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The WTI Oil price fell from $72.98 to $68.68 yesterday despite the inventories data showing a draw of -12.6M barrels which is the biggest since September 2016. Libya has said it would lift restrictions on exports and production would return to normal levels from close to 0.5M bpd back to 1.3M bpd. Saudi production has also increased by 0.7M bpd to 10.7M bpd in June responding to President Trump’s call for lower prices. Increased production can lead to further pressure on prices.

The USD strengthened to reverse much of its declines yesterday from trade war headlines with stronger PPI data and trouble in emerging market currencies adding to the push higher. The market grew tired of waiting for a Chinese response while US Senators passed a motion to review tariffs based on national security grounds, opening the way for some of the recent tariffs to be repealed in future. USDJPY roared through the 112.000 level and hit a high of 112.376 overnight. Stocks markets have found support and are attempting to rally higher as the risk off mood fades. US president Trump is meeting with NATO again today before he departs Brussels for the UK.

US Producer Price Index ex Food and Energy (YoY) (Jun) was 2.8% against an expected 2.6% from a previous reading of 2.4%. The FED will be analysing this data for developing trends in consumer inflation, with an increase in prices putting upward pressure on inflation. EURUSD moved higher from 1.17248 to 1.17579 after this data release.

Bank of Canada Interest Rate Decision and Rate Statement were released along with the Monetary Policy Report. The Rate Decision came in as it was expected to, with an increase from 1.25% up to 1.50%, the second hike this year after the Bank hiked rates in January. The Rate Statement confirmed that the Banks would like to continue to hike rates at a gradual pace that is data driven. USDCAD fell from 1.31446 to 1.30636 as a result of the releases but moved higher to an overnight high of 1.32175, unwinding the entire reaction move down. This was caused by a combination of factors including comments from BOC Governor Poloz in the press conference and Oil price moves.

EURUSD is up 0.07% overnight, trading around 1.16805.
USDJPY is up 0.22% in the early session, trading at around 112.255
GBPUSD is down -0.01% this morning trading around 1.32014
Gold is up 0.13% in early morning trading at around $1,243.47
WTI is up 0.23% this morning, trading around $69.68

The USD/CAD has made a U-turn from the W L3 level, after a breakout of inverted head and shoulders pattern. At this point, 1.3150-75 is the POC zone, and we might see a bounce from the zone during the London/New York session. Targets are 1.3220 and 1.3250. Continuation is only possible at the 4h close or strong 1h momentum above 1.3250 which should initially be hard to break due to the weekly/daily pivot confluence. If the price breaks it, 1.3290 should be next.

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)

UK new Foreign Minister Jeremy Hunt anticipated a "very very lively debates" in the parliament on the soon to be published Brexit White Paper. He added that "this is one of the biggest decisions that we have taken as a country in our political lifetimes so there's going to be a pretty fierce discussion but the prime minister has found a way forward."

Present in the NATO summit in Brussels, Hunt also said he had "good discussions with my French, German and Dutch counterparts, many other counterparts here, explaining to them that this is the way we get that deep and special partnership with Europe." He acknowledged the EU had "had a lot of concern about, for example how we're going to avoid a hard border with Northern Ireland, whether it is possible to have frictionless trade without a customs union." Hunt assured that "what we've shown them is that that is possible. This is a very very significant step... I think we have the basis that we can move forward."

New Brexit Minister Dominic Raab said the White Paper got "detailed proposals" and he wanted to assure EU Brexit negotiator Michel Barnier on that.

The white paper is scheduled to be released today.

WTI crude oil futures (August delivery) had their worst day in a year yesterday losing nearly 5% in the wake of new trade threats from the US to China. The price, however, managed to stay above 70 yesterday, finding support at the 20-day moving average (MA) despite the sharp fall from 74.

Momentum indicators have weakened, with the RSI retreating towards its neutral threshold of 50 and the MACD distancing itself further below the red signal line, suggesting that weakness might persist in the market in the short-term. Yet upside risks have not faded yet as both indicators hold in bullish territory; RSI above 50 and MACD above zero.

Should the market reverse higher, resistance could be found near the 73-key level, where the price formed a floor in the past two weeks. Further up, bulls could test the 3 ½ -year high of 75.24, while a significant move above from here could strengthen the bullish outlook resuming the long-term upleg off 42.02 (June 2017). In this case, resistance could run towards the 76 and 77 psychological marks.

On the other hand, an extension to the downside could retest the area between the 50-day MA at 69.44 and the 38.2% Fibonacci of 68.72 of the upleg from 58.18 to 75.24. A drop below that could then meet a stronger obstacle at the 50% Fibonacci of 66.67 which has restricted upside and downside corrections in the past.

In the bigger picture the market continues to hold positive, printing higher highs and higher lows above the Ichimoku cloud.

Here are the latest developments in global markets:

FOREX: The US dollar index is marginally higher on Thursday, attempting to extend the massive gains it posted in the previous session. Dollar/yen is up by 0.21%, having touched a fresh high for the year earlier. Meanwhile, the loonie dropped on Wednesday as oil prices collapsed, erasing the gains it posted after the BoC raised rates, to trade much lower in the aftermath.

STOCKS: US markets closed lower yesterday, as trade concerns remained the dominant theme. Some spectacular losses in oil prices also pushed energy stocks lower. The Dow Jones dropped by 0.88%, the S&P 500 by 0.71%, and the tech-heavy Nasdaq Composite by 0.55%. However, sentiment seems to have turned around, as futures tracking the Dow, S&P, and Nasdaq 100 are all currently signaling a higher open today. The shift in appetite was evident in Asia too, which was a sea of green. Japan’s Nikkei 225 and Topix climbed by 1.17% and 0.46% respectively, while in Hong Kong, the Hang Seng gained 1.48%. Europe was a similar story, with futures pointing to a higher open for all the major benchmarks today.

COMMODITIES: Oil prices collapsed on Wednesday, with WTI falling by 5.0% and Brent collapsing by 6.9% in the day. In dollar terms, WTI dropped by $3.73, and Brent by $5.46. The massive losses followed news that Libyan oil exports will soon return to normal levels, bringing back a significant chunk of supply to the market. A surge in the US dollar, data showing Saudi Arabia continues to raise its production, and concerns around the impact of trade tensions on oil demand, may have played a role too. In precious metals, gold plunged yesterday as well, pressured by a strengthening US dollar. Since the yellow metal is denominated in dollars, a strengthening greenback renders it less attractive for investors using foreign currencies. It’s currently trading near $1,244, not far above its lows for the year, at $1,238.

Major movers: BoC hikes, but loonie ends lower as oil collapses; dollar roars back

The Bank of Canada (BoC) raised interest rates yesterday, as was widely anticipated. The tone of the accompanying statement was neutral overall, acknowledging that the Canadian economy is strong and will likely require higher interest rates over time, but also that uncertainty surrounding trade tensions has risen lately. The loonie jumped on the decision. It appears investors were expecting a much more worried tone by policymakers, and hence even a neutral stance may have come as somewhat of a hawkish surprise.

That didn’t last though. The loonie gave back all its gains even before Governor Poloz’s press conference started, and continued to trade much lower in the subsequent hours. The losses appear to have been driven more by movements in the oil market and a surge in the US dollar, rather than anything Poloz said. Even though the weekly EIA crude inventory data showed a massive drawdown, that was dwarfed by news that recent supply disruptions in Libya have been resolved, and the nation will soon ramp up its crude exports. WTI plunged by almost $4, posting its largest one-day drop in two years. Since Canada is a major oil exporting economy, the collapse in oil was seen as undermining the nation’s export revenue, hence pushing the loonie lower.

Meanwhile, the US dollar gained across the board yesterday, with some relatively hawkish comments from Chicago Fed President Evans potentially aiding the move. He appeared quite relaxed about further hikes, saying that whether the Fed raises rates once or twice more this year is not that important in the big picture. Coming from someone who is usually ultra-cautious, his remarks likely amplified expectations for two more hikes this year. Stronger-than-expected US PPI data may have played a role too. Dollar/yen is 0.21% higher on Thursday, posting a new high for the year of 112.37.

The euro reached a seven-week high against the yen, which has been losing ground despite escalating trade tensions, after a media report suggested the ECB could raise rates earlier than September 2019. It said some policymakers believe their forward guidance does not rule out a hike as early as July 2019. The ECB minutes today will be scrutinized for any color on the subject.

Day ahead: ECB minutes and US CPI eyed; Brexit White Paper and eurozone industrial production also due

The releases that are likely to prove the most market sensitive out of Thursday’s calendar are the ECB’s official record of its latest meeting, as well as US consumer price data. The release of a White Paper on Brexit by the UK government could also gather attention.

Krona pairs will be gathering attention as Swedish inflation will be hitting the markets at 0730 GMT, while at the same time the Swedish central bank will be publishing the account of its latest monetary policy meeting.

At 0900 GMT, eurozone industrial production data for May will be made public. Output is anticipated to accelerate on both a monthly and yearly basis compared to April. Perhaps of more importance for euro pairs though, will be the ECB’s minutes pertaining to its June meeting due at 1130 GMT. During that meeting, the central bank surprised by committing to end its asset purchases by year-end. However, it left an overall “dovish taste” to the markets by pushing back expectations regarding the timing of the delivery of a rate hike, leading to a sell-off in the euro. As the record of the meeting is made public, investors will want to assess the strength of the commitment to end asset purchases, as well as maybe when a rate increase is most likely to materialize.

Concerns over global trade were also likely discussed during the ECB’s June meeting, and any comments on the issue and the risks posed by increased protectionism will be generating interest. Meanwhile, any updates on the US-China spat during Thursday’s trading will be closely monitored.

The US will be on the receiving end of June inflation data as gauged by the consumer price index (CPI) at 1230 GMT. Month-on-month, headline CPI, is projected to grow at 0.2%, the same as in May, while year-on-year growth is expected to reach a six-and-a-half-year high of 2.9% (from 2.8% in May). Core CPI, which strips out volatile food and energy items (the rise in oil prices is supportive of a higher headline CPI reading), is forecast to grow at 2.3%, from 2.2% in May. Yesterday’s producer price index (PPI) beat supported the case for two more rate increases by the Federal Reserve as the year unfolds. Another positive surprise in today’s data is likely to further boost such expectations, consequently pushing the greenback higher. Lastly, weekly jobless claims data are also due out of the US at 1230 GMT.

In the UK, all eyes will be on the release of the much-anticipated Brexit White Paper by Theresa May’s government. While a 3-page outline of the agreement was already released on Friday, today markets will get a glance at the full 100-page document. The details will be studied to determine how “workable” and “realistic” the UK’s proposals are, with the verdict likely to have a sizeable impact on sterling. Should it be seen as a practical plan that increases the likelihood for a “smoother Brexit”, the pound could benefit, and vice-versa.

Philadelphia Fed President Patrick Harker, a non-voting FOMC member on 2018, will be speaking at 1415 GMT. In the meantime, a meeting between US Secretary of State Mike Pompeo and EU Foreign Policy chief Federica Mogherini at 1100 GMT might be of interest, especially in light of the recent developments relating to global trade.

In equities, Delta Air Lines will be releasing its quarterly results before today’s opening bell on Wall Street.

Technical Analysis: EURUSD looking bearish-to-neutral in the near-term

EURUSD has retreated from Monday’s four-week high of 1.1790, eventually falling to a one-week low of 1.1665 on Wednesday, while it is currently trading not far above the aforementioned trough. The Tenkan-sen is below the Kijun-sen, this being a signal for a bearish bias, though the two lines have flatlined, an indication that bearish momentum has lost steam. Overall, the near-term picture is looking bearish-to-neutral.

A more hawkish ECB than initially thought after the completion of June’s meeting, is likely to push the pair higher. Initial resistance to advances may come around the current level of the 50-period moving average line at 1.1693, including the 1.17 round figure. The current levels of the Tenkan-sen (1.1711) and Kijun-sen (1.1727) lie not far above and may act as resistance as well.

On the other hand, a relatively dovish ECB, is expected to exert selling pressure on EURUSD. A first-line of support to declines may occur from the area around the 100-period MA at 1.1657, which also encapsulates yesterday’s one-week low (1.1665), as well as the Ichimoku cloud top (also at 1.1665). The Ichimoku cloud bottom at 1.1623 would be eyed in case of steeper losses.

Eurozone industrial production and US CPI figures also have the capacity to move the pair.

Pivot (invalidation): 0.7390

Our preference Short positions below 0.7390 with targets at 0.7360 & 0.7345 in extension.

Alternative scenario Above 0.7390 look for further upside with 0.7415 & 0.7430 as targets.

Comment The RSI is capped by a declining trend line.

Pivot (invalidation): 1.3170

Our preference Long positions above 1.3170 with targets at 1.3240 & 1.3260 in extension.

Alternative scenario Below 1.3170 look for further downside with 1.3135 & 1.3095 as targets.

Comment The RSI shows upside momentum.

Pivot (invalidation): 0.9940

Our preference Long positions above 0.9940 with targets at 0.9980 & 0.9990 in extension.

Alternative scenario Below 0.9940 look for further downside with 0.9925 & 0.9900 as targets.

Comment The RSI lacks downward momentum.

Pivot (invalidation): 111.90

Our preference Long positions above 111.90 with targets at 112.60 & 112.80 in extension.

Alternative scenario Below 111.90 look for further downside with 111.65 & 111.35 as targets.

Comment The RSI is supported by a rising trend line.

Pivot (invalidation): 1.3230

Our preference Short positions below 1.3230 with targets at 1.3170 & 1.3135 in extension.

Alternative scenario Above 1.3230 look for further upside with 1.3255 & 1.3285 as targets.

Comment The RSI advocates for further decline.