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The Reserve Bank of New Zealand (RBNZ) will announce its rate decision early on Wednesday, at 02:00 GMT. No action is expected, so markets will be looking for signals that a rate cut is on the table at the August meeting. While the kiwi could tumble in case of a dovish statement, any losses may be short-lived if the American and Chinese presidents strike a conciliatory tone on trade when they meet on Friday.

The RBNZ cut rates the last time it met, highlighting that more stimulus was needed in the face of a slowing domestic economy and mounting global trade risks. Incoming data since that gathering have been mixed. While GDP growth clocked in at 0.6% q/q in Q1, higher than the RBNZ’s own projection of 0.4%, the details reveal that much of the strength was owed to temporary factors that may fade soon.

Slowing

Separately, business confidence remains low, holding back investment and therefore posing downside risks for future growth. Likewise, dairy prices have fallen in the past three auctions, reversing some of the strength seen earlier this year, which is worrisome for an economy that’s reliant on milk-related exports.

All the above suggest the RBNZ is probably not done cutting rates, though considering the cut at the previous gathering, markets only assign a 28% probability for another move this time. That said, when one looks at the next meeting in August, the implied likelihood for a rate reduction jumps to 85%, so investors don’t really expect the RBNZ to stay sidelined for long either.

Cautious does it

In terms of the market reaction, the risks seem tilted towards a weaker kiwi on the decision. The Bank is likely to tweak its language in a more cautious direction, preparing markets for a potential August action. More importantly, since other major central banks have adopted an easing bias, the RBNZ will be conscious that unless it signals more cuts too, the kiwi could soar – an outcome it likely wants to avoid. A stronger currency pushes down on import prices, making it harder for inflation to rise, and also makes a nation’s exports less competitive abroad.

There’s also a slim chance the RBNZ decides to surprise and cut this week, which further argues for a negative reaction.

Down, but not out

Looking beyond this meeting though, the kiwi’s direction will depend mainly on how trade tensions between the US and China evolve – especially as the Trump-Xi meeting at the G20 summit commencing on Friday. Trade is probably the most important variable for the currency, as potential signals that trade talks will restart in a frank manner could paint a brighter picture for New Zealand’s export-heavy economy, and also make the RBNZ more hesitant to cut rates deeper.

In this sense, there is a clear upside risk for the kiwi this week after the RBNZ meets. The leaders of both China and the US might try to portray a positive picture, even if they remain far apart on crucial issues, for fear of hurting economic and business sentiment in their respective home economies.

Taking a technical look at kiwi/dollar, support to declines may be found near the May lows at 0.6480.

On the flipside, advances in the pair could encounter immediate resistance at 0.6680, an area marked by the June 7 top.

WTI oil remains in green for the fifth straight day and extends recovery to three-week high on Monday.

Rising tensions between the US and Iran and new sanctions Tehran that Washington is about to announce, keep oil prices supported.

Bulls are approaching strong barriers at $58.59/80 zone (50% of $66.58/$50.59 / converged 100/200SMA’s) violation of which would generate fresh bullish signal for extension of recovery from $50.59 (5 June low).

Strong bullish momentum underpins the action, however, overbought daily stochastic and flat RSI warn that bulls may run out of steam.

Overall picture is positive as global supply remains tight as OPEC+ group is likely to extent its production cut deal of 1-2 July meeting in Vienna.

Positioning before final push through 100/200SMA’s can be anticipated, with dips expected to hold above broken Fibo 38.2% barrier at $56.70 (reinforced by 30SMA) to keep bulls in play.

Res: 58.21, 58.59, 58.80, 59.79
Sup: 57.59, 56.70, 56.23, 54.44

The euro has enjoyed a busy European trading session against the US dollar, with bulls already provoking a technical test of the 1.1400 resistance level. A move above the 1.1400 level could easily catapult the EURUSD pair towards the 1.1440 resistance area. The 1.1370 level is now interim support, with the 1.1347 level the major downside level to watch if bears take back short-term control.

The EURUSD pair is only bearish while trading below the 1.1347 level, key support is found at the 1.1321 and 1.1290 levels.

If the EURUSD pair trades above the 1.1400 level, key technical resistance is found at the 1.1440 and 1.1500 levels.

The US dollar remains extremely weak against the Japanese yen currency, with the pair failing to catch a bid despite being technically oversold. USDJPY bears may continue to sell the pair on down towards critical monthly support, at 106.40. The 107.80 level is now key resistance, which is the bottom of the USDJPY pairs former consolidation channel.

The USDJPY pair is bearish while trading below the 107.80 level, key support is found at the 107.00 and 106.40 levels.

If the USDJPY pair trades above the 107.80 level, key technical resistance remains at the 108.00 and 108.44 levels.

Looking at the whole FX market, when we see such a nice recovery on XXX/JPY crosses and bullish commodity currencies, seems like risk-on mode may continue, so DAX and other stocks may remain within uptrend. USD remains bearish, we may just see a small corrective recovery today on Monday and we know that Mondays are usually fake flows, so it would be perfect for a pullback. That being said, USD Index may see a three-wave recovery here in the 96 area, at the same time EURUSD and GBPUSD could face a three-wave a)-b)-c) corrective decline into wave »b«/«ii«.

German DAX, 1h

USD Index, 1h

EURUSD, 1h

GBPUSD, 1h

The Australian dollar extends advance on Monday after Friday's long-legged Doji and cracked pivotal Fibo barrier at 0.6949 (61.8% of 0.7022/0.6831).

Fresh bullish extension hit two-week high at 0.6961, boosted by dovish tone from Fed, which could result in 0.5% rate cut in July.

Extended short squeeze may show signs of stall as bulls lack momentum, daily stochastic is overbought and falling an thickening daily cloud weighs (cloud base lays at 0.6990).

Failure to clearly break 0.6949 Fibo barrier would generate initial negative signal, however, bulls are expected to remain in play while the price holds above broken 20SMA (0.6931). Adding to negative signals are expectations of RBA rate cut by 0.25% on the policy meeting next week.

Res: 0.6961, 0.6977, 0.6990, 0.7000
Sup: 0.6931, 0.6922, 0.6910, 0.6897

Gold bulls got extra energy on Friday, driving the price towards an almost six-year high of 1,411. Downside corrections are likely in the very short term as the stochastics are set for a bearish cross above 80 overbought mark. The MACD however, has yet to show any sign of weakness, an indication that any slowdown in the market may be short-lived.

Slightly higher, the 50% Fibonacci ratio of 1,421 of the three-year old downleg from 1,796 to 1,046 could prove a trigger point for another bullish round if breached successfully. Such a move would shift all the attention towards a stronger barrier around 1,520.

The 1,400 level is currently working as an immediate support to downside movements. Falling aggressively below that number, the next stop could be within the 1,365-1,356 former resistance zone, while even lower the market may be exposed to the 38.2% Fibonacci of 1,332 and the 1,325 mark.

In the bigger picture, the recent gains turned the market strongly bullish as well. The positive slope in the 50-day simple moving average (SMA) suggests that the bright outlook may not fade soon.

In brief, gold is trading in the green both in the short- and the long-term, eyeing a key resistance around 1,421 in coming sessions.

On Friday, the US dollar continued to decline against a basket of major currencies despite optimistic economic data. The US dollar index #DX closed in the negative zone (-0.59%). So, on Friday, a report on existing home sales was published, the figure counted to 5.34M in May, while experts expected 5.29M. The greenback is still under pressure after the Fed meeting. The regulator is ready to consider the issue of reducing the key interest rate at the next meetings. At the moment, investors are focused on whether Washington and Beijing will be able to eliminate the trade conflict at the G20 summit in Japan. The two-day summit will start on Friday.

The euro jumped to a high in three months amid a decline in the US currency. The publication of positive economic statistics from the Eurozone supported the European currency. Thus, German manufacturing PMI counted to 45.4 in June and turned out to be better than the forecasted value of 44.6. Markit composite PMI counted to 52.1 in June and was better than the expected value of 51.8.

The "black gold" prices are rising amid tensions between Iran and the United States after US Secretary of State, Mike Pompeo, announced that serious sanctions would be imposed on Tehran. At the moment, futures for the WTI crude oil are testing the mark of $57.90 per barrel.

Market Indicators

• On Friday, there was the bearish sentiment in the US stock market: #SPY (-0.63%), #DIA (-0.37%), #QQQ (-0.15%).
• The 10-year US government bonds yield is at 2.04-2.05%.

The news feed on 2019.06.24:

• German IFO business climate index at 11:00 (GMT+3:00).

Notes/Observations

• Main focus remains on geopolitical risks
• G20 leaders meeting in Osaka from June 28-29th (Friday-Saturday); Traders focused on expected meeting between Trump and Xi
• Germany Jun IFO survey was mixed
• EU Commission said to hold off on launching a disciplinary process against Italy's rising debt levels this week

Asia:

• US and Chinese trade teams said to be discussing next steps after Presidents Trump and Xi agreed to meet on the sidelines of the upcoming Group of 20 summit in Japan
• China Commerce Ministry (MOFCOM): China and US trade negotiating teams could meet as soon as Tues, Jun 25th
• China PBoC Dep Gov Gousheng: Policy room for countries to deal with economic slowdown was limited
• China Assistant Foreign Min: World economy faced rising risks; G20 to ensure unity and cooperation; would safeguard its fundamental interests
• Reserve Bank of India (RBI) Deputy Gov Acharya said to resign 6 months before his term ends
• RBA Gov Lowe reiterated that risks to global economy were tilted to the downside; legitimate to ask how effective monetary easing would be globally; if everyone was easing, the impact on exchange rates was offset

Europe/Mideast:

• EU Commission was expected to hold off on launching disciplinary process against Italy this week
• Turkey opposition CHP party won the redo of the Istanbul mayoral election, CHP candidate Imamoglu was leading by a 54% to 45% margin over the ruling AKP (99% of the ballots counted)

Americas:

• President Trump: moving ahead with additional sanctions on Iran aimed at preventing it from getting a nuclear weapon; military action still on the table

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.1% at 384.3, FTSE +0.1% at 7412, DAX -0.5% at 12283, CAC-40 -0.2% at 5519, IBEX-35 -0.4% at 9191, FTSE MIB -0.4% at 21,301, SMI -0.1% at 9951, S&P 500 Futures +0.2%]
• Market Focal Points/Key Themes: European Indices trade mixed this morning following a generally positive session in Asia and stronger US Index futures. On the corporate front shares of Metro in Germany trades higher after a takeover offer at €16/shr; Carrefour trade higher following a agreement to sell a stake in in Chinese activities to Suning.com for €1.4B. After recent weakness Natixis shares rebound slightly as the board support H20 Management's measures, while Morphosys gains on the presentation of analysis from L-Mind study. To the downside Eurofins declines following providing impact analysis of the cyber attack in early June, Daimler declines after cutting its full year outlook, while Voltalia falls following a capital increase. Looking ahead notable earners include Lennar Corp, Factset Research and Barnes and Noble Education.

Equities

• Consumer discretionary: Carrefour [CA.FR] +2% (divestment), Metro [B4B.DE] +1.5% (analyst action), Voltavia [VLTSA.FR] -6.5% (capital raise), Lufthansa [LHA.DE] -1.5% (dividend policy change; capital markets day)
• Consumer staples: Eurofins Scientific [ERF.FR] -4% (cyber attack impact)
• Financials: Danske Bank [DANSKE.DK] -2% (Head of Banking resigns)
• Healthcare: Morphosys [MOR.DE] +6% (study results)
• Industrials: Daimler [DAI.DE] -4.5%, BMW [BMW.DE] -1.5%, Volkswagen [VOW3.DE] -1.5% (Daimler's profit warning), Leonardo [LDO.IT] +2.5% (acquisition speculation)

Speakers

• German IFO economists noted that the domestic economy was heading for the doldrums but its maintained its current GDP growth forecast and did not see any recession forthcoming. US-China trade despite was the main cause of uncertainty while Brexit and Iran conflict did not have any dominant role at this time
• Ukraine Fin Min Markarova: In active talks for longer IMF loan
• India Central Bank (RBI) statement confirms Deputy Gov Acharya to resign citing personal reasons
• China Foreign Ministry spokesperson Lu Kang: Fedex should offer a proper explanation on Huawei matter
• China Vice Fin Min Zou Jiayi said to be appointed to PBoC monetary policy committee
• Iran Presidential advisor Ashena: US offer for talks with no preconditions is not acceptable while sanctions remain in place
• Iran Naval chief Khanzadi: Country is capable of shooting down additional US spy drones
• Russia Energy Min Novak: we see rivalry heating up on global energy markets

Currencies/Fixed Income

• USD began the week on wobbling legs as market participants continued to ponder the prospect of a Fed rate cut in July.
• EUR/USD tested 3-month high as the week began but was unable to break the 1.14 level. German Jun IFO reading could not propel the Euro as the readings came in mixed overall.
• TUR currency (Lira) was firmer by 1.5% after Turkey opposition CHP party won the Istanbul mayoral election. CHP candidate Imamoglu 9 point victory over former PM Yildirim suggested that President Erdogan's AK Party won't challenge the result again.
• European bond yields remains softer with the main driver of the downward pressure being markets' expectations of either a rate cut or some other easing measure by the ECB by September

Economic Data

• (NL) Netherlands Q1 Final GDP Q/Q: 0.5% v 0.5% prelim; Y/Y: 1.7% v 1.7% prelim
• (FI) Finland May PPI M/M: 0.1% v 0.1% prior; Y/Y: 0.9% v 2.0% prior
• (CZ) Czech Jun Consumer Confidence Index: 2.8 v 2.8 prior; Business Confidence: 11.9 v 12.7 prior; Composite (Consumer & Business Confidence): 10.1 v 10.7 prior
• (TR) Turkey Jun Real Sector Confidence: 99.6 v 94.7 prior; Real Sector Confidence: 102.5 v 98.9 prior
• (TR) Turkey Jun Capacity Utilization: 77.1% v 76.3% prior
• (TW) Taiwan May Industrial Production Y/Y: -3.1% v -1.5%e
• (TW) Taiwan May Unemployment Rate: 3.8% v 3.7%e
• (CH) Swiss Weekly Total Sight Deposits (CHF): 578.9B v 578.5B prior; Domestic Sight Deposits: 465.9B v 467.6B prior
• (DE) Germany Jun IFO Business Climate: 97.4 v 97.4e; Current Assessment: 100.8 v 100.3e; Expectations Survey: 94.2 v 94.6e
• (PL) Poland May Retail Sales M/M: -3.0% v -1.9%e; Y/Y: 7.3% v 8.5%e; Real Retail Sales Y/Y: 5.6% v 6.9%e
• (PL) Poland May Construction Output Y/Y: 9.6% v 14.0%e

Fixed Income Issuance

• None seen

Looking Ahead

• (IT) Italy Debt Agency (Tesoro) announcement for upcoming BTP auction on Thursday, Jun 27th
• (IL) Israel May Leading 'S' Indicator M/M: No est v 0.3% prior
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IL) Israel May Unemployment Rate: No est v 3.8% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (DE) ECB's Lautenschlaeger (Germany, SSM member)
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) May Chicago Fed National Activity Index: -0.05e v -0.45 prior
• 08:55 (FR) France Debt Agency (AFT) to sell combined €3.8-5.0B in 3-month, 6-month and 12-month Bills
• 09:00 (MX) Mexico Apr IGAE Economic Activity Index (Monthly GDP) M/M: 0.6%e v -0.6% prior; Y/Y: -0.4%e v 1.3% prior
• 09:00 (BE) Belgium Jun Business Confidence: No est v -3.6 prior
• 09:00 (CL) Chile May PPI M/M: No est v -0.1% prior
• 09:30 (BR) Brazil May Current Account Balance: +$0.7Be v -$0.1B prior; Foreign Direct Investment (FDI): $7.8Be v $7.0B prior -
• 10:30 (US) Jun Dallas Fed Manufacturing Activity: -2.0e v -5.3 prior
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

Trump is very much at the centre of the main market-related headlines this week, not for the first time it's safe to say.

Last week, the attention was on the central banks as the Fed and ECB adopted a more accommodative tone and opened the door to easing measures this year, with the former now entirely priced in for a rate cut in July. This week sees focus shift to trade and geopolitics, which will likely make it a very interesting week for oil markets.

We saw a resurgence in WTI last week as various events seemed to line up favourably for oil bulls. Whether it was the sudden escalation in the Gulf of Oman - and nearly a far more severe one had the US not shown some restraint late in the day - the improved prospects for Sino-US trade talks, unexpected drawdowns in crude inventories or just the stock market rally, everything lined up to bring some relief to the sell-off.

While oil prices had stabilized in recent weeks, any rallies had faced still resistance - even those built on worrying events in the Gulf - giving the indication that sellers remained in control. The events of the last week though have seen that resistance broken and should talks at the G20 go well later this week, alleviating some of the risks to the global outlook, oil bulls may feel reinvigorated.

Gold continues higher on soft dollar

Gold is creeping higher again on Monday, as the dollar once again finds itself in the red. The yellow metal rose more than 4% last week as traders exited the dollar and paved the way for gold to take off. The Fed naturally had a lot to do with this on Wednesday as it opened the door nice and wide to rate cuts, with markets fully pricing one in for next month.

The only question now is what's left to price in when you consider just how dovish traders have become when it comes to the Fed. Especially when you consider that we may have some good news later this week from the G20 which may force traders to rethink their expectations for interest rates, given that the trade war is a huge risk to the economic outlook.

Bitcoin rally a blast from the past

Bitcoin is very much back in the headlines, as the cryptocurrency surged through $10,000 for the first time in more than a year and reminded us all of the good old days of late-2017. The launch of Facebook's Libra seems to be primarily behind the surge in bitcoin, with traders likely eyeing the news as legitimizing the industry which has come under scrutiny since falling more than 80% from its peak.

Clearly we're still seeing the same behavioral trends that we saw in late-2017 and early-2018 which should make the coming weeks interesting, to say the least. Adoption is obviously key for this space so the Facebook news is obviously being viewed positively but the same questions around bitcoin will still persist, regardless of this and whatever movements we see in the near-future.