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The US dollar stays stable against the basket of major currencies. It was learned that the Fed intends to continue the increase of the interest rate despite criticism of the President of the United States. It should be reminded that last Friday Donald Trump expressed the belief that the policy of the Central Bank undermined his efforts to strengthen the US economy. The US dollar index (#DX) decreased slightly and closed in the negative zone (-0,05%).

The British pound grew against the American currency, as soon as it became known that the premier-minister of Great Britain, Teresa May intends to take control of the negotiations on Brexit. According to provisional data, the process of British exit from the EU will officially finish on March 29, 2019.

The Business Climate Index of Germany was published yesterday. It was 57,3, while the experts’ expectation was 55,5. Today during the Asian trading session the consumer price index in Australia has been released. It is 0,4% which is worse than the predicted value of 0,5%. The experts expect important statistics of the USA and the Eurozone.

The "black gold" prices are growing. At the moment, futures for the WTI crude oil are testing a mark of $68,80 per barrel. At 17:30 (GMT+3:00), a report on the US crude oil inventories will be published.

Market Indicators

Yesterday, the bullish sentiment prevailed in the US stock market: #SPY (+0,50%), #DIA (+0,78%), #QQQ (+0,41%).

At the moment, the 10-year US government bonds yield is at the level of 2,93-2,94%.

The news feed on 2018.07.25:

The IFO Business Climate Index of Germany – 11:00 (GMT+3:00);

The US New Home Sales – 17:00 (GMT+3:00).

Cable stands at the front foot in early Wednesday's trading, supported by Tuesday's bullish engulfing and eased Brexit concerns.

Extension of Tuesday's rally cracked technical barriers at 1.3160/73 (50% of 1.3362/1.2957/20SMA) but without clear break so far.

Flat momentum and mixed setup of daily MA's keeps the pair without clear direction.

Sustained break above 20SMA and Fibo barrier at 1.3208 (61.8%) is needed for bullish signal for extension towards 1.3300 zone targets (falling 55SMA/16 July high/falling daily cloud base).

Bearish scenario requires break below 10SMA (initial support at 1.3139) and extension below Tuesday's low (1.3071) to expose psychological 1.30 support and key point at 1.2927 (19 July low) in extension.

Res: 1.3173, 1.3190, 1.3292, 1.3327
Sup: 1.3139, 1.3102, 1.3071, 1.3049

The EUR/USD has formed an inverted Head and Shoulders Pattern with a subsequent breakout above the highest pattern point. The price has bounced from 50.0 fibonacci retracement and it is trying to break above 1.1700. If the price breaks 1.1700 targets are 1.1715, 1.1745 and 1.1766. Breakout or close above W H3, aims for 1.1812. If the price drops below 1.1650, the way to 1.1618 will be open.

W L3 - Weekly Camarilla Pivot (Weekly Interim Support)

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

The GBP/USD is challenging a key resistance trend line (orange) and a bullish breakout could confirm the ABC zigzag pattern (blue). Price needs to break above the downtrend channel before a larger bullish correction can take place whereas a break below the support (green) line could indicate a bearish continuation with the down trend.

The GBP/USD is probably building a bullish wave 5 (green) but if price fails to break above the resistance trend line (red), then price could also be building an ABC (orange) correction within wave 4 (green). At the moment though, a bullish breakout to complete the wave 5 (green) seems likely and price could move up to the Fibonacci targets of wave 5.

The EUR/USD made a bearish bounce at the resistance trend line as expected in yesterday’s wave analysis. Price is now showing bearish price action but could be running into support as price challenges the support Fibonacci levels of wave B (blue).

The EUR/USD could invalidate the ABC (blue) pattern if price manages to break below the bottom of wave B (blue) vs A, which is the 100% Fib level. A bullish reversal however could confirm a potential ABC (blue) zigzag pattern that could take price all the way up to the previous top which is indicated by the red box. Price is now still in the triangle pattern (indicated by the S&R trend lines) and the breakout above or below it will indicate the next trend.

The EUR/USD has completed 5 bullish waves (orange) within a 5th wave (green) of wave A (blue) as mentioned in yesterday’s wave analysis. Price is now building bearish momentum which could indicate a retracement to the Fibonacci levels and potential support of wave B (blue). A break above the resistance trend line (orange) could be a first indication that price is making a bullish reversal, completing wave B (blue) and starting wave C. But once again, a break below the bottom of wave B (100% level) invalidates the bullish ABC potential.

Daily Pivots: (S1) 1.3131; (P) 1.3156; (R1) 1.3197; More...

Intraday bias in USD/CAD remains neutral first. The corrective fall from 1.3385 is still mildly in favor to continue lower. Below 1.3114 will target 1.3063 support and then 100% projection of 1.3385 to 1.3063 from 1.3289 at 1.2967. But we'd expect strong support from rising channel line (now at 1.2897) to contain downside and bring rebound. Larger rally from 1.2061 is expected to resume later.

In the bigger picture, as long as channel support (now at 1.2897) holds, we're holding to the bullish view. That is, fall from 1.4689 (2015 high) has completed at 1.2061, ahead of 50% retracement of 0.9406 (2011 low) to 1.4689 (2015 high) at 1.2048. Further rally should be seen for 61.8% retracement of 1.4689 to 1.2061 at 1.3685 and above. However, sustained break of the channel support will argue that rise from 1.2061 has completed and will bring deeper fall to 1.2526 support to confirm.

Here are the latest developments in global markets:

FOREX: The US dollar index is fractionally lower on Wednesday (-0.04%), after posting some marginal losses in the previous session as well. Pound/dollar is up by 0.16%, looking set to extend the gains it posted yesterday after UK PM May announced she will be taking over the Brexit negotiations personally.

STOCKS: Wall Street closed mixed on Tuesday. While the Dow Jones (+0.79%) and the S&P 500 advanced (+0.48%), the tech-heavy Nasdaq Composite gave back some notable gains it had posted early to close practically flat (-0.01%). Stellar earnings from Google parent Alphabet (+3.89%) helped to lift the broader market, with news the US will provide subsidies to farmers also lifting manufacturers like John Deere (+3.18%) and Caterpillar (1.24%). Asian markets were mostly higher on Wednesday. Japan’s Nikkei 225 and Topix climbed by 0.46% and 0.38% respectively, while in Hong Kong, the Hang Seng gained 1.15%. Major European and US markets were expected to open modestly lower today, according to futures, with the only notable exception being the French CAC 40.

COMMODITIES: Oil prices climbed, amid continued signs of tension between the US and Iran, as well as optimism that increased Chinese infrastructure spending may help offset any negative impact on oil demand from the US-China trade spat. A larger-than-expected drawdown in the private API inventory data may have helped as well. WTI is up by 0.38% at $68.78 per barrel on Wednesday, and Brent higher by 0.82% at $74.02. In precious metals, gold oscillated in a tight range and ended the day flat on Tuesday. It is up by 0.21% at $1,226 per troy ounce today.

Major movers: Pound rebounds as PM May takes over Brexit; yen advances

UK PM Theresa May announced yesterday that she will take personal charge over the Brexit negotiations, and the Brexit Department will now focus solely on internal preparations for exiting the EU. The move was likely seen as demonstrating May’s commitment to making some progress in the talks, and was hence cheered by the pound, which closed the day higher against all its major peers – including the broadly stronger yen. With a BoE rate increase in August now all but priced in (86% probability according to UK OIS), the Brexit saga will likely remain the primary driver for sterling in the short-run.

In the US, the government announced it will help farmers affected by foreign tariffs by providing subsidies of up to $12bn. While the number is relatively small relative to the US budget, the announcement was likely seen as a harbinger of things to come, opening the way for more subsidies should trade tensions escalate further. It will also likely help to keep the Republican voting base content ahead of the US midterm elections in November. Staying on trade, today’s meeting between US President Trump and EU Commission President Juncker could be decisive for broader risk sentiment. European carmaker stocks will likely be in the eye of the storm, in light of US threats for tariffs on EU car imports if the talks fail to bear fruit.

Meanwhile, the yen continued to advance on Tuesday, closing higher against both the euro and the dollar amid continued speculation the BoJ may begin to reduce its massive stimulus dose as soon as at next week’s meeting. While there’s a lot of attention on this theme, it’s worth reiterating that the conditions the BoJ would like to see before withdrawing some stimulus are mostly absent. Inflation is still subdued, household spending is muted, the economy contracted in Q1, and while wages are showing some signs of life, they are still far from healthy levels. These make any near-term hawkish policy shift seem unlikely, something Japanese press noted overnight as well, reporting that seasoned BoJ watchers don’t expect any changes until October.

Elsewhere, aussie/dollar is down by 0.28% today, following Australia’s inflation data for Q2 overnight, which were a touch softer than expected.

Day ahead: German Ifo surveys and US new home sales due; Juncker-Trump meet

Wednesday’s calendar features the Ifo surveys gauging business sentiment in Germany, as well as new home sales data out of the US. In the meantime, a meeting between European Commission President Jean-Claude Juncker and US President Donald Trump is on the agenda.

The Ifo institute’s surveys gauging business morale in Germany, the eurozone’s largest economy, are due at 0800 GMT. The business climate index, as well as the ones on current conditions and expectations, are all expected to deteriorate in July. Specifically, the measure gauging the business climate is anticipated to record its eighth straight monthly decline and fall to its lowest since early 2017. The rising prospect for a trade war was one of the factors weighing on business sentiment in Germany in the previous months.

The ECB will be releasing monthly data on lending and money supply at 0800 GMT; the figures will pertain to the month of June.

The Confederation of British Industry’s distributive trades retail sales balance is projected to ease to +15 in July after jumping to a multi-month high of +32 in June; June’s print was helped by hot weather which was supportive of higher growth in British retail sales.

US new home sales for June will be made public at 1400 GMT. Sales are forecast to drop by 2.8% on a monthly basis after rising by 6.7% in May; the previously reported month’s sales were boosted by transactions in the south part of the country which climbed to a near 11-year high.

Meanwhile, the Juncker-Trump meeting in the White House will be attracting attention, with trade issues being on the table. Also of interest, will be discussions on NAFTA between Canadian Foreign Minister Chrystia Freeland and Mexican President-elect Andreas Manuel Obrador.

In emerging markets, a BRICS summit commencing in South Africa and lasting up to Friday will be watched for any important agreements between the parties involved.

In equities, Boeing, Facebook and Qualcomm are some of the big names reporting quarterly earnings today.

Of interest to oil traders will be weekly EIA data on crude oil stocks due at 1430 GMT.

Technical Analysis: Gold looking mostly neutral in the short-term

Gold has gained a bit after edging closer to the one-year low of 1,211.42 hit earlier in the month on Tuesday. The RSI is largely moving sideways around the 50 neutral-perceived level, supporting the view for a predominantly neutral picture in the short-term. Turning to the stochastics, it is of note that the %K line has moved above the slow %D line. This is a bullish signal in the very short-term, though it is still early to conclude in that direction.

Should concerns over trade ease in the aftermath of today’s Juncker-Trump meeting, then the risk-on sentiment is likely to divert funds away from gold, pushing the precious metal lower. Initial support to declines may come around yesterday’s five-day low of 1,218.04, with steeper losses shifting the attention to the one-year low of 1,211.49 from July 19.

Rising trade concerns on the other hand, could boost the safe-haven perceived asset. Resistance to advances may come around the current level of the 50-period moving average at 1,230.19, with the regions around Monday’s eight-day high and the 100-period MA being eyed next at 1,235 and 1,2412.20 respectively.

Movements in the greenback can also affect the dollar-denominated metal; a weaker USD is supportive of higher gold prices and vice versa.

Daily Pivots: (S1) 0.7373; (P) 0.7403; (R1) 0.7447; More...

AUD/USD continues to gyrate in range of 0.7309/7483 as consolidation extends. Intraday bias stays neutral and outlook is unchanged. Above 0.7483 will bring stronger rebound. But in that case, upside should below 0.7676 resistance to bring larger fall resumption. On the downside, break of 0.7309 and sustained trading below 0.7328 cluster support (61.8% retracement of 0.6826 to 0.8135 at 0.7326) will extend the fall from 0.8135 to 0.7158 support next.

In the bigger picture, medium term rebound from 0.6826 is seen as a corrective move that should be completed at 0.8135. Deeper decline would be seen back to retest 0.6826 low. This will now remain the favored case as long as 0.7676 resistance holds.

Daily Pivots: (S1) 110.93; (P) 111.23; (R1) 111.49; More...

USD/JPY is staying in consolidation above 110.74 and intraday bias remains neutral. On the downside, below 110.74 will extend the correction from 113.17 to 38.2% retracement of 104.62 to 113.17 at 109.90. But downside should be contained there to bring rebound. On the upside, break of 113.17 is needed to confirm rally resumption. Otherwise, we'd expect more consolidation in near term 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) 0.9916; (P) 0.9935; (R1) 0.9958; More...

Intraday bias in USD/CHF remains neutral for the moment. Also, 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.