Sample Category Title

Pivot (invalidation): 1254.00

Our preference Long @ 1257.73 with targets @ 1260.50 & 1264.00 in extension.

Alternative scenario Below 1254.00 look for further downside with 1251.00 & 1246.00 as targets.

Comment The RSI is mixed to bullish.

Pivot (invalidation): 0.8830

Our preference Long positions above 0.8830 with targets at 0.8850 & 0.8860 in extension.

Alternative scenario Below 0.8830 look for further downside with 0.8815 & 0.8805 as targets.

Comment Intraday technical indicators are mixed and call for caution.

Our pivot (invalidation) point stands at 6669.

Our preference The downside prevails as Long as 6669 is resistance.

Alternative scenario Above 6669, look for 6917 and 7065.

Comment The RSI is below 50. The MACD is below its signal line and negative. The configuration is negative. Moreover, the pair is trading under both its 20 and 50 MAs (respectively at 6530 and 6575).

XAUUSD (1257.03): Gold prices managed to maintain the bullish momentum as price action rose close to the resistance level near 1263. In the near term, the retracement indicates that price could pull back toward the 1250 handle. As long as price action is supported above 1247 we expect gold prices to remain biased to the upside. A breakout above 1263 resistance is needed for prices to extend the gains toward the 1282.50 handle.

USDJPY (110.43): The USDJPY currency pair posted declines on the day following the breakout from the steeply rising wedge pattern. The close below 110.62 level suggests that in the near term, a minor retracement to the losses could see price retesting this level. As long as the price level of 110.62 holds, we can expect to see the downside prevail. USDJPY is likely to decline toward the lower support region of 109.57 - 109.43 level where support is pending a retest.

EURUSD (1.1664): The EURUSD currency pair was trading subdued as it extended modest losses on the day. Price action was contained within the price range established from last Friday. While there was a rebound on the intraday charts off the support level near 1.1610 the gains were limited. Price action will need to clear the highs from Friday in order to extend toward the resistance level of 1.1730. To the downside, we expect the currency pair to remain supported above 1.1610.

Sentiment in the markets were somewhat mixed with the safe haven, Japanese yen and gold prices rising on the day. The U.S. dollar was however seen stronger across most of the currencies.

The UK's construction PMI came out stronger than expected as the index rose to 53.1. This beat forecasts of an increase to 52.6. The U.S. factory orders were seen rising 0.4% which also beat estimates of a 0.1% increase. The previous month's data was seen revised to show a 0.4% decline.

Looking ahead, the economic data for the day will cover the services PMI from the Eurozone, including numbers from Germany and France. The final services PMI are forecast to remain unchanged at 55.0 as signaled from the preliminary estimates.

The UK's services PMI is expected to fall slightly to 53.9 compared to 54.0. The U.S. markets are closed today due to the Independence Day bank holiday. The markets are expected to remain trading light toward the U.S. trading session.

Today's main risk event for the British Pound will be the UK services PMI figures for June which could offer some insight into the health of the UK economy.

Growth in the UK services is projected to remain unchanged at 54.00 in June. While a figure that meets or exceeds market expectations may support the Pound in the near term, gains remain threatened by Brexit-related uncertainty.

Appetite towards the Pound is likely to diminish as anxiety heightens ahead of the looming UK cabinet meeting on Friday. Theresa May is expected to present a “third way” post-Brexit custom proposal in an effort to break the deadlock within her cabinet and the EU. Sterling could witness heavy losses if Theresa May's proposal is met with rejections.

Will the Bank of England raise UK interest rates in August? This is a question that remains on the mind of many investors. While last week's upward revision to first-quarter GDP growth and positive PMI figures for June may support expectations of a rate hike, Brexit uncertainty and global trade tensions could force the BoE to delay monetary policy normalization.

In regards to the technical picture, the GBPUSD remains bearish on the daily charts. There have been consistently lower lows and lower highs while the MACD trades to the downside. Daily bears remain in firm control below the 1.3290 lower high. An intraday breakdown below 1.3186 could trigger a decline towards Tuesday's low at 1.3114. Alternatively, a bullish move above 1.3230 may signal an incline towards 1.3290.

Will FOMC minutes refresh Dollar rally?

The Dollar could continue weakening against a basket of major currencies as investors profit-take ahead of Thursday's FOMC meeting minutes.

Investors are likely to closely scrutinize the FOMC meeting minutes for clues on rate hike timings during the second half of 2018. With unemployment in the United States falling to an 18-year low and inflation hitting the golden 2% target, speculation remains elevated over the Fed raising rates at least two times this year. However, an appreciating Dollar and global trade tensions could dampen expectations over the Fed adopting a more aggressive approach towards monetary policy normalization. The Dollar could receive a welcome boost if the FOMC meeting minutes are more hawkish than expected.

Focusing on the technical picture, the Dollar Index could be experiencing a technical correction on the daily charts. A breakdown below the 94.30 level may trigger a decline towards 94.00 and 93.85, respectively. If bulls are able to awake from their temporary slumber, the Dollar Index has scope to venture towards 95.00 and 95.40.

Commodity spotlight – Gold

Gold bulls have found support in the form of a weakening Dollar this morning with prices rebounding towards a fresh weekly high at $1260.

While the yellow metal has scope to appreciate further amid a softening Dollar, the outlook remains bearish in the medium to longer term. This year, Gold is still at risk to losing more value on the outlook that the Dollar could strengthen further.

Much attention will be directed towards the US jobs report on Friday which could play a key role in where Gold concludes this week. A strong NFP figure coupled with signs of accelerating wage growth may boost speculation of higher US interest rates – ultimately punishing Gold.

In regards to the technical picture, Gold remains bearish on the daily charts. A technical rebound is in the process with prices trading above the 23.6% Fibonacci retracement level of $1254. An intraday breakout above $1260 could encourage a further incline higher towards $1264.43. Alternatively, a failure for bulls to keep above $1251 could open a path back towards $1245.

Markets

Yesterday morning, tentative signs of easing tensions on China caused a rebound of risk assets on European markets. However, the impact on core bonds markets was limited. German and US bonds initially lost a few ticks, but the damage was negligible. Later US yields in particular reversed the initial rise as US equities couldn't sustain a positive open. The US yield curve bull flattened (2-y -2.4 bp) with the 10-y slightly outperforming (-4bp). The European yield curve also flattened. Yields on 2 & 5 year bunds rose marginally, but the (very) long end outperformed. The move was reinforced by market talk that the ECB could engineer some kind of ‘operation twist' by reinvesting the proceeds of bonds maturing under APP in bonds with longer maturities. For example, the French 30-y yield drop to the lowest level since November 2016.

This morning, the yuan gains slightly further ground against the dollar. However, it is not enough to trigger a further risk rebound. Most Asian equity indices still show modest losses with China again underperforming. Uncertainty on possible further steps in the US-China trade war apparently still make investors staying on the sidelines. Today, US markets are closed for the 4th of July Holiday. The EMU eco calendar is thin with only the final release of the EMU services/composite PMI scheduled for release. Yesterday, European equities outperformed the US and Asia. We look out whether this trend continues. However, even if this would be the case, it is unlikely to change the constructive bond market sentiment in a profound way. We also look out whether the ‘aggressive' flattening trend on EMU bonds markets continues.

Yesterday, the dollar corrected lower as Chinese authorities indicated that they could take action to slow the decline of the yuan. Chinese authorities also reiterated that China doesn't intend to use the currency as a weapon in the trade ware with the US. The USD correction mostly occurred in Asia and Europe, but slowed later in the session. After all, the move was not that big and no important technical levels were broken. EUR/USD finished at 1.1658 (from 1.1639). The late-session correction on US equity markets also caused USD/JPY to reverse an early gain. The pair traded temporary north of 111 but closed at 100.59. With US markets closed, USD trading will probably develop in thin market conditions. Over the previous days, EUR/USD traded rather constructive. However, a fragile risk sentiment probably won't make it easy for the pair to make a big progress. EUR/USD 1.1720 and 1.1851 remain the first relevant resistance levels.

Yesterday, sterling profited from ‘hawkish' comments from BoE Saunders and from a decent UK construction PMI. EUR/GBP drifted further South in the 0.88 big figure (close at 0.8834). Today, UK services PMI is expected unchanged at 54.0. However, the market focus will probably turn to the key UK Cabinet meeting on Friday. At that meeting UK PM May will try to reach a government consensus on Brexit. We expect sterling to trade in a wait-and-see modus going into this key meeting.

News Headlines

ECB's chief economist Peter Praet said that interest rates will again become a key policy tool for adjusting the monetary policy. He remains confident that EMU inflation will continue to accelerate toward the target of just below 2 percent, even after ECB's recent decision to stop its monthly purchasing of bonds at the end of the year.

With traditional trade alliances shaken up, China is putting pressure on the EU to join forces against the trade war initiated by US President Trump. Chinese officials offered to open more of the Chinese market in return. However, the EU has rejected the suggestion saying the bloc is not going to take sides.

UK Prime Minister May has been pleading with EU leaders not to dismiss her ‘white paper' right away. She will present her plan to keep the UK closely tied to European market rules for goods to her cabinet on Friday but is first taking temperature with EU officials whether the plan has a chance of surviving in EU-UK negotiations.

Daily Pivots: (S1) 145.33 (P) 145.86; (R1) 146.44; More...

GBP/JPY remains bounded in range of 143.76/146.63 and intraday bias remains neutral. Break of 146.63 will turn bias to the upside for 148.10 resistance first. Decisive break there will be a strong signal of near term reversal. Further rally would be seen to 149.99 resistance for confirmation. On the downside, break of 148.13 will extend the fall from 156.59 for 139.25/47 cluster support level.

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.