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It seems markets will either need to see substantial progress on trade or stronger easing signals to yield any major moves.  Light volumes are expected until we get to Friday’s employment report, which economists see rebounding to 164,000 jobs.  Fed funds futures contract are fully pricing in a rate cut at the July 31st meeting, with markets split whether we see an additional one or two cuts by the end of the year.  Regarding trade both the US and China continue to highlight positive steps and that talks are ongoing.  Markets will become more optimistic if we see both sides agree to schedule another meeting to iron out details on enforcement and structural reform.  If the Xi and Trump want a deal to finalize before October, the Chinese need to take back some of the red ink they put in place in May when talks blew up.

Stocks

For US stocks to continue the march further into uncharted territory, the world’s largest two economies need to show some trade war concessions on both sides and for the Fed to signal they will not signal they will stand pat after delivering a 25 basis-point cut. Markets need a punch bowl and not just a drink to continue drive stocks higher.

Oil

Oil producing countries signaled production cuts will be extended another nine months, taking the effort to balance the oil market to beyond three years.  Oil prices are trading sharply lower after a wrath of softer global manufacturing data hinted that central banks are behind the curve in delivery fresh stimulus.  If we are in the beginning of global slowdown, the effects of fresh stimulus will take months before filtering into the economy.
Crude prices appear vulnerable markets are beginning to price in this will be the last production cuts we see from OPEC +. It is hard to imagine a scenario that would see all countries remain supportive for cuts at the next meeting which will be closer to the end of the year.

Gold

Safe-havens are shining bright today as global slowdown worries are growing.  The initial trade truce risk-on rally is over, and markets have little to show in hopes of a trade deal getting finalized anytime soon.  The de-escalation in fresh tariff threats might not be enough to ease falling sentiment concerns.  The other key catalyst for safe-haven demand is the expectations on how accommodative the Fed will be in the coming months. If we continue to see the US data points deteriorate, we could see safety trades reign supreme this summer. The Japanese yen is also benefiting with the flight to safety and is the best performing currency on the day.

EURJPY declines with eyes on 121.76 support zone as it holds on its bear pressure. On the downside, support comes in at the 121.00 level where a break if seen will aim at the 120.50 level. A cut through here will turn focus to the 120.00 level and possibly lower towards the 119.50 level. On the upside, resistance resides at the 122.50 level. Further out, we envisage a possible move towards the 123.00 level. Further out, resistance resides at the 123.50 level with a turn above here aiming at the 124.00 level. On the whole, EURJPY retains its broader downside pressure.

Cleveland Fed President Loretta Mester said in a speech that she will be monitoring incoming data to determine if her baseline outlook of sustainable-growth remains intact. And for now, it's "too soon" to make that determination. Hence, she said, "I prefer to gather more information before considering a change in our monetary policy stance."

To be more specific, Mester added, "if I see a few weak job reports, further declines in manufacturing activity, indicators pointing to weaker business investment and consumption, and declines in readings of longer-term inflation expectations, I would view this as evidence that the base case is shifting to the weak-growth scenario. In this scenario, the economy's short- to medium-term equilibrium interest rate would be moving down, and our policy rate could need to move down "

Mester's full speech here.

BoE Governor Mark Carney said in a speech that the robust, broad-based expansion in the global economy has turned into a widespread slowdown. He warned "the latest actions raise the possibility that trade tensions could be far more pervasive, persistent and damaging than previously expected." Risks have shifted to the downside.

Regarding UK, Carney said Q2 is likely to be "considerably weaker" than Q1. Also, "recent data also raise the possibility that the negative spillovers to the UK from a weaker world economy are increasing and the drag from Brexit uncertainties on underlying growth here could be intensifying." Also, "underlying growth in the UK is currently running below its potential, and is heavily reliant on the resilience of household spending."

Further, Carney warned "a no deal outcome would result in an immediate, material reduction in the supply capacity of the UK economy as well as a negative shock to demand. And, "as in other advanced economies, if there is a material trade shock, other policies, including fiscal policy, would likely need to play important roles in supporting the economy."

Carney's full speech here.

The services PMI out of the UK will be in focus for pound traders on Wednesday at 0830 GMT. But if the manufacturing and construction PMIs are anything to go by, there’s unlikely to be much to cheer about from June’s services activity report. Growing risks of a disorderly Brexit and signs the UK economy may have contracted in the second quarter have kept the pound on the backfoot since May.

UK growth outlook deteriorating fast

Things are not looking good for the British economy at the moment. After getting a boost in the first quarter from Brexit stockpiling, industrial output slumped in April, dragging GDP lower by 0.4% over the month as businesses run down their high stock levels. Furthermore, inflation remains low and even the strong labour market is showing signs of cooling off.

The closely watched PMI indicators by IHS Markit/CIPS support the deteriorating picture. The latest readings for the manufacturing and construction sectors were dismal in June. Both PMIs fell deeper below the 50 neutral level, with activity declining for a second straight month. The manufacturing PMI fell to the lowest in six years, while the construction PMI plunged to the lowest in 10 years.

Services PMI not expected to impress

The services sector, which makes up almost 80% of the UK economy, managed to return to growth in April after shrinking in March and is expected to hold in expansion territory in June. Forecasts are for the services PMI to stay unchanged at 51.0 in June.

Whether this would be enough to keep overall economic output from contracting in the second quarter remains to be seen. Consumer spending – the main driver of domestic demand – has weakened sharply since April and unless there was a solid bounce back in June, growth in the services sector is unlikely to have been strong enough to offset the falling output in the other sectors.

Pound stuck in the doldrums

So where does all this leave the pound? Cable is currently testing the 61.8% Fibonacci retracement (1.2611) of the June upleg. A break below this support is likely if the services PMI disappoints, turning the focus to the 78.6% Fibonacci at 1.2564, followed by June’s 5½-month trough of 1.2504. If there’s a big miss in the data, pound/dollar could head towards the 123.6% Fibonacci extensions at 1.2438, especially if the dollar rebounds further.

On the upside, a better-than-expected PMI print could help cable recoup some of its recent losses, with potential resistance being provided initially by the 50% Fibonacci at 1.2643 and then the 38.2% Fibonacci at 1.2676.

Conservative leadership contest could be key for sterling outlook

However, any positive momentum is likely to be temporary until at least the Conservative leadership contest is over. Conservative party members will get to choose between former foreign secretary Boris Johnson and current foreign secretary Jeremy Hunt as their next leader, with the result to be revealed on July 22.

Both candidates, who are fighting to replace Theresa May as prime minister, have said they will not rule out the possibility of a no-deal Brexit on October 31, when the current extension for leaving the EU expires. But Hunt has adopted a somewhat softer stance than Johnson on a no-deal scenario, and given that the EU would much rather negotiate with him than Johnson, the only prospect for a relief rally in sterling in the short term is a surprise win by Jeremy Hunt to become the next prime minister. Otherwise, the chances of the pound’s fortunes improving before the October 31 deadline appear very little.

EURAUD found resistance for its wave iv correction as part of a downtrend at the 1.625 level from where a final leg v followed. This leg v can look for support, and a temporary recovery into a three-wave correction near the Fibonacci ratio of 161.8/423.6 (1.610/1.608 region).

EURAUD, 1h

EURNZD is similat to EURAUD. We see pair falling as expected, and is currently still trading below the trend line, connected from June 21th. Seems like price is turning down again after only three waves of recovery, ideally into a wave "iv", so new lows can be coming for a wave "v" of 3 towards 1.6840 - 1.6800 target area. Invalidation level remains at 1.7090, in case if price unfolds more complex.

EURNZD, 1h

The pair is consolidating above psychological 14.00 support, from where four-day fall faced headwinds. Break below higher base at 14.13 was bullish signal, reinforced by optimism over global trade salutation and signals of Fed rate cut that kept the greenback under pressure. Daily studies maintain strong bearish momentum, with multiple bear-crosses of daily MA's which are in bearish configuration, supporting scenario of break through 14.00 handle (reinforced by Fibo 61.8% of 13.23/15.17 ascend at 13.97) and attack at key support at 13.86 (11 Apr low). Strong barriers at 14.22/25 (weekly cloud top / 200DMA) need to limit upticks and keep bears intact. Conversely, sustained break above 200DMA would put bears on hold for stronger correction.

Res: 14.22; 14.25; 14.32; 14.40
Sup: 14.03; 13.97; 13.92; 13.86

Daily Pivots: (S1) 1.1254; (P) 1.1312; (R1) 1.1344; More...

Intraday bias in EUR/USD remains mildly on the downside at this point. Recovery from 1.1107 might have completed earlier than expected at 1.1412. Break of 1.1181 support will confirm and bring retest of 1.1107 low. Though, above 1.1344 minor resistance will turn bias back to the upside to resume the rebound from 1.1107 through 1.1412 instead.

In the bigger picture, considering bullish convergence condition in daily and weekly MACD, a medium term bottom should be in place at 1.1107 after hitting 61.8% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.1186. Further rise should be seen to 38.2% retracement of 1.2555 to 1.1107 at 1.1660. Reactions from there could indicate whether rebound from 1.1107 is a corrective rise or reversing medium term trend. In any case, risk will stay mildly on the upside as long as 1.1107 low remains intact.

Daily Pivots: (S1) 1.2612; (P) 1.2659; (R1) 1.2686; More....

Intraday bias in GBP/USD remains on the downside as this point. Corrective rise from 1.2506 could have completed at 1.2783 already. Further fall should be seen to retest 1.2506 support first. Break will resume larger fall from 1.3381 to 1.2391 low. On the upside, above 1.2662 minor resistance will extend the rebound. But upside should be limited by 38.2% retracement of 1.3381 to 1.2506 at 1.2840 to bring fall resumption eventually.

In the bigger picture, down trend from 1.4376 (2018 high) is still in progress. Break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don't expect a firm break there yet. Hence, focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.