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On Wednesday morning the common European currency pierced the long standing resistance against the US Dollar. However, the following surge was quickly stopped. It was stopped by the resistance of the pivot point at the 1.1682 level.

In the aftermath of the surge the rate plummeted down to trade near the support cluster that surrounded the 1.1640 mark. However, most of the support levels of the cluster were also pierced by 12:00 GMT.

If the 100-hour SMA will not hold at the 1.1630 mark, the rate would aim at declining down to the first support level at the 1.1569 level.

There are more than couple of new developments on the GBP/USD charts. First of all the pair has pierced the medium term resistance line, as it was expected before.

Secondly, a new medium scale ascending pattern has been revealed, which is highly likely going to guide the currency exchange rate higher throughout July.

Third and utmost important to day traders is the increase of volatility caused by UK Services PMI this morning. The increase of volatility caused the reveal of a junior ascending channel pattern, which is guiding the currency pair up to the PP at the 1.3250 mark.

The US Dollar has stopped the surge against the Japanese Yen. Moreover, the long running, rather narrow range ascending channel pattern has been broken.

However, to most market participants it was clear that a passing of the lower trend line of the pattern and the 55– hour SMA can be used as a level for setting up orders. So most likely most retail traders got out on time.

Meanwhile, note that the breaking of the pattern occurred in a descending channel pattern, which is likely a part of a larger pattern. That means that a new medium scale pattern is about to be revealed.

The bullion broke the upper trend line of the long term descending channel, which had pierced a dominant support level.

The most notable aspect about the move is that the bullion did not even stop at the 55 and 100–hour simple moving averages, which were providing resistance. Moreover, the upper trend line of the descending pattern was also ignored.

Only the 200-hour SMA provided some sort of significance, as it forced a short lived retreat of the metal.

On Wednesday, all attention was on whether the 200-SMA will provide enough support to push the rate up to the 1,270.00 mark.

Notes/Observations

• EU is considering talks on a tariff-cutting deal between the world's big car exporters to prevent an all-out trade war with the US
• China (responds to US) to implement tariffs on $34B worth of US goods from midnight July 6th
• US Markets closed for July 4th Holidays

Asia:

• China June Caixin PMI beats forecasts, records highest reading since Feb
• India Cabinet approves minimum support price for farm output
• China said to be pressuring the EU to issue a ‘strong’ joint statement against US President Trump’s trade policies at the upcoming Sino-European summit

Europe:

• Post Brexit-Document showed customs system could take up to 5-years
• Team England's World Cup (round of 16) win bodes well for UK retailers; bringing a big boost in sales (electronics & alcohol)
• EU is said to consider talks on tariff cutting deal between car exporters to prevent an all-out trade war with the US
• European Services PMIs mixed, Spain and France missing, Italy Germany and UK beats

Economic Data:

• (IE) Ireland Jun Services PMI: 59.5 v 59.3 prior (5-month high)
• (IN) India Jun Services PMI: 52.6 v 49.6 prior (highest reading since Jun 2017)
• (RU) Russia Jun Services PMI: 52.3 v 54.6e (29th month of expansion and lowest reading since May 2016)
• (SE) Sweden Jun Services PMI: 59.8 v 57.0 prior - (CZ) Czech May Retail Sales Y/Y: 2.1% v 3.5%e
• (ES) Spain Jun Services PMI: 55.4 V 56.2E (55th month of expansion, lowest reading since Dec 2017)
• (IT) Italy Jun Services PMI: 54.3 V 53.3E (24th month of expansion)
• (FR) France Jun Final Services PMI: 55.9 V 56.4E (confirms 24th month of expansion)
• *(DE) Germany Jun Final Services PMI: 54.5 V 53.9E (confirms 60th month of expansion)
• (EU) Euro Zone Jun Final Services PMI : 55.2 V 55.0E (confirms 60th month of expansion)
• (UK) JUN SERVICES PMI: 55.1 V 54.0E (23rd month of expansion and a 9-month high)
• (UK) Jun Official Reserves Changes: $0.7B v $0.5B prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 +0.1% at 3,411, FTSE -0.2% at 7,582, DAX -0.2% at 12,331, CAC-40 +0.1% at 5,320; IBEX-35 +0.5% at 9,705, FTSE MIB -0.1% at 21,738, SMI 0.04% at 8,656, S&P 500 Futures closed]
• Market Focal Points/Key Themes: European stocks open broadly lower but reversed trend as the session progressed to trade mixed; trade war concerns making their way back to the fore in terms of risk assessment; with light corporate news attention on macro data; technology leads to the upside; telecom sector underperforming; US closed for holiday

Equities

• Consumer discretionary: Danone BN.FR +0.6% (analyst action), Sainsbury SBRY.UK +1.4% (results)
• Energy: Fred Olsen Energy FOE.NO -19.1% (stops servicing debt)
• Financials: Danske Bank DANSKE.DK -3.0% (accusation of money laundering at unit)
• Industrials: BAM Groep BAMNB.NL -3.9% (outlook), Mersen MRN.FR +1.3% (analyst action), PSA UG.FR - 0.4% (press reports of asset sale consideration)
• Materials: Vicat VCT.FR +3.3% (analyst action)
• Telecom: Altice ATC.NL -3.5% (Drahi not planning to sell SFR)

Speakers

• (DE) German Chancellor Merkel: Reiterates US had a trade surplus if services are included
• (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley: Reiterates that October could see the central bank's first hike in 7-years
• Russian Economy Minister: Sees 2018 GDP 1.9%, 2019 1.4%
• (PL) Poland Central Bank Gov Glapinski; Reiterates Polish inflation remains at moderate level; forecasts show it staying near goal

Currencies

• EUR/SEK (Swedish krona) initially rallied as Riksbank's Skingsley keeps hawkish tone
• GBP/USD trades marginally higher on the back of stronger Services PMI data out of the UK. Cable sits in the middle of the days range in a relatively quiet session.

Fixed Income

• Bund Futures trade 3 ticks lower at 162.69 on stronger than expected German and Euro Zone service PMI data. Upside targets 163.25 followed by 163.85, while a return lower targets the 159.75 level.
• Gilt futures trade at 123.21 lower 21 ticks following better than expected UK Services PMI data. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
• Wednesday's liquidity report showed Tuesday's excess liquidity rose from €1.844T to €1.847T. Use of the marginal lending facility stayed steady at €0M.
• Corporate issuance saw no deals priced in the primary market

Looking Ahead

• 07:00 (US) MBA Mortgage Applications w/e Jun 29th: No est v -4.9% prior
• 07:30 (TR) Turkey Jun Effective Exchange Rate(REER): No est v 77.85 prior
• 08:00 (BR) Brazil May Industrial Production M/M: No est v 0.8% prior; Y/Y: No est v 8.9% prior
• 08:00 (HU) Hungary Central Bank (MNB) Jun Minutes
• 08:05 (UK) Baltic Dry Bulk Index
• 09:00 (BR) Brazil Jun Services PMI: No est v 49.5 prior; Composite PMI: No est v 49.7 prior

UK PMI services rose to 55.1 in June, up from 54.0 and beat expectation of 53.9. Markit noted "robust and accelerated upturn in business activity, with new work increased at fastest pace for 13 months. Input cost inflation also intensified.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:

"Stronger growth of service sector activity adds to signs that the economy rebounded in the second quarter and opens the door for an August rate hike, especially when viewed alongside the news that inflationary pressures spiked higher.

"The survey data indicate that the economy likely grew by 0.4% in the second quarter, up from 0.2% in the opening quarter of 2018. The sharp rise in business costs, linked to surging oil prices and the need to offer higher wages, suggests inflation will also pick up again from its current rate of 2.4%.

"It remains encouraging yet also surprising that current business activity continues to show such resilience amid relatively moribund confidence regarding the year ahead outlook. The survey once again highlights how the business outlook remains clouded by widespread concerns about the impact of Brexit uncertainty in particular.

"Such a divergence between current and expected future activity stokes worries that the upturn is being fueled by short-term spending, based on hopes that uncertainty will lift, and likely masks a lack of longer-term business investment."

Full UK PMI services release.

EURJPY has declined over the previous couple of daily sessions as the price struggled to jump above the 38.2% Fibonacci retracement level of the downleg from 137.50 to 124.60. Also, the pair is still developing below the medium-term ascending trend line, which has been holding since February 2.

Momentum indicators in the 4-hour chart though are currently supporting that the negative momentum is likely to strengthen in the short-term. Specifically, the RSI is picking up speed to the downside and the MACD continues to hold below its trigger line. As a side note, the Bollinger bands are following the price action and seem to be ready to create a sideways channel.

On the downside, a decline could meet the 40-simple moving average (SMA) in the 4-hour chart, which overlaps with the 128.40 support. A slip below this level, the price could retest the 23.6% Fibonacci of 127.66.

Should the price decisively close above the roof of the descending line and the 38.2% Fibonacci, the next resistance to have in mind is the 130.30 barrier. Further advances above this level, could then target the area around the 50.0% Fibonacci of 131.10 and the 131.37 resistance.

To sum up, EURJPY continues the negative bias in the short- and medium-term as the bounce off the diagonal line has driven the pair significantly lower.

Eurozone PMI services was revised up to 55.2 in Jun, from initial estimate of 55. It also improved from May's reading of 53.8. Eurozone PMI composite was revised up by 0.1 to 54.9, up from May's 54.1.

Ireland lead by hitting 5 month high to 58.1. pain hit 17 month low at 54.8.

Chris Williamson, Chief Business Economist at IHS Markit said:

"Eurozone growth regained momentum in June, rounding off a respectable second quarter performance, for which the survey data point to GDP rising by just over 0.5%. June also saw new orders and employment growth perk up, suggesting rising demand continues to motivate companies to expand capacity.

"Firms' costs and average selling prices for goods and services are meanwhile rising at rates close to seven-year highs, which will likely feed through to higher consumer price inflation in coming months.

"The upturn in the pace of economic growth and resurgent price pressures adds support to the ECB's view that stimulus should be tapered later this year, but the details of the survey also justify the central bank's cautious approach to policy.

"In particular, a weakening in business optimism to the lowest for over one-and-a-half years reflects intensifying nervousness about the outlook for the economy, notably in manufacturing, as trade-war talk escalates. Service sector companies – generally less affected by international trade – are more upbeat about the year ahead, though less so than earlier in the year as domestic political issues once again add to uncertainty about the outlook.

"With many service companies – notably transport – dependent on a healthy manufacturing sector, any downturn in trade could soon spill over to the service sector."

Full Eurozone PMI service release.

Germany PMI services was revised up to 54.4 in June, from initial estimate of 53.9. It's also notably better than May's reading at 52.1 and hit a 4-month high.

Commenting on the final PMI® survey data, Phil Smith, Principal Economist at IHS Markit said:

"The service sector showed renewed vigour at the end of the second quarter, with the final PMI data indicating an even stronger rebound in business activity growth than was signalled by the earlier 'flash' estimate.

"June's increase in activity in the largely domestically-focussed service sector was the steepest seen since February and strong enough to offset a further loss of momentum across manufacturing, where slowing global trade has weighed on growth.

"There was more good news for the German labour market in June as the rate of service sector employment growth picked up to the fastest since January. An expanding workforce base represents another factor supporting household spending, alongside upward wage pressures and still-elevated consumer confidence."

Full Germany PMI services release.

EUR/USD

Current level - 1.1645

The reversal at 1.1600 signals, that the slide below 1.1690 is corrective, so my outlook here is bullish, for a rise towards 1.1730 major resistance. This time we should witness a break through the mentioned hurdle, for a rise towards 1.1830.

USD/JPY

Current level - 110.51

A reversal has been confirmed at yesterday's peak at 111.13 and the bias is bearish, for a slide towards 109.40 area.

GBP/USD

Current level - 1.3194

The outlook remains positive despite today's minor sell-off below 1.3225, for another leg upwards, to 1.3310.