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XAUUSD (1220.43): Gold prices were seen drifting back lower as price action was testing the support level at 1219.74. The retest back to this support level could signal a potential turn around in price. Gold prices continue to consolidate with the ascending triangle pattern likely taking shape. A breakout above the resistance level at 1235.25 is required to post further gains in the near term. Alternately, with the double top pattern being formed, a breakout below 1219.74 support could see gold prices extending the declines lower.

USDJPY (111.31): The USDJPY currency pair has been consolidating near the support level of 111.13 - 110.85 level. The BoJ meeting saw the dollar posting strong gains but price action is currently seen struggling to break past the long term trend line. Failure to post gains above the trend line could trigger potential declines to the downside. The immediate target to the downside comes from the support level at 109.45 region. Establishing support here could potentially signal the end of the correction to the uptrend..

EURUSD (1.1708): The EURUSD currency pair posted strong gains on Monday. Price action managed to recover the losses from last Thursday's ECB meeting. However, the common currency remains trading below the resistance level of 1.1730. This is expected to keep the currency pair's gains in check. To the upside, a close above the short term resistance level at 1.1742 is required in order to confirm the upside toward 1.1824 - 1.1846. Alternately, in the event that the EURUSD fails to break past to this level, we can expect the ranging price action to continue.

On the economic front, the preliminary inflation report for Germany showed that consumer prices rose 0.3% on the month. This was slightly below the median estimates of a 0.4% but inflation accelerated from 0.1% previously. On an annualized basis, German inflation rate was seen at 2.1%.

Spain's preliminary inflation report also released on the day showed a 2.2% increase annually, slightly missing estimates of 2.3% increase.

Data from the U.S. showed that pending home sales snapped a two month decline to rise 0.9% on the month. However, on an annualized basis, pending home sales is still down 2.5%.

Earlier today, the Bank of Japan held its monetary policy meeting. The central bank kept monetary policy unchanged. It said that inflation would increase gradually to 2% but would take more time than expected.

Later in the day, the preliminary inflation report from France will be released followed by the inflation estimates for the Eurozone. Canada will be reporting on the monthly GDP figures and later in the evening, New Zealand will be releasing the quarterly employment figures.

The euro continues to hold above the 1.1700 level against the US dollar, following a sharp decline in the value of the greenback on Monday. The EURUSD pair currently retains a bullish intraday bias while price trades above the key 1.1681 technical level. Traders now look to Jobs and Retail Sales data from the German economy and the release of US CORE PCE data later today, which is the Federal Reserve’s preferred measure of inflation.

The EURUSD pair is bullish while trading above the 1.1680 level, key resistance is found at the 1.1730 and 1.1790 levels.

If the EURUSD pair falls below the 1.1680 level, key technical support is found at the 1.1650 and 1.1630 levels.

The British pound trades back towards the 1.3100 level against the US Dollar after traders sold the GBPUSD pair from the 1.3150 level on Monday. Sterling is likely to remain under selling pressure while trading below the 1.3177 level, as it marks a pivotal technical area bulls must break. Sellers will once again attempt to target sustained losses below the 1.3080 level, while buyers will need to break above Monday’s daily-high for further bullish advancement.

The GBPUSD pair is bearish while trading below the 1.3080 level, key support is now found at the 1.3050 and 1.3030 levels.

If the GBPUSD pair holds above the 1.3177 level, buyers are likely to test towards the 1.3205 and 1.3245 resistance levels.

Two weeks ago, the price of Ethereum rose to a multi-monthly high of $505. The rise was in line with the surge in other cryptocurrencies like Bitcoin and Litecoin. It came after the earnings release of major financial firms, including Blackrock. The firm announced that it would set up a team to explore investments in the cryptocurrencies industry. Afterwards, traders started to focus on the regulations and whether the US regulator would accept proposals for cryptocurrencies ETFs.

After reaching the $505 high, Ethereum was unable to hold above the important $500 level. Since then, the ETH/USD pair has dropped to a weekly low of $432 and is currently trading at $443.

Yesterday, the Commonwealth Bank of Australia announced that it had completed the first blockchain-powered shipping experiment. The experiment involved shipping 17 tonnes of almonds from Australia to Germany. The experiment also included five other Australian and international leaders in the supply chain. This experiment demonstrated a blockchain platform using Ethereum’s technology of smart contracts and distributed ledger. It also used the concept of Internet of Things (IoT). Combined, these technologies facilitated the tracking of shipping and the end delivery along the existing processes.

This was a good demonstration of how the concept of blockchain can help companies around the world speed the documentation, operations, and finance.

On the hourly chart below, the ETH/USD pair is trading below the 50 and 100-day Exponential Moving Averages. In the past few days, the pair has been in consolidation mode, which has led to the creation of a symmetrical triangular pattern. This pattern was broken yesterday when the pair fell below the $450 level. In the coming days, traders will wait for any news from the SEC on the ETF proposal submitted by VanEck. A positive outcome will likely see the ETH/USD pair resume upward movements.

A steady stream of economic data will make its way through the financial markets on Tuesday, headlined by Eurozone GDP and US personal incomes and outlays. These and other data could have a significant impact on currency pairs with exposure to the euro and US dollar.

Action begins at 06:00 GMT with a report on German retail sales. Receipts at retail stores likely rose 1% in June after falling 2.1% the month before. In annualized terms, this would translate into 1% growth.

Germany’s statistics agency is back at 08:00 GMT with a report on unemployment. The nation’s jobless rate is forecast to hold steady at 5.2% in July.

At 09:00 GMT, the European Commission’s statistical agency will report on the second-quarter gross domestic product (GDP). The economy is projected to grow 0.4% in the second quarter following a similar advance in January-March.

In a pair of separate releases, Eurostat will report on unemployment and consumer inflation. The June unemployment rate is forecast to hold at 8.3%. Meanwhile, the consumer price index (CPI) is projected to rise 2% annually in July following a similar gain the month before.

Shifting gears to North America, the US Department of Commerce will report on personal income and spending at 12:30 GMT. Personal income for the month of June likely rose 0.4%, according to a median estimate of analysts. A similar gain is also expected for the personal spending category.

The report also contains the latest reading on core personal consumption expenditures, the Federal Reserve’s preferred measure of inflation. The core PCE index is projected 2% annually.

The Canadian government will also release a batch of economic data on Tuesday, including May GDP and June industrial production.

EUR/USD

Europe’s common currency is bracing for a potentially active Tuesday session headlined by economic data. The EUR/USD exchange rate reclaimed the 1.1700 handle at the start of the week, though upside was generally contained. The pair is now eyeing immediate resistance at 1.1749, which is the high from 23 July. On the flipside, immediate support is located at 1.1625, the low from Friday.

GBP/USD

Cable traded within a narrower range on Monday, as the bulls continued to eye a bullish reversal near the 21-day simple moving average of 1.3200. At the time of writing, the GBP/USD exchange rate is trading near 1.3130, where it was virtually unchanged.

USD/CAD

The Canadian dollar saw a little more upside on Monday, as the USD/CAD exchange rate briefly fell below 1.3000 for the first time since mid-June. The pair currently sits at 1.3027, with all eyes on the economic calendar. The pair remains firmly capped below 1.3085, which is the 50-day simple moving average. A breach of this level is needed to generate bullish pressure.

Markets

On Friday, core bonds ended the day mixed to slightly stronger. German yields were little changed, despite disappointing French Q2 growth. The focus for core bond trading was on the US Q2 GDP. The US economy expanded 4.1% QoQ (annualized), close to expectations (4.2%). The details of the Q2 report were constructive, too. Even so, it failed to inspire any further rise in US yields. On the contrary, US yields declined up to 2 bp, with the 2-10-yr part of the curve showing a slight flattening. Markets already expected strong growth. Most price indicators of the report (including the core PCE deflator) remained rather soft. A risk-off correction on US equity markets also added to a bond friendly sentiment. US yields declined between 2.1 bp (10-y) and 1.2 bp (2-y).

Today, the EMU calendar is interesting with EC confidence data and the German July CPI. German HICP is expected to rise 0.4% M/M and 2.1% Y/Y. Markets will also look forward to several key events/data later this week. The BOJ (tomorrow), the Fed (Wednesday ) and the Bank of England (Thursday) will announce policy decisions. Markets are pondering whether the BOJ will fine-tune its policy, mainly to mitigate side effects. The Fed is expected to leave its policy rate unchanged, but markets will look for clues whether the scenario of two additional rate hikes is still viable. The BoE is expected to raise rates by 25 bp. At the end of the week, key US data including the US payrolls will be published. The price action Friday was slightly disappointing for bond bears. The report suggests that upcoming US eco data should be really strong to inspire a sustained (further) rise in yields. Given this morning’s risk-off sentiment in Asia core bonds might remain well supported at the start of this week. For now, at test/re-break of the 3.0% level for US 10-year yields doesn’t look that easy.

The US Q2 GDP was also not strong enough to inspire further USD gains. EUR/USD first traded with a negative bias changing hands in the 1.1625 area just before the GDP release. However, the dollar faced some kind of modest ‘buy-the rumour sell, sell the fact’ reaction after the publication. EUR/USD closed the session at 1.1657 (from 1.1643). USD/JPY also finished the session slightly softer at 111.05. Some caution on yen shorts ahead of the BOJ and a correction on the equity markets weighed slightly USD/JPY, too. This morning sentiment on risk remains modestly risk-off in Asia. However, both EUR/USD and USD/JPY are trading near Friday’s closing levels. Friday’s price action was also slightly disappointing for USD bulls. The dollar needs positive surprises to succeed any further sustained gains. EUR/USD is holding firmly within the 1.15/1.1850 trading range. Friday’s price action suggests that a downside break also won’t be evident. For now there is no sign of a directional break out of the mentioned range.

Sterling even finished the day slightly softer with EUR/GBP closing just below 0.89. The EU rejecting PM May’s proposal on the customs issue didn’t help sterling. Today, the UK monetary data are on the agenda. Later this week, the focus will turn to the BoE policy decision. A rate hike is more or less discounted. Carney and Co will probably stay cautious on any additional rate hikes. We don’t see much reason for a sustained GBP-comeback.

News Headlines

US president Donald Trump has threatened to shut down the government if Democrats do not back his border wall funding (to build that wall on the US-Mexican border) and back immigration law changes. While the big majority of Republicans is backing Trump on the ideas, they do not favor a government shutdown.

After investors were disappointed with the results of Facebook and Twitter last week, plunging their shares, market sentiment worsened (NASDAQ -1.46% on Friday). Asian markets continue this sentiment with all indices opening in red today. The Chinese Shenzhen Comp is outperforming with a 1.25% loss.

Yen apparently suffers another round of selling after BoJ Governor Haruhiko Kuroda's post meeting press conference. A key to note is that under the strengthened framework, BoJ will now allow yields to move between -0.1% and +0.1%. And Kuroda emphasized that "we do not intend this change to lead to a rise in interest rate levels." He added that the 0.2% range will "improve functions in the government bond market, which had been deteriorating" and "help make our easy-policy more sustainable".

"On forward guidance, Kuroda said it's for strengthening the "commitment to achieve our 2 percent inflation target". And, "we've adopted this to ensure market trust in our policy as we will be maintaining our massive stimulus longer than initially expected." Kuroda pointed to "some speculation" that BoJ will seek an "early exit". And he hoped this can "dispel such speculation".

He also admitted that it takes "longer than expected" for inflation to pick up. Hence, "achievement of our target will be beyond our (three-year) forecast timeframe". And he also emphasized that "Under our yield curve control (YCC), real interest rates will fall even if nominal rates are steady as long as inflation expectations heighten." But there is no need for additional easing for now.

10 year JGB yield drops to as low as 0.054, after hitting 0.115 earlier today.