Sample Category Title

Pivot (invalidation): 1.1720

Our preference Long positions above 1.1720 with targets at 1.1765 & 1.1785 in extension.

Alternative scenario Below 1.1720 look for further downside with 1.1700 & 1.1670 as targets.

Comment Technically the RSI is above its neutrality area at 50.

Pivot (invalidation): 7370

Our preference Long positions above 7370 with targets at 7700 & 7900 in extension.

Alternative scenario Below 7370 look for further downside with 7230 & 7035 as targets.

Comment The RSI is bullish and calls for further advance.

The Dollar resumed its slide on Monday morning as trade jitters seem to have stepped up, further threatening a currency war. President Trump publicly criticized the Federal Reserve’s tightening policy on Friday, stating that “the United States should not be penalized because (they) are doing so well” - in his opinion, tightening now is hurting his efforts to boost the economy.

The erstwhile real estate tycoon is not in favor of rates going higher and neither are many U.S. households. After all, higher rates mean increased costs of borrowing, higher mortgage interest payments and less incentive to spend. However, the Fed cannot base its decision on short-term political ambitions, as letting inflation run out of control will be much more damaging in the long run.

Trump’s comments on Friday also threaten the independence of the central bank which is crucial to markets’ confidence. In my opinion, Fed Chair Jerome Powell will proceed with the tightening process, but there is a chance that hikes will become less gradual if the President continues to pressure the central bank.

In another intervention, Trump accused China and the E.U. of manipulating their currencies to gain a competitive edge over the U.S.; in fact, the real reason for the Dollar’s appreciation until now is that the U.S. economy is outperforming its peers. This is not because other countries are pushing down their currencies, but because of Trump’s fiscal and trade policies.

If it becomes evident that the current trade war is shifting towards a currency war, expect risk assets to tumble heavily - investors need to keep a close eye for such developments. Going forward, the Yuan will be a key currency to watch as a break above 6.8 will draw more criticism to China and the way they are managing their currency.

The European Central Bank is meeting on Thursday. After announcing on 14 June their plans to end the stimulus program by the end of this year, we don’t expect to see a significant change in policy and therefore no surprises on this front. What will be more interesting is how the ECB assesses the latest development in trade tensions and whether President Draghi responds to Trump’s criticisms of currency manipulation.

On the data front, U.S. GDP is expected to expand more than 4% in Q2, or double its Q1 growth, when the numbers are out on Friday. This fast growth may be attributed to multiple factors, including consumer spending, business investments, and inventories. The rapid growth will likely guarantee another interest rate hike in September, pushing the dollar higher. However, there is a high chance that we won’t see the 4% figure in the coming quarters as trade tariffs begin to hurt both U.S. exports and capital expenditures.

Rates: Higher US risk premium and bearish engulfing Bund

Friday's bear steepening of the US yield curve seemed to be at odds with events. Or are investors starting to discount a higher US risk premium? The German Bund and US Note future remain within July trading ranges, but technical pictures become heavier (bearish engulfing Bund). This week's eco calendar contains EMU PMI's, the ECB meeting and US Q2 GDP.

Currencies: dollar trading off recent highs after Trump comments

On Friday, the dollar continued to suffer after president Trump's comments on trade, on Fed policy and on FX. During the weekend, Fin Min Mnuchin downplayed the risks of an FX war, but it is far from sure whether this will change fortunes for the dollar. EUR/GBP is holding below the 0.8968 resistance even as the global picture on Brexit remains foggy

The Sunrise Headlines

• US sUS stock markets ended slightly lower on Friday, posting losses from -0.03% (DJI) to -0.09% (S&P 500). Asian markets are trading mixed, with Japan underperforming (-1.3%).
• China's central bank (PBOC) injected roughly $74bn of cash in the market via one-year loans to commercial banks. It is seen as the latest move to easier monetary policy, after the PBOC cut the bank's reserve ratio twice.
• Japan's 10-y yield spiked and the yen strengthened after media reports that the country's central bank (BoJ) might discuss changes to its loose monetary policy at next week's meeting.
• At the G20 summit over the weekend trade dominated discussions. The group warned, amongst others, for 'heightened trade and geopolitical tensions” to threaten (the still robust) global growth.
• In New Zealand, the government introduced a bill to Parliament to extend the central bank's (RBNZ) objectives. If approved, the RBNZ would also target employment alongside inflation.
• EU's chief Brexit negotiator Barnier dismissed PM's May's 'enhanced equivalence' proposal for the financial services sector, saying it would deprive the EU from its 'decision-making autonomy”.
• Today's eco calendar is rather meagre with only US housing data, the Chicago Fed National Activity Index and EC's consumer confidence scheduled for release. Alphabet publishes its Q2 results (aft-mkt).o calendar is rather meagre with only US housing data, the Chicago Fed National Activity Index and EC's consumer confidence scheduled for release. Alphabet publishes its Q2 results (aft-mkt).

Currencies: Dollar Trading Off Recent Highs After Trump Comments

FX war worries continue weighing on the USD.

On Friday, the dollar continued Thursday's correction when president Trump said that he was unhappy with the Fed raising rates and as he saw the strong dollar being disadvantage for the US. On Friday, Trump stepped up its trade rhetoric as he reiterated he was ready to impose tariffs on all Chinese imports. He also accused China and the EU of manipulating their currency. The new Trump comments put additional pressure on the dollar. EUR/USD jumped north of 1.17. USD/JPY tumbled below 112 and closed at 111.41. (From 112.47, with a week top at 113.17) Overnight, Asian equities mostly show moderate losses. China outperforms. Japan underperforms. The PBOC eased monetary conditions. In Japan, yields and the yen jumped on market speculation of a potential policy adjustment at next week's BOJ meeting. The process remains unclear as the BOJ offered to buy 10-y bonds at fixed yields above current market yields. Even so, the decline of USD/JPY slows. The pair trades again near 111. EUR/USD holds at end last week's levels. At a meeting of the G20 finance Ministers, US Fin Min Mnuchin downplayed the risk of a FX war and indicated that the president didn't want to challenge the independence of the Fed. Today, the eco calendar is thin. Global FX trading will mostly look at the developments regarding the trade/FX war. Corporate earnings are a wild card. Of late, the trade tensions and a cautious risk-off sentiment didn't really hurt the dollar. On the contrary. However, after last week's comments from President Trump on FX, the dollar looks less solid. For now we see no reason for EUR/USD to leave the 1.1510/1.1850 range, but the downside looks better protected. The yen decline apparently has also run its course both due to a softer USD as due to yen-specific issues.

On Friday, EUR/GBP held near recent highs in the mid-0.89 area, but the UK currency regained some ground going into the weekend. Brexit comments during the weekend were mixed. British government officials said the UK should step up preparations for a no deal scenario. The impact on sterling is limited. For now, the EUR/GBP 0.8968 resistance looks solid. A break probably won't be easy ST unless there comes additional negative news from the Brexit or unless the scenario of an August BoE rate hike is really questioned

EUR/USD: Trump comments take shine off the dollar

The euro continues to trade to the upside against the US dollar after Friday’s sharp reversal, following US President Donald Trump’s bearish comments about the US currency. The EURUSD pair retains a strong intraday bullish bias while trading above the 1.1724 technical level. EURUSD buyers will look for further gains above the 1.1755 level, while sellers will look to move the price back towards the 1.1650 support level.

The EURUSD pair is intraday bullish while trading above the 1.1724 level, key resistance is found at the 1.1755 and 1.1800 levels.

If the EURUSD pair moves below the 1.1724 level, sellers will likely test towards the 1.1681 and 1.1650 support levels.

The British pound continues to benefit from broad-based weakness in the greenback on Monday, with the GBPUSD pair once again reclaiming the 1.3100 level. The GBPUSD has scope to recover higher while trading above the 1.3100 level, assuming the US dollar index continues to trade lower. Buyers will look to target the 1.3194 level, while sellers will attempt to hold price below the 1.3100 level.

The GBPUSD pair is intraday bullish while trading above the 1.3100 level, key technical resistance is now found at the 1.3155 and 1.3194 levels.

If the GBPUSD pair falls below the 1.3100 level, sellers will likely target the key 1.3080 and 1.3055 resistance levels.

Ahead of an active week in the financial markets, Monday’s session is considered relatively calm from the perspective of economic data. Nevertheless, a pair of US data releases will make headlines at the start of North American trading.

Following a mostly quiet European session, the Federal Reserve Bank of Chicago will release the June National Activity Index at 12:30 GMT. The monthly report is designed to track overall economic activity in the world’s largest economy. In May, the National Activity Index reached -0.15.

North of the border, the Canadian government will report on wholesale sales at 12:30 GMT. The monthly gauge is projected to show 0.6% growth for May following a 0.1% uptick the month before.

At 14:00 GMT, the National Association of Realtors (NAR) will report on US existing home sales for the month of June. The latest reading is projected to show growth of 1.5% to a seasonally adjusted 5.47-million units. In May, existing home sales dipped slightly to 5.43 million.

The European Commission’s statistical agency will release the preliminary consumer confidence index for July at 14:00 GMT. The monthly print is expected to come in at -0.75 compared with 0.50 the month before. Measures of consumer confidence are used to gauge trends in consumer spending, which is a key driver of economic output for most advanced industrialized economies.

USD/CAD

The Canadian dollar is coming off a productive Friday session following the release of solid retail sales figures. As a result, USD/CAD plunged to 1.3145 from a high of around 1.3300 earlier in the week. The pair has declined another 0.1% on Monday to trade at 1.3127. Investors can expect greater volatility for this pair amid NAFTA negotiations, central bank policy and fluctuating oil prices.

EUR/USD

Europe’s common currency extended its rally against a slumping dollar on Monday, with prices climbing 0.2% to 1.1743. The EUR/USD exchange rate jumped 73 pips, or 0.6%, to 1.1718 on Friday as the dollar fell against a basket of currencies. The currency pair faces immediate support at 1.1695, followed by 1.1650. On the opposite side of the ledger, EUR/USD is eyeing resistance at 1.1750, followed by 1.1790.

USD/JPY

The Japanese yen opened the week in positive territory amid speculation that the Bank of Japan (BOJ) is considering tweaking its bond-buying program next week. USD/JPY is down 0.5% on Monday, extending its two-day slide to roughly 1%. The pair now sits at 110.84. Last week, USD/JPY surged to its highest level in six months. Short-sellers are being told to target USD/JPY at 108.10, with a stop limit at 113.40, according to Barclays. This suggests that analysts are pricing a bigger decline for the pair amid heightened trade tensions involving the US.

Daily Pivots: (S1) 146.00; (P) 146.34; (R1) 146.69; More...

Intraday bias in GBP/JPY remains on the downside for the moment. Consolidation consolidation pattern from 143.18 has completed with three waves up to 149.30 already. Deeper fall should now be seen back to 143.18/76 support zone. On the upside, above 147.65 minor resistance will turn bias back to the upside for 149.30/99 resistance zone instead.

In the bigger picture, no change in the view that decline from 156.59 is a corrective move. In case of another fall, strong support should be seen above 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) to contain downside and bring rebound. Meanwhile, break of 153.84 should confirm that the correction is completed and target 156.59 and above to resume the medium term up trend.

EUR/USD

The EUR/USD showed a strong bullish reversal at the support zone (blue) of the triangle pattern and sideways consolidation zone (blue).

Daily chart:

The EUR/USD seems to be building a bearish ABC (purple) correction within wave B (red).

Weekly chart:

The EUR/USD has probably completed wave A (red) and price is now most likely retracing to the Fibonacci levels of wave B (red).

Monthly chart:

GBP/USD

The GBP/USD remains in a downtrend channel but the strong bullish reversal at the channel support suggests a larger bullish correction.

Daily chart:

The GBP/USD has probably started the bearish wave 5 after price has completed a wave 4 (light purple) correction.

Weekly chart:

The GBP/USD bearish breakout could see the continuation of the wave 5 (purple) whereas a bullish break above resistance (red) could indicate that a wave C has been completed at the bottom.

Monthly chart:

USD/JPY

The USD/JPY seems to have completed a WXY (pink) pattern within wave D (light purple) and could be building a new ABC pattern within wave E.

Daily chart:

The USD/JPY could be building an ABCDE triangle (light purple) within wave B (red).

Weekly chart:

The USD/JPY is in the wave D (light purple) of the triangle pattern.

Monthly chart:

Daily Pivots: (S1) 130.39; (P) 130.80; (R1) 131.06; More....

EUR/JPY's fall from 131.97 extends today but it's still held above 129.90 support. Intraday bias remains neutral and near term outlook stays bullish for another rally. On the upside, above 131.97 will target 100% projection of 124.61 to 130.33 from 127.13 at 132.85 next. However, considering bearish divergent condition in 4 hour MACD, break of 129.90 will indicate short term reversal, and turn bias back to the downside for 127.13 support and below.

In the bigger picture, the strong break of channel resistance from 137.49 suggests that the decline from there has completed. The three wave structure suggests that it's a correction. With 124.08 key resistance turned support intact, medium term bullishness is also retained. Break of 133.47 will affirm this bullish case and target 137.49 and above. This will now be the favored case as long as 127.13 support holds.