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• German IFO data painted more optimistic picture
• US shale oil producers are facing problems and that could support the oil price
• Gold traders are looking towards the FOMC minutes

US Futures are trading higher as investors are picking up momentum from Europe. The German IFO business confidence is one of the most closely watched data in the Eurozone and the number shows that the confidence among companies is more positive than ever. There has been some concerns especially if you look at yesterday's data (manufacturing and services PMI data) that there may be another wave of economic slowdown activity hitting the country but the soft data released today has defied those predictions. This has provided fresh fuel for the euro currency which is already trading in a strong uptrend but we are still below the 2015 resistance which is 1.1714.

While the ECB's president hawkish comments are still very much behind the euro rally, but some ECB policy committee members tried to calm the markets that tapering is not imminent. Not that Draghi said anything substantial last week which can justify the move in the euro, but the market is determined to keep their own version which is that the days of loose monetary policy are over.

The dollar index has been caught between a rock and a hard place in light of the recent Trump-Russia scandal. Jared Kushner who claims that his actions did not cross the line, left a lot to be desired with traders preparing for further losses in the dollar as the investigation continues.

On the healthcare front, no news is no good news in this case. Trump's fiscal agenda has a mountain to climb and with no progress on the horizon for the healthcare reform, we expect big question marks to arise in regard to Trump's ability to deliver.

What is most worrisome though is the President's unpredictable nature. It is no surprise that the IMF downgraded the estimates for the U.S. economic growth over the next two years to 2.1% each. The same scenario is playing out in the UK, with growth expectations reduced to 1.7% on the back of Brexit uncertainty

Oil

Something which you can cheer about when it comes to the oil price is not what they OPEC and non OPEC players said in their conference yesterday in St Petersburg. It is the increase in the declining rate of major US shale basins which should not go unnoticed. The reason for that is very simple, the rates are rising and the crude price is strong enough to encourage investors to throw their money at them. The cost simply exceeds benefits and currently some players are producing oil which is well below their breakeven cost but they have to pump that in order to pay their overheads and financing cost.

During the big oil price crash, a vast majority of investors were apprehensive about their capital return and guess what, those concerns are still here and it is only a matter of time before they will become more prominent given the gradual rate of interest rate hike which the Fed is trigging.

If you need the evidence of this, just look at Anadarko which brought these issues under the spotlight when they missed the earning forecast badly. The expected number was a loss of 33 cent when the number reported came in at 77 cent for the Q2. In order to survive in this tough environment, the only way out of this is to cut your expenses and new investments.

Gold

The precious metal is hitting highs on the back of political uncertainty over in the US. But the event which matters the most is the upcoming FOMC meeting. Given that there is no press conference after the event, we do not believe that there will be something major out of this. However, we are expecting more details on the Fed scaling down the size of their balance sheet and that would move the gold price. Overly hawkish stance would create uncertainty because everyone is worried about one thing which is what if the Fed is wrong. One wrong decision is going to change the game.

USD/CHF - 0.9469

Original strategy :

Sell at 0.9555, target: 0.9455, Stop: 0.9590

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9555, target: 0.9455, Stop: 0.9590

Position : -

Target :  -

Stop : -

As the greenback has remained under pressure after recent selloff, bearishness is seen for the decline from 1.0340 top to resume after consolidation, whilst initial corrective bounce to 0.9500 and then 0.9520-25 cannot be ruled out, reckon the upper Kumo (now at 0.9530) would limit upside and bring another decline later, below support at 0.9438 would extend recent decline to 0.9405-10 but loss of momentum should limit downside to 0.9375-80, price should stay above 0.9350, risk from there is seen for a rebound later.

In view of this, we are looking to sell dollar on subsequent recovery as 0.9550-55 should limit upside and bring another decline. Above 0.9580-85 would suggest a temporary low is formed instead, bring a stronger rebound towards resistance at 0.9622 which is likely to hold from here.

GBP/USD - 1.3075

Original strategy :

Sell at 1.3100, Target: 1.2980, Stop: 1.3135

Position : - 

Target :  -

Stop : -

New strategy  :

Sell at 1.3100, Target: 1.2980, Stop: 1.3135

Position : -

Target :  -

Stop : -

Cable edged higher yesterday to 1.3058, suggesting near term upside risk remains for the recovery from 1.2933 to bring further gain from here, however, if our view that top has been formed at 1.3126 is correct, upside would be limited to 1.3100 and bring another decline later, below 1.2985-90 would signal an intra-day top is formed but break of 1.2950-55 is needed to signal the rebound from 1.2933 has ended, bring weakness to 1.2932-33 (61.8% Fibonacci retracement of 1.2812-1.3126 and said support), break there would extend the fall from 1.3126 top to previous support at 1.2912. 

In view of this, we are looking to sell cable on further recovery as 1.3100-10 should limit upside. A firm break above 1.3100 would abort and suggest the fall from 1.3127 has ended instead, bring retest of this level but only break there would shift risk back to upside for further gain to 1.3150-60.

While the Oil markets are attempting to maintain gains following the latest OPEC meeting, I remain unconvinced whether the outcome to the gathering actually means anything for the price of Oil in the long run. If anything, the tone coming from St. Petersburg was more of a sign of unity and confidence that the current production deal, and path that is being followed, will eventually rebalance the markets.

Although the willingness of a major Oil producer such as Saudi Arabia to make deeper cuts sounds great on the surface, OPEC is still trapped in what could be described as a "mission impossible" scenario. The cartel is ultimately being trapped between a combination of an ongoing oversupply in the atmosphere, being pressured towards making further cuts and not being in control of production from elsewhere around the globe.

This ultimately all comes back to the same issue - OPEC is no longer in control of the industry in the same manner that it used to be, and the cartel no longer has the dominant say over the overall volume of global production. Even though OPEC and some Non-OPEC members are showing high levels of flexibility to cut production, if increased production is still noticed from producers outside of the agreement, the price of Oil will remain pressured in the longer run.

What would have encouraged the drastic bounce higher in valuation that Oil producers would love to achieve? An unexpected announcement that OPEC will make deeper cuts to the current arrangement. The major issue with this is that it would still not deter other producers, including Shale producers in the United States from turning the taps higher on increased production in such an event.

The OPEC meeting in St. Petersburg was simply a renewal of commitment by OPEC and non-OPEC members to respect their current production cut deal. For this reason, I am unsure whether this current bounce can continue and it is likely more hopeful in my view that the commodity will stabilize around its current levels.

Unless OPEC is able to encourage additional Non-Members and producers from elsewhere to join the party to cap output, we still appear to be a long distance away from rebalancing the market. I even remain doubtful as it stands that the Oil markets will be able to beat the 2016 high in December last year above $55.

The headline that Nigeria has pledged not to top daily production of 1.8 million barrels per day means very little in terms of the ongoing oversupply in the market, when you consider that this "cap" is still above the latest data showing that Nigeria's daily output is around 1.64 million. When you also consider the recent threat than an OPEC member such as Ecuador could have been considering leaving the production cut deal does also indicate the element of stress that the production cut agreement is putting on those taking part in the production cut.

My final take is that it is still very difficult to be bullish on Oil as it currently stands.

EUR/USD - 1.1690

Original strategy  :

Buy at 1.1580, Target: 1.1680, Stop: 1.1545

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1590, Target: 1.1700, Stop: 1.1555

Position : -

Target :  -

Stop : -

As the single currency has maintained a firm undertone after last week’s rally, suggesting recent upmove is still in progress and bullishness remains for further gain to previous chart resistance at 1.1714 but break there is needed to retain bullishness for the rise from 1.0340 low to head towards 1.1750 which is likely to hold from here due to loss of upward momentum. 

In view of this, we are looking to buy euro on subsequent pullback as previous resistance at 1.1583 should limit downside. Below 1.1550 would defer and suggest a temporary top is formed instead, bring correction to 1.1510-15 but support at 1.1479 should remain intact.

USD/JPY - 111.35

Original strategy  :

Sold at 111.45, Target: 110.45, Stop: 111.80

Position :  - Short at 111.45

Target :  - 110.45

Stop : - 111.80

New strategy  :

Exit short entered at 111.45 and

Sell at 111.75, Target: 110.75, Stop: 112.10

Position :  - Short at 111.45

Target :  -

Stop : -

Current rebound suggests near term upside risk has increased for the corrective bounce from 110.62 temporary low tho extend gain to 11.75 (38.2% Fibonacci retracement of 113.58-110.62), however, price should falter below 112.08-10 (previous resistance and 50% Fibonacci retracement) and bring another retreat later. Below 111.10-15 would suggest top is formed but break of 110.80 is needed to signal the rebound from 110.62 has ended, bring retest of this level first.

In view of this, would be prudent to exit short entered at 111.45 and sell again on further subsequent rebound. Above 112.08-10 would risk a stronger rebound to 112.42-45 (previous resistance and 61.8% Fibonacci retracement of 113.58-110.62) which is likely to hold on first testing.

CRUDE OIL: With the commodity taking back most of Friday losses on Monday and following through higher on Tuesday, a follow through higher is envisaged in the days ahead. On the downside, support resides at the 46.50 level where a break will expose the 46.00 level. A cut through here will set the stage for a run at the 45.50 level. Further down, support resides at the 45.00 level. On the upside, resistance resides at the 47.50 level. Further out, resistance comes in at the 48.00 level. A break above here will aim at the 48.50 level and then the 49.00 level followed by the 49.50 level. All in all, CRUDE OIL remains biased to the upside on recovery higher.

Brent edges higher and is trading much above the 50% retracement level, a retest of this level will give us a very good buying opportunity, the next upside target will be at the sliding line (SL). A larger rebound will be confirmed after a valid breakout from the descending channel's body.

Is on a declining path as long as is trading within the descending channel's body, technically was expected to drop further after the failure to stay above the ML and above the 61.8% retracement level. The current bounce back is natural as the rate failed to reach the downside targets from the 38.2% retracement level and the 50% Fibonacci line.

The Kiwi is going down versus the greenback on the short term, even if the dollar index stays below the 94.00 psychological level. Price found resistance at the 0.7458 level and now could correct after the impressive rally.

Could decrease in the upcoming days after another failure to reach the warning line (WL3) of the former major ascending pitchfork. Has also failed to reach and retest the 0.7484 major static resistance, so a retreat towards the 0.7375 static support is favored on the short term.

Maintains a bullish perspective as long as is trading above the fourth warning line (WL4), a only a valid breakdown below this level will confirm a larger drop.

Price posted little gains today and stays below the 1.3057 yesterday's high, technically is expected to increase further in the upcoming period. Is still shy on the short term and is waiting support from the fundamental factors, the US data could bring some action on this pair.

You should be careful in the afternoon as the US is to release the CB Consumer Confidence indicator, which could decrease from 118.9 to 116.5 points in July, while the Richmond Manufacturing Index is expected to remain steady at 7 points for the second month in July.

Price has come down to retest the upper median line (UML) of the major descending pitchfork and now is struggling to extend the latest gains. Technically should climb much higher in the upcoming period if will stay much above the UML and above the 1.2932 previous low.

Personally, I would like the price to come down to retest also the first warning line (wl1) of the ascending pitchfork before will climb towards new highs, well have a perfect buying opportunity if will retest the confluence between the UML and the wl1.

The next upside target will be at the 150% Fibonacci line (ascending dotted line), resistance can be found at the upside line of the ascending pitchfork as well.