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The euphoria around the trade truce gave way to a more restrained mood on the market.

Trump said that the deal with China should be in favour of the States. In addition, the US government has returned to the threat of tariffs for the EU in connection with subsidies for Airbus. In addition, ISM manufacturing activity data was higher than expected, and the EU PMIs deceived expectations once again.

Stocks

To some extent, investors were ready for such a turn of events, and therefore responded immediately. In the wake of positive G20 results, the S&P500 updated its historical highs but a fresh round of negative rhetoric launched a sale in shares at the end of the day.

On Tuesday morning, the S&P500 hovers around Monday's opening levels. While optimism levels have decreased, market participants are still more prone to cautious purchases than sales on growth.

EURUSD

The dollar demand lowered the EURUSD rate below the important 200-day average on Monday. The pair jumped to this area a little more than a week ago but failed to develop any momentum growth. The sharp decline under MA(200) on the daily charts, combined with the failure under 1.1300, have raised doubts about the sustainability of growth, since now, the ECB has more reasons to mitigate policy than the Fed. Europe is clearly stalling much more in recent months, which reduces the demand for the euro and stocks.

Brent

Oil has fluctuated widely in recent days. Over the weekend, Russia and Saudi Arabia expressed support for quotas for the coming months. This eliminated the looming threat that Russia might not support further quotas – during the OPEC+ meeting on July 2nd. Now, investors are focused on fluctuations, following a change in sentiment about the trade conflicts. Brent collapsed $2.5 from intraday peaks to $64.2 – but then again rose above $65.

During Monday, the USD/JPY currency pair traded sideways, trying to surpass the resistance level formed by the Fibonacci 38.20% retracement and the weekly R1 at 108.48.

Note, that the pair is supported by the 55– and 100-hour SMAs, currently located at 108.16 and 107.99 respectively. Thus, if the given support and resistance hold, it is likely, that the exchange rate could continue to trade sideways.

However, if the given support level does not hold, it is expected, that a reversal south could occur in the nearest future. In this case, the rate could be supported by the weekly and monthly PPs, as well the 200-hour SMA in the 107.63/107.84 range.

The GBP/AUD currency pair depreciated about 1.69% in value during last week's trading sessions. The pair was guided down by a two-month descending channel pattern.

Everything being equal, it is likely that the Pound Sterling will continue to lose ground against the Australian Dollar during the following trading sessions. The exchange rate could aim for a swing low at 1.7736.

However, a support cluster formed by the combination of the weekly and the monthly PPs at 1.7957 might provide support for the currency exchange rate within this week's sessions.

The GBP/CAD exchange rate has lost about 1.80% in value since last week's trading sessions. The 50– hour simple moving average has continued to pressure the exchange rate lower.

Given that the 50-, 100– and 200-hour SMAs are above the price level, it is likely that the currency exchange rate will continue its decline during the following trading sessions.

Technical indicators flash sell signals on both the smaller and the larger time-frame charts. Therefore, bearish traders could drag the British Pound further south in the short-term.

On Monday, the EUR/USD currency pair dropped to the support level—formed by the weekly S3 at 1.1275. During today's morning, the pair reversed north.

Some upside potential could prevail in the market in the short term. However, note, that the exchange rate has to surpass the resistance formed by the monthly PP and the weekly PP located circa 1.1310.

If the given resistance and support levels hold, it is expected, that the pair could trade sideways within the following trading session.

It is unlikely that the Euro could exceed the 1.1343 mark due to the resistance level formed by the 55-, 100– and 200-hour SMAs, as well the weekly S1.

Yesterday, the British Pound depreciated gradually against the US Dollar. During Tuesday's morning, the exchange rate declined to the 1.2620 level.

It is expected, that the rate could reach the lower boundary of the short-term descending channel located circa 1.2600. From a theoretical point of view, a reversal north could occur.

On the other hand, the currency pair could trade sideways, trying to surpass the support level formed by the weekly S1 at the 1.2594 mark.

It is unlikely, that the pair could jump higher than 1.2664/1.2696 range due to the resistance cluster formed by the 55-, 100– and 200-hour SMAs, as well the weekly PP.

Notes/Observations

• Proposed US tariffs on European goods curbed risk appetite; optimism waned over a recent US-China trade truce
• UK Construction PMI misses expectations to hit a 10-year low
• EU Leaders hold another summit to try to fill key EU positions

Asia:

• RBA cut its Cash Rate Target by 25bps to 1.00% (as expected) for its 2nd straight meeting (14th overall in the current easing cycle). This was the 1st back-to-back rate cut in 7 years. The decision to lower the cash rate to help make further inroads into the spare capacity in the economy and assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target.
• South Korea Jun CPI M/M: -0.2% v -0.1%e; Y/Y: 0.7% v 0.8%e
• China Premier Li reiterated stance that China would not resort to competitive yuan devaluation, to keep yuan at reasonable and equilibrium level; to keep economic growth stable and maintain prudent monetary policy. Would not flood economy with excess liquidity; To use targeted RRR, lower real borrowing costs to SMEs

Europe/Mideast:

• Italy Govt said to be cutting its 2019 deficit target from 2.4% to 2.04% and confirmed its 2020 budget deficit at 2.1% of GDP. Remain compliant with all EU fiscal rules and added that the reduction of structural deficit meant EU disciplinary procedure would not be warranted
• Parliament Speaker Bercow denies amendment that would block a no deal Brexit

Americas:

• USTR proposed increased tariffs on EU products due to EU aircraft subsidies, proposes adding more tariffs to $4.0B of EU goods; increases total amount to $25B

Energy:

• OPEC delegates stated that OPEC had reached agreement on cooperation charter; Iran had approved compromise on OPEC+ charter. Ratified 3-year contract renewal for Sec Gen Barkindo
• Saudi Oil Min Al-Falih: commitment to 9-month extension is unequivocal; all countries promise a better conformity to OPEC cuts

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.08% at 388.18, FTSE +0.38% at 7,525.62, DAX -0.11% at 12,506.45, CAC-40 -0.07% at 5,564.27, IBEX-35 -0.35% at 9,233.87, FTSE MIB +0.04% at 21,261.50, SMI +0.40% at 10,016.50, S&P 500 Futures -0.16%]
• Market Focal Points/Key Themes: European Indices trade mixed consolidating after gains seen yesterday tracking mixed Asian Indices and slightly lower US Index futures. On the corporate front shares of Johnson Service Group trades higher following an upbeat trading statement, with continued strong trading into May; Plus500 gains on a rise in Revenues q/q, while Funding Circle declines sharply after cutting its full year revenue outlook. Celyad gains over 10% following a strategic update, while Galapagos moves to a 14 year high on confirmed Filgotinib filing in the US for 2019. Elsewhere Ryan ticks higher after June metrics, with H^T group gaining on an acquisition of assets, while Carr'sGroup declines on the acquisition of NW Total Engineered Solutions for £9.6M. Looking ahead notable earners include Greenbrier, Omnova solutions and Acuity Brands.

Equities

• Consumer discretionary: WPP [WPP.UK] -2% (confirms in discussion on Kantar), Adidas [ADS.DE] -1% (analyst action)
• Financials: Funding Circle [FCH.UK] -19% (trading update; profit warning), Deutsche Bank [DBK.DE] -1% (considering lowering capital buffer to fund the company's overhaul), Plus500 [PLUS.UK] +4.5% (trading update)
• Healthcare: Celyad [CYAD.BE] +9% (strategic update), BioInvent [BINV.SE] +5.5% (approval), Nicox [COX.FR] +4% (license agreement)
• Industrials: Dialight [DIA.UK] -31% (profit warning; CEO to step down)

Speakers

• German Association of Chambers of Trade and Industry (DIHK) cuts 2019 export forecast from 2.5% to 1.0% as trade disputes and protectionism were increasingly affecting Germany companies overseas
• Poland PM Morawiecki stated a=that he hoped that EU leaders would be able to choose a new EU Commission chief today
• Spain PM Sanchez: stated that Socials supported Timmermans (Netherlands) for EU Commission chief and supportedt Manfred Weber (Germany) for EU Parliament head)
• Spain Parliament Speaker: To begin debate on forming govt on Monday, July 22nd
• Romania Central Bank gov Isarescu stated that had a balanced approach to targeting price stability. Tensions between fiscal and monetary policies were inherent
• China Premier Li reiterated stance to fine-tune monetary policy while being prudent; domestic economy faced downward pressure from slowing global growth
• Iran Oil Min Zanganeh: OPEC+ may need to cut production by more than 1.2M bpd

Currencies/Fixed Income

• FX markets were little phased in directionless trading.
• EUR/USD little changed just under the 1.13 level. More analysts calling for 1 10bps rate cut by the ECB later this month keeping a cap on the pair. Italian yield continue to fall as Italy Govt improving its forecasts on its 2019 budget deficit to GDP ratio in order to avoid EU deficit proceedings.
• GBP/USD was only slightly weaker after UK Jun Construction PMI fell like a rock to test 10-year lows. pair at 1.2615 just ahead of mid-session.
• AUD/USD was higher by 0.3% after the RBA again cuts its key rate by another 25 bps. Dealers citing technical support aiding the Aussy. Pair just under the 0.70 level.

Economic Data

• (DE) Germany May Retail Sales M/M: -0.6% v +0.5%e; Y/Y: 4.0% v 2.7%e
• (UK) Jun Nationwide House Prices M/M: 0.1% v 0.2%e; Y/Y: 0.5% v 0.5%e
• (FR) France May YTD Budget Balance: -€83.9B v -€67.2B prior
• (ES) Spain Jun Unemployment Change: -63.8K v -90.0Ke
• (HU) Hungary Apr Final Trade Balance: €0.3B v €0.2B prelim
• (UK) Jun Construction PMI: 43.1 v 49.2e (2nd straight contraction and lowest reading since Apr 2009)
• (HK) Hong Kong May Retail Sales Value Y/Y: --1.3% v -4.3%e; Retail Sales Volume Y/Y: -1.7% v -5.4%e
• (EU) Euro Zone May PPI M/M: -0.1% v +0.1%e; Y/Y: 1.7% v 1.8%e

Fixed Income Issuance

• (ID) Indonesia sold total IDR22.15T vs. IDR15.0T target in 3-month and 12-month Bills and 5-year, 10-year, 15-year, and 20-year Bonds

Looking Ahead

• 05:30 (UK) Weekly John Lewis LFL Sales data - 05:30 (AU) RBA Gov Lowe speaks in Darwin
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (UK) DMO to sell £3.0B in new 0.625% 2025 Gilts
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.4-1.8B in 3-month and 6-month Bills
• 06:00 (IE) Ireland Jun Unemployment Rat: No est v 4.4% prior
• 06:30 (EU) ESM to sell €2.5B in 3-month bills
• 06:35 (US) Fed's Williams (moderate, voter) on Global Economic and Policy Outlook
• 07:00 (MX) Mexico May Leading Indicators M/M: No est v 0.05 prior
• 07:01 (US) Preview: June 2019 Vehicle Sales numbers expected throughout the day from major auto makers
• 07:45 (US) Weekly Chain Stores Sales data
• 08:00 (BR) Brazil May Industrial Production M/M: -0.3%e v +0.3% prior; Y/Y: +6.3%e v -3.9% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (RU) Russia announces upcoming OFZ Bond issuance
• 08:30 (CA) Canada May MLI Leading Indicator M/M: No est v 0.4% prior
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:30 (CA) Canada Jun Manufacturing PMI: No est v 49.1 prior
• 10:00 (MX) Mexico weekly International Reserve data
• 10:05 (UK) BOE Gov Carney
• 11:00 (DK) Denmark Jun Foreign Reserves (DKK): No est v 451.7B prior
• 11:00 (US) Fed's Mester (hawk, non-voter)
• 11:30 (US) Treasury to sell 52-week bills
• 13:00 (NZ) New Zealand Jun QV House Prices Y/Y: No est v 2.3% prior
• 14:00 (CO) Colombia Central Bank Jun Minutes
• 16:30 (US) Weekly API Oil Inventories

Downside risks dominated the New Zealand Dollar versus the US Dollar on Monday. As a result, a breakout through the lower boundary of an ascending channel pattern occurred.

Most likely, the currency pair might continue its downwards movement within this session. The potential target for bearish traders will be near a swing low at the 0.6600 area.

However, a support cluster formed by the combination of the weekly pivot point and the 200-hour simple moving average at 0.6648 could providing support for the currency exchange rate in the short-term

On Monday, the common European currency depreciated about 112 base points against the Japanese Yen. The decline was stopped by the 200-hour simple moving average.

Currently, the exchange rate is stranded between SMAs. The 50– and 100-hour SMAs are providing resistance, while the 200-hour moving average is providing support for the pair.

By and large, a breakout is likely to occur within this session. Technical indicators suggest that the currency exchange rate might make an upside reversal today.

During yesterday's trading session, the Australian Dollar edged lower by 66 pips against the US Dollar. The currency pair tested a support cluster at 0.6961 at the end of Friday's trading session.

The exchange rate bounced off the support cluster formed by the 200-hour simple moving average and the weekly pivot point at 0.6961 during the Asian session on Tuesday.

As for the near future, it is likely that the currency exchange rate regains some of its lost position. Bullish traders might target a swing high at 0.7040 during the following trading session.