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Daily Pivots: (S1) 110.63; (P) 111.01; (R1) 111.35; More...

With 111.53 minor resistance intact, the corrective fall from 113.17 could extend lower. But downside should be contained by 38.2% retracement of 104.62 to 113.17 at 109.90 to bring rebound. On the upside, break of 111.53 minor resistance will turn bias to the upside for retesting 113.17 high first.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.36 support holds.

Daily Pivots: (S1) 0.9899; (P) 0.9925; (R1) 0.9942; More...

Intraday bias in USD/CHF stays neutral at this point. With 0.9957 minor resistance intact, further decline is mildly in favor. Below 0.9900 will target 0.9856 support. Break there will pave the way to key support level at 0.9787. On the upside, above 0.9957 minor resistance will turn bias back to the upside for retesting 1.0067.

In the bigger picture, as long as 0.9787 support holds, we're still favoring the bullish case. That is, rise fro 0.9787 is resuming the whole up trend from 0.9186 and should target 1.0342 key resistance on resumption. However, break of 0.9787 will indicate medium term reversal and turn outlook bearish.

Daily Pivots: (S1) 1.3149; (P) 1.3175; (R1) 1.3217; More...

GBP/USD lost momentum after hitting 1.3212 as seen in 4 hour MACD. Intraday bias is turned neutral again. Overall outlook is unchanged that price actions from 1.2956 are seen as a correction. In case of another rise, upside should be limited below 1.3362 resistance to bring fall resumption eventually. On the downside, below 1.3070 minor support will bring retest of 1.2956 first. Break of 1.2956 low will resume the decline from 1.4376 to 1.2874 fibonacci level.

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 1.4179). 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 1.3362 resistance is needed to be the first indication of medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.

Daily Pivots: (S1) 1.1682; (P) 1.1711 (R1) 1.1758; More.....

EUR/USD dips mildly early US session but stays inside range above 1.1507/9. Intraday bias remains neutral for the moment. Stronger recovery cannot be ruled out as the consolidation from 1.1509 extends. But in that case, upside should be limited by 1.1851 resistance to bring fall resumption eventually. On the downside , firm break of 1.1507 will resume larger down trend through 50% retracement of 1.0339 to 1.2555 at 1.1447.

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.

Euro weakens slightly against Dollar after ECB left monetary policy unchanged as widely expected. President Mario Draghi delivered a balanced yet Uninspiring press conference. Fresh buying is seen in Dollar in early US session and the greenback has overtaken Yen as the strongest major currency for today. But it's to early to call for completion of recent correction in Dollar. For now, Australian Dollar and New Zealand Dollar are trading as the weakest ones.

In other markets, DOW extends this week's rally in early trading, up over 100pts, on optimism on EU-US trade relationship. German DAX outperforms other European indices on such optimism too. The receding threat of auto tariffs is clearly a blessing to German investors. DAX is trading up 1.47% at the time of writing, CAC up 0.45%. FTSE, on the other hand, is down -0.18%. However, Risk aversion was dominant in Asia though. China Shanghai SSE closed down -0.74%, Hong Kong HSI down -0.48%. Nikkei also lost -0.12%.

US initial jobless claims rose 9k to 217k in the week ended July 21, below expectation of 221k. The four-week moving average of initial claims dropped -2.75k to 218k. Continuing claims dropped -8k to 1.745m. The four-week moving average of continuing claims rose 9.5k to 1.74575m.

Headline durable goods orders rose 1.0% in June, well below expectation of 2.5%. Ex-transport orders rose 0.4%, above expectation of 0.3%. Wholesale inventories rose 0.0% mom versus expectation of 0.3% mom. Dollar is relatively unmoved after the releases. Also from US, trade deficit widened to USD -68.3B in June versus expectation of USD -67.0B.

Released earlier today, German Gfk consumer sentiment dropped 0.1 to 10.6 in August. Australia import price index rose 3.2% qoq in Q2, export price index rose 1.9% qoq.

ECB Draghi reiterated the policy path, rates to stay at current level at least through 2019 summer

ECB left interest rates unchanged as widely expected. Main refinancing rate is held at 0.00%, marginal lending facility rate at 0.25%, deposit facility rate at -0.40%. In the introductory statement to the press conference, ECB President Mario Draghi reiterated that the asset purchase target will be lowered to EUR 10B per month after September, subject to data confirmation to economic forecasts. The program will end after December. Interest rates are expected state at present levels through the summer of 2019.

Draghi also said latest stabilization in economic data is inline with forecasts and points to ongoing growth. Risk to growth outlook remains broadly balanced despite prominent threat of protectionism. Meanwhile, underlying inflation remains muted for now but is expected to rise gradually in medium term. And, ample degree of monetary policy stimulus is still needed at present.

In the Q&A section, Draghi acknowledged that the EU-US trade talks this week was a "good sign" but it's too early to assess the content of the agreement. Regarding question on Trump's attack on Eurozone's currency manipulation, Draghi said it's known that exchange rate isn't a policy target of the ECB.

More responses on EU-US trade negotiations

Finance Minister Bruno Le Maire urged that "each side, the Europeans and the Americans, must find something in these discussions", and, "any trade deal must be based on reciprocity". He also emphasized that agriculture must be excluded from the trade negotiations. To him, Europe could not ease its food safety and environmental norms. Also, he seems to prefer more focus in the negotiation and said "we don't want to enter into a negotiation a wide-ranging deal."

German Foreign Minister Heiko Maas welcomed the results even though "this is not yet the result we are aiming for". He acknowledged that "it has made a positive result in the whole discussion...on free trade or protectionism more likely than before." Economy Minister Peter Altmaier also expressed his optimism that " we can get a good result in the coming weeks and months."

Department for International Trade said in statement that "we welcome the agreement by the U.S. and the EU to work together to reduce barriers to trade and to further increase trade and investment." And, "we look forward to progress towards the removal of steel and aluminum tariffs and de-escalation of the tit-for-tat action that could harm businesses and jobs on both sides of the Atlantic."

EU-US trade war temporarily averted as Trump made major concession

Yesterday, European Commission President Jean-Claude Juncker's meeting with US President Donald Trump seemed to have achieved a breakthrough that could avoid a full-blown EU-US trade war. A rather positive joint statement was issued pledging to work towards "zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods". This is taken well generally by both sides.

While the auto tariffs were not mentioned in the joint statement, Juncker later said that the Trump made a "major concession" for holding off on further tariffs, including autos, as long as the negotiations continue. Juncker said he expected Trump to follow through on it. Also, he noted that Trump agreed to reassess the measures in the steel and aluminum sector.

Chinese Xi urged to safeguard the rule-based multilateral trading regime

Chinese President Xi Jinping called for joint effort in fighting protectionism at a BRICS summit in South Africa today. He told BRICS leaders that "we must work together ... to safeguard the rule-based multilateral trading regime; promote trade and investment, globalization and facilitation; and reject protectionism outright."

But Xi should be reminded that EU and US have agreed on a joint position. That is, both EU and US agreed to join forces against "unfair global trade practices". And specifically, they the practices include "intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state owned enterprises, and overcapacity." They clearly target China and it's time for Xi to step up reforms.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1682; (P) 1.1711 (R1) 1.1758; More.....

EUR/USD dips mildly early US session but stays inside range above 1.1507/9. Intraday bias remains neutral for the moment. Stronger recovery cannot be ruled out as the consolidation from 1.1509 extends. But in that case, upside should be limited by 1.1851 resistance to bring fall resumption eventually. On the downside , firm break of 1.1507 will resume larger down trend through 50% retracement of 1.0339 to 1.2555 at 1.1447.

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.

Economic Indicators Update

NZDUSD has come under renewed selling pressure, falling back below the 38.2% Fibonacci retracement level of the downleg from 0.7060 to 0.6686, near 0.6828. In the 4-hour chart, the price is set to record the third straight negative session, indicating further declines during the day. Broadly, the pair has been trading within a consolidation area since July 3 with upper boundary the 0.6850 resistance level and lower boundary the 0.6712 support.

Looking at momentum oscillators, they suggest further bearish extensions in the short-term. The RSI indicator is moving south, detecting negative momentum and is also pointing downwards. The MACD oscillator, already negative and is ready to post a bearish crossover with its trigger line.

In case of further declines in the price, immediate support may be found near the 20- and 40- simple moving averages (SMAs) at 0.6803 and 0.6789 respectively. A downside break of these levels would open the way for the 23.6% Fibonacci mark of 0.6774. In addition, if sellers manage to push below that hurdle too, they could drive the price until the 0.6767 support barrier.

On the flip side, if the bulls retake control, price advances may stall initially near the latest high at 0.6850 (upper boundary of the trading range). A potential upside violation of this level is raising the likelihood for more advances until the 0.6858 minor resistance and then towards the 50.0% Fibonacci of 0.6872.

Overall, NZDUSD is struggling in a sideways channel in the near term. A downside penetration of the channel would reinforce the negative medium-term outlook. However, an upside break would weaken the bearish picture.

The ECB has made no changes to its policy or forward guidance, and comments during the press conference are likely to confirm the bank’s optimistic but cautious stance.

“Prudence, Patience, Persistence Will Continue to Guide Policy”

Draghi’s assessment in press conference:

• Urges “Decisive Steps” to Complete Banking Union, Capital Mkt Union
• Monetary Analysis Confirms Need for Ample Degree of Stimulus
• Recovery in Private-Sector Loan Growth Ongoing
• Underlying Inflation Expected to Rise Gradually Over Medium Term
• Underlying Inflation Expected to Pick up Towards Year-End
• Uncertainty Concerning Inflation Outlook Receding
• Domestic Cost Pressures Strengthening
• Underlying Inflation Remains Generally Muted Despite Recent Pick Up
• Headline Inflation to Hover Around Current Level until Year-End
• Rise in HICP in June Reflects Higher Energy Prices
• Risk of Heightened Fincl Market Volatility Warrants Monitoring
• Risks Related to Global Factors Remain “Prominent”
• Data Point to Growth in Line With Staff Estimates
• Expansion in Global Demand Should Continue, Underpinning Exports
• Econ Growth Expected to Remain Solid, Broad-based
• ECB Stands Ready to Adjust All Instruments if Needed
• Significant Stimulus Still Needed to Underpin Inflation
• Incoming Data Consistent With Solid, Broad-based Growth
• Exchange Rate is No Policy Target
• Euro Has Appreciated Considerably in Last 1.5 Yrs Despite Ample Stimulus

PRESS CONFERENCE

Mario Draghi, President of the ECB,
Luis de Guindos, Vice-President of the ECB,
Frankfurt am Main, 26 July 2018

INTRODUCTORY STATEMENT

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today's meeting of the Governing Council.

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

Regarding non-standard monetary policy measures, we will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of €30 billion until the end of September 2018. We anticipate that, after September 2018, subject to incoming data confirming our medium-term inflation outlook, we will reduce the monthly pace of the net asset purchases to €15 billion until the end of December 2018 and then end net purchases. We intend to reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

While uncertainties, notably related to the global trade environment, remain prominent, the information available since our last monetary policy meeting indicates that the euro area economy is proceeding along a solid and broad-based growth path. The underlying strength of the economy confirms our confidence that the sustained convergence of inflation to our aim will continue in the period ahead and will be maintained even after a gradual winding-down of our net asset purchases. Nevertheless, significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ECB interest rates. In any event, the Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards the Governing Council's inflation aim in a sustained manner.

Let me now explain our assessment in greater detail, starting with the economic analysis. Quarterly real GDP growth moderated to 0.4% in the first quarter of 2018, following growth of 0.7% in the previous three quarters. This easing reflects a pull-back from the very high levels of growth in 2017 and is related mainly to weaker impetus from previously very strong external trade, compounded by an increase in uncertainty and some temporary and supply-side factors at both the domestic and the global level. The latest economic indicators and survey results have stabilised and continue to point to ongoing solid and broad-based economic growth, in line with the June 2018 Eurosystem staff macroeconomic projections for the euro area. Our monetary policy measures, which have facilitated the deleveraging process, continue to underpin domestic demand. Private consumption is supported by ongoing employment gains, which, in turn, partly reflect past labour market reforms, and by growing household wealth. Business investment is fostered by the favourable financing conditions, rising corporate profitability and solid demand. Housing investment remains robust. In addition, the broad-based expansion in global demand is expected to continue, thus providing impetus to euro area exports.

The risks surrounding the euro area growth outlook can still be assessed as broadly balanced. Uncertainties related to global factors, notably the threat of protectionism, remain prominent. Moreover, the risk of persistent heightened financial market volatility continues to warrant monitoring.

Euro area annual HICP inflation increased to 2.0% in June 2018, from 1.9% in May, reflecting mainly higher energy and food price inflation. On the basis of current futures prices for oil, annual rates of headline inflation are likely to hover around the current level for the remainder of the year. While measures of underlying inflation remain generally muted, they have been increasing from earlier lows. Domestic cost pressures are strengthening and broadening amid high levels of capacity utilisation and tightening labour markets. Uncertainty around the inflation outlook is receding. Looking ahead, underlying inflation is expected to pick up towards the end of the year and thereafter to increase gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion, the corresponding absorption of economic slack and rising wage growth.

Turning to the monetary analysis, broad money (M3) growth increased to 4.4% in June 2018, up from 4.0% in May. M3 growth continues to benefit from the impact of the ECB's monetary policy measures and the low opportunity cost of holding the most liquid deposits. The narrow monetary aggregate M1 remained the main contributor to broad money growth.

The recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. The annual growth rate of loans to non-financial corporations rose to 4.1% in June 2018, after 3.7% in the previous month, while the annual growth rate of loans to households remained unchanged at 2.9%. The euro area bank lending survey for the second quarter of 2018 indicates that loan growth continues to be supported by easing credit standards and increasing demand across all loan categories.

The pass-through of the monetary policy measures put in place since June 2014 continues to significantly support borrowing conditions for firms and households, access to financing – in particular for small and medium-sized enterprises – and credit flows across the euro area.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

In order to reap the full benefits from our monetary policy measures, other policy areas must contribute more decisively to raising the longer-term growth potential and reducing vulnerabilities. The implementation of structural reforms in euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. Regarding fiscal policies, the ongoing broad-based expansion calls for rebuilding fiscal buffers. This is particularly important in countries where government debt remains high. All countries would benefit from intensifying efforts towards achieving a more growth-friendly composition of public finances. A full, transparent and consistent implementation of the Stability and Growth Pact and of the macroeconomic imbalance procedure over time and across countries remains essential to increase the resilience of the euro area economy. Improving the functioning of Economic and Monetary Union remains a priority. The Governing Council urges specific and decisive steps to complete the banking union and the capital markets union.

We are now at your disposal for questions.

US initial jobless claims rose 9k to 217k in the week ended July 21, below expectation of 221k. The four-week moving average of initial claims dropped -2.75k to 218k. Continuing claims dropped -8k to 1.745m. The four-week moving average of continuing claims rose 9.5k to 1.74575m.

Headline durable goods orders rose 1.0% in June, well below expectation of 2.5%. Ex-transport orders rose 0.4%, above expectation of 0.3%. Wholesale inventories rose 0.0% mom versus expectation of 0.3% mom. Dollar is relatively unmoved after the releases.

The Canadian dollar has posted slight gains in the Thursday session. Currently, USD/CAD is trading at 1.3054, up 0.06% on the day. On the release front, there are no Canadian indicators for the remainder of the week. In the U.S, the focus is on durable goods orders. Core durable goods orders is expected to climb to 0.5% and the durable goods orders is forecast to jump to 3.0%. Both indicators recorded declines in the previous release. On Friday, the U.S releases Advance GDP and UoM Consumer Sentiment.

Canadian policymakers are keeping a close eye on Wednesday’s breakthrough in the EU-U.S trade war. On Wednesday, EU Commission President Jean-Claude Juckner met with President Trump, and the talks appear to have been more successful than expected. The parties agreed to hold off on any further tariffs while talks are ongoing. This is a major concession from Trump, who had threatened to impose tariffs on European car imports. U.S tariffs on European aluminum and steel will remain in place, but Juckner pointed out that the U.S has agreed to reassess these measures. The surprise agreement eases fears of a full-blown transatlantic trade war. Will the goodwill displayed by Trump extend into some kind of agreement with Canada as well?

The Canadian dollar posted strong gains on Wednesday, following an Energy Information Administration report showed a huge decline of 6.1 million in U.S crude inventories. This is the second decline in three months, and was much higher than the estimate of 2.6 million. Tensions between Iran and the U.S have also raised concerns about oil supplies, and higher crude prices have boosted the Canadian dollar.