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The market opened to a quiet trading day on Monday. The U.S. Dollar was trading stronger, while the U.S. Dollar Index posted intraday gains to fresh highs. The gains came despite the market's opening, with the headline about China threatening to impose fresh trade tariffs against the U.S.

Australia's inflation gauge report showed that inflation expectations increased 0.1% on the month. The factory orders report from Germany showed a 4.0% decline on the month. This briefly pulled the Euro currency lower on the day.

The Reserve Bank of Australia held its monetary policy meeting earlier today. As widely expected, the central bank left its cash rate unchanged at 1.50%. The statement was broadly unchanged from the previous monetary policy meeting.

Later in the day, the German Industrial Production and Trade Balance figures will be coming out. The U.S. trading session will see the release of Canada's Ivey PMI. The index is forecast to rise modestly from 63.1 in June to 64.2 in July.

GBPUSD had been in a falling mode over the previous three days as it posted a fresh 11-month low of 1.2919. The rally brought the pair below the 20- and 40-simple moving averages (SMAs) and near the lower Bollinger Band in the daily timeframe. However, the technical indicators are suggesting for a possible upside correction.

The RSI indicator is moving slightly higher in the bearish zone, while the stochastic oscillator is ready to post a bullish crossover within the %K and %D lines in the oversold zone, indicating an upside movement is more likely than a downside one. However, the MACD oscillator is strengthening its negative momentum below the trigger and zero lines.

If the bulls manage to take charge from near the lower Bollinger Band or the 1.2960 barrier, then we would expect the price to touch the 20 and then the 40 SMAs at 1.3100 and 1.3165 respectively. Such a break would confirm an upside move until the 23.6% Fibonacci retracement level of the downleg from 1.4375 to 1.2919, around 1.3263, which stands near the upper Bollinger Band.

A clear dip below the 1.2919 low would bring the price until the 1.2770 support level, taken from the low on August 2017. Further losses would drive the pair towards the 1.2580 hurdle, identified by June 2017.

Overall, GBPUSD continues the strong negative outlook in the medium-term and was denied posting a strong bullish correction in the previous sessions.

Asian stocks rallied on Tuesday, following a surge on Wall Street that sent the S&P 500 to a near all-time high and the Cboe’s Volatility Index to itslowest level since late January.

The strong earnings season has been the key factor lifting U.S. stocks. With 24.1% earnings growth and more than 79% of S&P 500 companies managing to beat profit forecasts it looks to bethe best earning season in recent history. However, as we get closer to the end of company announcements, the focus will return to trade frictions, geopolitics and the forthcoming U.S. mid-term elections.

Many investors were watching oil prices after the U.S. re-imposed sanctions on Iran. The U.S. aims to bring Iranian oil exports to zero by November, but given that China, India, and the E.U. are opposing these sanctions it's becoming a difficult guess as to how many barrels will be off the market by then. Brent was slightly up on Tuesday trading near $74. With global demand remaining healthy and the global heat wave increasing oil demand, I think prices will remain well-supported in the near term. However, a break above $80 needs a supply shock, but we are not there yet.

In currency markets, the Pound fell to an 11-month low against the Dollar on Monday on renewed worries that the U.K. will break away from the E.U. with no deal. This came after Trade Minister Liam Fox put the chances of Britain leaving the E.U. without a deal at “60 – 40”. Pessimistic voices out of the U.K. are increasing. Fox’s comments came after BoE Governor Mark Carney warned that the risk of a no-deal Brexit is “uncomfortably high”. The more we hear the term “no Brexit deal” from U.K. officials, the more selling pressure is expected to be felt by the Sterling. GBPUSD has fallen by more than 10% from its 2-year high recorded on 17 April and this downtrend is likely to resume unless there is a positive surprise breakthrough.

The Turkish Lira also came under renewed selling pressure, tumbling more than 6% on Monday to a hit a new record low of 5.42 against the Dollar as tensions escalated between Washington and Ankara. The central bank’s change of reserve rules to support foreign exchange liquidity seems to have had a limited effect on the currency. The only tool that may provide some relief for the currency for the moment is raising interest rates, but there doesn’t seem to be a willingness to do so.

General Trend:

• Asian equity markets trade mixed
• Chinese equities move higher in early trading
• Shanghai Composite Property index rises over 2.5%
• Large Nikkei component Softbank rises over 6% post earnings
• China Tower confirmed that HK IPO to price at the lower end of the expected range
• Japan wage data accelerates in June
• RBA sees Q3 CPI a little lower than expected on one-off factors
• ASX remains under pressure from mining names
• Expected earnings report from BHP in focus
• China July FX reserves data may be released later today, trade balance seen later during the week

Headlines/Economic Data

Japan

• Nikkei 225 opened flat
• TOPIX Info & Communications index +2.1%, Iron & Steel +1.1%, Marine Transportation +0.6%
• (JP) Japan FSA said to have started on-site inspections of certain regional banks - Japanese Press
• (JP) Japan Jun Household Spending m/m: 2.9% v 1.7%e; y/y: -1.2% v -1.4%e
• (JP) Japan Jul Labor Cash Earnings y/y: 3.6% v 1.7%e; Real Cash Earnings y/y: 2.8% v 0.9%e (fastest rise since Jan 1997)
• (JP) Japan BoJ board said to have considered raising rates before tweaking policy - financial press
• (JP) Capital Economics says the rise in Japan’s June wage data was mostly due to larger contribution from bonus payments which could more reflect strong corporate profits as opposed to tightness in the labor market – US financial press
• (JP) Japan MoF sells ¥399.6B v ¥400B indicated in 10-yr 0.1% inflation-indexed bonds; highest yield -0.309%; bid to cover 3.12x v 4.02x prior

Korea

• Kospi opened +0.2%
• 005930.KR Deputy PM and Fin Min Kim calls on company to make more effort in improving governance and discarding unfair trade, while working for job creation and innovative growth; Samsung asks for more deregulation in bio sector and holds off on investment plan announcement - Korean press
• (KR) North Korea thinks there is a "strong possibility" of a second summit with President Trump and Kim Jong Un – press
• (KR) South Korea Govt to ease progressive charge in electricity bills, to temporarily ease power tariff in July and August - Korean press

China/Hong Kong

• Hang Seng opened +0.3%, Shanghai Composite +0.2%
• Hang Seng Energy index +2.6%, Property/Construction +2.6%, Materials +1.5%, Consumer Goods +1.4%, Industrials +1.3%, Services +0.9%, Financials +0.7%,
• China Tower, 788.HK Prices 43.1B shares at HK$1.26/shr v HK$1.26-1.58/shr indicated; 1.36x oversubscribed
• (CN) China to 'soon' adopt policies to increase investment and credit - Chinese Press
• (CN) China 2018 railway investment seen > CNY800B - Chinese Press
• (CN) China PBoC Open Market Operation (OMO): Skips OMO for the 13th straight session
• (CN) CHINA PBOC SETS YUAN REFERENCE RATE AT 6.8431 V 6.8513 PRIOR

Australia/New Zealand

• ASX 200 opened -0.1%
• ASX 200 Telecom index -1.4%, Consumer Discretionary -1.1%, Resources -0.5%, Financials -0.3%; Energy +0.7%
• (NZ) New Zealand Shadow Board: Conditions do not warrant change in RBNZ rate
• (AU) Australia Jul AiG Performance of Construction Index: 52.0 v 50.6 prior
• (AU) Australia Treasurer Morrison: Will enforce additional changes to support ASIC, to receive additional A$70M in funding
• (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 118.9 v 119.8 prior
• Amcor, [-4%], BMS To be acquired by Amcor for $57.75/shr in all-stock deal valued at $6.8B; combined company to list on NYSE, ASX
• (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED

Other Asia

• (PH) Philippines Jul CPI m/m: 0.5% v 0.6% prior; y/y: 5.7% v 5.5%e

North America

• US equity markets ended higher: Dow +0.2%, S&P500 +0.4%, Nasdaq +0.6%, Russell 2000 +0.7%
• S&P500 Telecom +1%
• SPDR Gold Trust ETF daily holdings -0.8% at 788.7 metric tonnes

Europe

• (UK) Jul BRC Sales LFL y/y: 0.5% v 1.5%e
• (TR) Delegation of officials from Turkey said to plan to go to the US in 2 days; Turkey and the US said to reach pre-agreement on certain issues including sanctions - CNN

Levels as of 01:30ET

• Hang Seng +0.8%; Shanghai Composite +1.3%; Kospi +0.3%; Nikkei225 +0.6%; ASX 200 -0.4%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.2%, Dax +0.1%; FTSE100 +0.2%
• EUR 1.1551-1.1564; JPY 111.23-111.42; AUD 0.7382-0.7400;NZD 0.6725-0.6735
• Dec Gold +0.0% at $1,218/oz; Sept Crude Oil +0.0% at $69.03/brl; Sept Copper +0.4% at $2.74/lb

The British pound trades to the downside against the US Dollar in early Tuesday, as bearish technicals and a possible Brexit no-deal, continue to hurt the British pound sentiment. The GBPUSD pair is strongly bearish while trading below the 1.2955 level, as it represents a large head and shoulders pattern neckline. Buyers will attempt to push the price above the 1.2955 level, while sellers will try to push price well-below the 1.2900 level.

The GBPUSD pair is strongly bearish while trading below the 1.2955 level, key support is now found at the 1.2915 and 1.2880 levels.

If the GBPUSD pair moves above the 1.2955 level, buyers may be encouraged to target the 1.3000 and 1.3040 resistance levels.

The euro currency has recovered marginally higher against the US dollar in early Tuesday trading, as the greenback pauses after moving sharply-higher on Monday. The EURUSD pair still has scope to recover while trading above the 1.1554 level, but the trend still remains bearish while price trades below the 1.1600 level. Sellers will likely continue to push to make lower daily price lows, while buyers need to stabilize price above the 1.1600 level.

The EURUSD pair is strongly bearish while trading below the 1.1554 level, key support is now found at the 1.1527 and 1.1507 levels.

If the EURUSD pair trades above the 1.1600 level, buyers will likely test toward the 1.1630 and 1.1630 resistance levels.

After a tepid start to the week, economic data are back in focus Tuesday with Germany and France scheduled to deliver potentially market-moving releases.

The European session kicks off at 06:00 GMT with a report on industry production by Germany’s statistical agency. Output at German factories and mines likely fell 0.5% in June after rising 2.6% the month before. In annualized terms, Germany’s rate of industrial production likely rose 3%.

In a separate report, the German government will report on international trade at 06:00 GMT. Germany’s trade surplus with the rest of the world is forecast to dip slightly to €20.1 billion in June compared with €20.3 billion the month before.

Forty-five minutes later, France will issue its monthly trade report for June. Paris’ trade deficit is projected to narrow to €5.6 billion from just over €6 billion the previous month.

Shifting gears to North America, the US Department of Labor will report on the JOLTS job opening survey for the month of June. Last week, Labor said nonfarm payrolls rose by 157,000 in July as unemployment fell to 3.9% from 4%.

North of the border, the Richard Ivey School of Business will report on business conditions in Canada. The July version of the index is expected to show a gain of 1.1 percentage point to 64.2.

EUR/USD

Europe’s common currency traded within a narrow range on Monday, a sign that traders were awaiting fresh market catalysts in the form of economic data. The EUR/USD exchange rate traded in the mid-1.1500 region, eventually consolidating around 1.1560. At the time of writing, the pair was hovering right around that level. In terms of technical levels, the pair faces immediate support at 1.1527, which corresponds with the low from 28 June. Below that, the next major support is located at 1.1500. On the opposite side of the ledger, EUR/USD is likely to run into resistance at 1.1647, the 10-day simple moving average.

GBP/USD

Cable resumed its descent on Monday, as prices crashed below 1.3000 en route to fresh yearly lows. At the time of writing, the GBP/USD exchange rate was trading at 1.2940, where it was little changed compared with the previous close. With the latest reversal, cable risks an even bigger drop toward 1.2925, according to Commerzbank. Below that level, the pair is looking at the August 2016 low of 1.2866 as the next target.

USD/JPY

The dollar-yen exchange rate saw its momentum fade in the latter half of Monday, as the pair continued to hold below 111.50. The dollar has witnessed multiple breakdowns against its Japanese counterpart over the past five days after the market rejected bids above 112.00. At the time of writing, USD/JPY is trading at 111.33.

The EUR/USD is testing a critical support trend line (blue) which is decision zone for a continuation of the downtrend or extension of the bullish correction (pink WXY as indicated in the image). A bullish bounce confirms the current wave pattern whereas a bearish break below 1.15 support makes a different wave pattern more likely (a completed wave 4 and bearish wave 5).

The EUR/USD made a new low as part of a wave 5 (green), which could either complete a larger wave 3 or wave C (blue). A bullish breakout above the resistance (red) trend line makes the current wave pattern more likely, which is a wave C of wave Y of X. A break below the 100% Fibonacci target makes a wave 5 of a wave 3 more likely.

Daily Pivots: (S1) 1.1532; (P) 1.1552 (R1) 1.1574; More.....

With 1.1610 minor resistance intact, deeper fall is still mildly in favor for 1.1507 key support level. Decisive break there will resume larger down trend from 1.2555 through retracement of 1.0339 to 1.2555 at 1.1447. On the upside, however, above 1.1610 minor resistance will delay the bearish case and extend the consolidation from 1.1509 with another rebound instead.

In the bigger picture, EUR/USD was rejected by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. And, a medium term top was formed at 1.2555 already. Decline from there should extend further to 61.8% retracement of 1.0339 to 1.2555 at 1.1186 and below. For now, even in case of rebound, we won't consider the fall from 1.2555 as finished as long as 1.1995 resistance holds.

Daily Pivots: (S1) 1.2904; (P) 1.2960; (R1) 1.2999; More...

For now, intraday bias in GBP/USD remains mildly on the downside. The down trend from 1.4376 has just resumed and should target 1.2874 fibonacci level next. On the upside, above 1.2998 minor resistance will turn intraday bias neutral first. But in case of recovery, upside should be limited below 1.3212 resistance to bring fall resumption.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA (now at 1.4141). Fall from 1.4376 should extend to 61.8% retracement of 1.1946 (2016 low) to 1.4376 at 1.2874 next. Decisive break of 1.2874 will raise the chance of long term down trend resumption through 1.1946 low. On the upside, break of 1.3212 resistance is needed to be the first indication of medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.