come to the market with €4.75B in nominal and inflation-linked bonds and up to €10B in long-dated debt.

In Italy, BTP yields have again fallen to a new three-year low after Italy dodged the threat of disciplinary action over its public finances. Italian 10-year bond yields have fallen over -50 bps so far this week, putting them on track for their best weekly performance in seven-years, and are now yielding +1.576%, having risen as high as +3.78% last year. The Italy/Germany bond yield spread has narrowed to its tightest in 18-mlonths at +194 bps.

Note: U.S 10-year notes closed out at +1.95% Wednesday.

4. Demand for HKD surges ahead of “mega” IPO

HKD hit two-year highs in the overnight session outright ($7.7815 the lowest since May 2017). Most of the recent HKD strength comes as investors are preparing funds to subscribe to Budweiser's +$9.8B IPO. The retail portion of the IPO will be launched tomorrow, ahead of a July 19 listing in Hong Kong. Budweiser's fundraising size is bigger than expected and caused “short-covering” trading from some investors who had expected the currency to soften after the quarter-end. Also providing support is the overnight Hibor rate which has surged +0.84% to +3.14%.

Elsewhere, USD is little changed, but fractionally lower – €1.1284, £1.2572 and ¥107.78. The slight retracement is being attributed to Trumps tweet that the U.S should match China and Europe at their “big currency manipulation game.”

Tomorrow's U.S non-farm payroll (NFP) data is seen as pivotal whether the Fed would shift to rate cuts as soon as it meets later this month (July 30/31).

5. Australia retail sales miss

Data late last night showed that retail sales in Australia rose +0.1% in May from a month earlier, rebounding from the -0.1% posted in April but falling short of economists' expectations of a +0.2% print.

The weak outcome, led by food retailing, department stores and clothing, point to another quarter of slow economic growth.

The report probably justifies the RBA's second-rate cut (+1%) in a row earlier this week. However, Governor Lowe in a post-meeting speech noted that “monetary policy had a significant role to play in allowing the RBA to hit its inflation goal” but he also called on the government to also do their bit by loosening its purse strings.

Fixed income dealers are pricing in a +90% chance of a third RBA cut to +0.75% before Christmas.

The AUD/USD pair has been in a strong downtrend since March 2018 as per the daily chart. Fairly recently, the price had another attempt to break above the downward trend line, shown in blue. Having said this, the price has broken out of its 50-day moving average, shown in pink, to the upside and it is still in battle to break above the 100-day moving average, shown in orange. If the price is able to break above the 100-day moving average, it would be a positive sign for the bulls.

Another important signal for the bull strength may also come from the RSI, it is trading above the upward trend line and as long as this remains intact, bulls have their hopes for the price to move higher.

The green horizontal line represents the support
The red horizontal line represents the resistance

The US dollar is changing slightly against a basket of major currencies. Yesterday, the US dollar index (#DX) closed the trading session with a slight increase (+0.08%). Today, trading activity may be low, as US markets are closed due to Independence Day. Earlier this week, the Fed's Vice Chairman, Richard Clarida, said at a conference of the Central Bank in Finland that many Fed's officials saw signals to ease monetary policy. However, Thomas Barkin, President of the Federal Reserve Bank of Richmond, said in an interview that it was too early to predict whether the Fed would lower the interest rate at the next meeting, which would be held on July 30-31. Investors expect additional clues regarding further Fed's steps.

The US dollar is under pressure due to weak economic data from the US. ADP nonfarm employment change increased by 102K in June, while experts forecasted growth by 140K. Initial jobless claims counted to 221K instead of 220K. ISM non-manufacturing PMI was 55.1 in June instead of the forecasted 56.1.

The bearish sentiment is prevailing in the "black gold" market. At the moment, futures for the WTI crude oil are testing the mark of $56.90 per barrel.

Market Indicators

• Yesterday, the bullish sentiment was observed in the US stock market: #SPY (+0.80%), #DIA (+0.71%), #QQQ (+0.75%).
• 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 2019.07.04:

• Today, the news feed is calm. US financial markets are closed due to Independence Day.

Yesterday, the EUR/USD currency pair traded sideways between the weekly S3 at 1.1275 and the 55-hour moving average, currently located at 1.1289. During Thursday's morning, the pair continued to trade within the given cluster.

On the one hand, the exchange rate could surpass the given support level and go downside. In this case, the rate could surpass the psychological level at the 1.1260 mark.

On the other hand, the pair could continue to trade sideways within the cluster formed by the given support level, as well the resistance formed by the 100-hour SMA, the weekly S2 and the monthly PP at 1.1310

During the previous trading session, the GBP/USD exchange rate traded sideways around the 1.2580 level. No significant changes were observed during today's morning.

Note, that the currency pair is pressured by the 55-hour SMA, currently located at the 1.2594 mark. Thus, it is likely, that some downside potential could prevail in the market, and the pair could decline to the support level—the monthly S1 a 1.2545.

On the other hand, the rate could continue to trade sideways in the nearest future within the cluster formed by the psychological level at 1.2560 and the weekly S2 at 1.2594.

During Wednesday, the USD/JPY currency pair tried to surpass the resistance level formed the monthly PP at 107.84. During today's morning, the pair was testing the given resistance.

Note, that the exchange rate is supported by the 200-hour SMA, currently located at 107.50. Thus, bulls could prevail in the market in the short term. In this case, the rate would have to surpass the 55– and 100-hour SMAs, located at 107.89 and 108.01 respectively.

However, if the given resistance hold, the pair could trade sideways between it, as well the support level formed by the weekly PP at 107.63.

As it was expected previously, the price for gold declined to the support level formed by the 55-, 100– and 200-hour SMAs, located circa the 1,410.00 mark.

If the given support holds, it is expected, that the XAU/USD exchange rate could reverse north within the following trading session.

However, it is unlikely, that gold could exceed the 1,435.00 mark against the US Dollar in the short term due to the resistance of the upper boundary of the long-term ascending channel.

If the given support does not hold, the price for gold could maintain its decline. A possible downside target is the 1,400.00 level.