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On Tuesday morning it could be observed that the common European currency continued to fluctuate against the US Dollar near the 1.1650 mark. It might be a signal that the markets are expecting fundamental clues regarding the strength of one of the currencies. However, from a technical perspective the currency pair had two options. Either it will decline down to the support levels near the 1.16 mark, where the 100-hour SMA is located at together with the weekly PP, or the currency exchange rate will pass the levels of significance near the 1.1650 mark and resume the surge. In that scenario the Euro might surge up to the 1.1750 mark against the Greenback, as there are no notable resistance levels until that level. At the 1.1753 level the weekly R1 is located at.

Tuesday July 25: Five things the markets are talking about

The mighty U.S dollar is looking for conviction and that is not expected to come ahead of tomorrows FOMC rate decision (2:00 pm EDT).

The markets this week are moving to the beat of company- and industry dynamics as investors brace for the tomorrows Fed decision, when U.S policy makers will weigh robust global growth against meagre inflation and mixed U.S economic data. Expectations are for policy makers to keep rates on hold, as the market searches for clues to the fate of the Fed's balance sheet, which should be key.

Overnight, the dollar has surrendered some of its short-lived gains as concerns about the U.S economy and politics returned to the fore. Global equities trade mixed, while gold is heading for it's first loss in four sessions, and crude oil gets a lift for a second day supported by the Saudi's promise yesterday to further cut crude exports.

1. Stocks mixed bag

In Japan, the Nikkei share average edged down -0.1% overnight in choppy trade as investors braced for the outcome of the Fed's two-day policy meeting that begins this morning. The market is also concerned that the long-term rising trend in the broader Topix maybe somewhat hitting toppish levels – it fell -0.3% in the session.

Note: The techies note that the Topix is falling below its 25-day moving average on a closing basis for the first time in three-months.

In Hong Kong, stocks finished flat as gains in the technology sector were outweighed by declines concentrated in energy and industrials stocks. The Hang Seng index ended up +0.02% after yesterday's posted two-year high on Monday. The Hang Seng China Enterprises Index was down -0.35%.

In China, the major stock indexes retreated overnight, led lower by resource firms after their recent strong rally. The blue-chip CSI300 index fell -0.6%, while the Shanghai Composite Index lost -0.2%.

In Europe, most indices are trading in the black, led higher by the Spanish Ibex and the FTSE100, which have rebound after sharp falls yesterday. Investor sentiment has been further boosted following a strong German Ifo reading for July (see below) marking a post reunification high. Earnings continue to be at the forefront.

U.S stocks are set to open little changed.

Indices: Stoxx600 -+0.5% at 381.0, FTSE +0.8% at 7433, DAX +0.3% at 12248, CAC-40 +0.6% at 5159, IBEX-35 +1.1% at 10556, FTSE MIB +0.7% at 21478, SMI +0.6% at 8955, S&P 500 Futures flat

2. Oil extends gains as Saudi pledges export curbs, gold lower

Oil prices have extended yesterday's gains after Saudi Arabia pledged to curb exports from next month. Gains have also been supported by a warning from Halliburton that the growth in North America's rig count was 'showing signs of plateauing,' a possible threat to U.S shale oil production.

Brent crude for September delivery is up +22c, or +0.5% at +$48.82 a barrel after settling up +1.1% yesterday. U.S West Texas Intermediate (WTI) futures are up +23c, or +0.5% at +$46.57 a barrel.

In Russia yesterday, OPEC and non-OPEC producers discussed extending their deal to cut output by -1.8n bpd beyond March 2018 if necessary.

The Saudi's indicated that they would limit its crude exports to +6.6m bpd next month, almost -1m bpd below the levels of a year ago, while Nigeria voluntarily agreed to join the deal by capping or cutting its output from +1.8m bpd, once it stabilizes at that level – up to now, Nigeria had been exempt from the output cuts.

Crude price direction now looks forward to today's U.S API oil inventory numbers (04:30 am EDT). The market is expecting a drawdown of -3m barrels last week.

Ahead of the U.S open, gold prices are a tad softer (-0.3% to +$1,251.87 an ounce), after hitting a one-month high in the previous session, buoyed by political uncertainty in the U.S, as investors wait for tomorrow's Fed decision.

3. Yields – EU/US spreads widen

U.S Treasuries are drifting about in a narrow range, with looming debt supply creating a bias toward slightly higher yields.

Note: The U.S Treasury will sell +$26B 2-year notes today, +$34B 5-year notes tomorrow and +$28B 7-year notes Thursday.

Aside from traders having to make room to take down supply, global yields direction will depend on tomorrows FOMC meeting and Friday's initial report on U.S Q2 GDP.

The Fed is not expected to hike rates, but the market is looking for any change in tone from policy makers, especially since they have leaned towards being a little 'dovish' in recent weeks. U.S 10-year yield is trading atop of +2.27%.

Euro data yesterday showing Germany's private sector growing at a slower pace in July, while French business activity slowed more than expected last month to a six-month low gave investors another incentive to move back into fixed income that have been rattled by concerns over tapering.

German Bunds have backed up +1 bps to +0.52%, while French OAT's are little changed at +0.75%. U.K Gilts have added less that +1 bps to +1.191%.

4. Dollar diddles in the middle

The EUR (€1.1652) got a lift this morning after Germany's Ifo business sentiment surged (see below) to a record high in July, but it stays short of Monday's 23-month peak of €1.1683, with investors cautious ahead of tomorrow's FOMC rate announcement. Some EUR 'bears' remain wary that the single units recent strong rise may soon dampen German exporter sentiment.

Overnight, USD/JPY hit a five-week lows below ¥110.85 before rebounding. The two new Bank of Japan (BoJ) board members (Kataoka and Suzuki) in their inaugural press conference showed that they are a 'team player' under Governor Kuroda and helped the pair regain a foothold above the psychological ¥111.00 level to trade at ¥111.44.

Note: The new board members replace Kiuchi and Sato, who were dissenters. Yen 'bears' believe that the incoming members will support the camp for QE.

The AUD (A$0.7923) is little changed. However, attention now turns to two key events later this evening down-under, June quarterly inflation data (09:30 pm EDT) and a speech on the labor market and monetary policy from Reserve Bank of Australia (RBA) Governor Lowe (11:05 pm EDT).

5. German Business Sentiment Surges to Record High in July

Data this morning showed that German business sentiment surged to a record high last month, and the Ifo institute described the mood among German companies as 'euphoric.'

The Ifo's business climate index rose to 116.0 points, comfortably beating June's record of 115.2 points and the markets forecast of 114.9 points.

Digging deeper, German companies were more upbeat about their current business situation and their six-month outlook.

Crude oil is trading lower. Hourly support is given at 43.65 (10/07/2017 low). Strong resistance given at 48.42 (05/06/2017). Expected to show continued weakness.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).

Silver is pushing higher after the bounce still bouncing from hourly support given at 15.18 (10/07/2017 low). Key resistance is given at a distance at 17.75 (06/06/2017 high). The commodity has broken the 16-mark. Expected to inch higher.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Gold's is trading higher after the precious metal reached the support given at 1204 10/07/2017 high). Hourly resistance lies at 1258 (23/06/2017 high). Expected to show further strengthening.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low)

Bitcoin has surged strongly last week. Hourly resistance can be found at 3000 (12/06/2017 high) and hourly support is given at 2615 (21/07/2017 low). Expected to show further retracement.

In the long-term, the digital currency has had an exponential growth. There are decent likelihood that the asset will consolidate above $1500. Long-term support is given at $1464 (04/05/2017 low).

EUR/CHF is still trading above psychological level at 1.1000 and the pair is ready to monitor 1.1100. Selling pressures are growing below 1.1100. Hourly support is located at a distance at 1.0922 (30/06/2017 low). Expected to inch higher.

In the longer term, the technical structure is mixed. Resistance can be found at 1.1200 (04/02/2015 high). Yet,the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

EUR/GBP is very volatile. The pair has surged toward 0.9000. Hourly resistance is given at a distance at 0.8742 (16/07/2017 low). Downside risks are important.

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.

The DAX index has posted gains in the Tuesday session. Currently, DAX is trading at 12,275.00, up 0.50% on the day. On the release front, German Ifo Business Climate climbed to 116.0 points, beating the estimate of 114.9 points. German Import Prices posted a fourth straight decline, coming in at -1.1%. This reading was weaker than the estimate of -0.7%. On Wednesday, the Federal Reserve will conclude its 2-day policy meeting and publish a rate statement.

German numbers continue to move upwards. On Tuesday, German Ifo Business Climate impressed in July, as the indicator strengthened for a sixth straight month. The indicator hit another record high of 116.0, surprising the markets which had forecast a small drop from the previous reading. Clements Fuest, president of the Ifo Institute, continues to use superlatives to describe the German economy, calling sentiment in the business sector “euphoric”. Fuest added that optimism in the business sector is at its highest since Germany’s reunification. German data continues to point upwards, and the robust economy has been the locomotive behind a reinvigorated eurozone economy. The marked improvement in economic conditions in the eurozone has sent the euro soaring, as the currency is up 9.8% since March 1. Although, the strong euro has not put a dent in business sentiment, this has not been the case with German stock markets. The high exchange rate has weighed on exporters’ shares and the DAX has declined 2.7% since June 1.

The Federal Reserve is holding its monthly policy meeting on Tuesday and Wednesday, With the odds of a rate hike at just 3%, the markets will be focused on the Fed’s rate statement, which will be released on Wednesday. US numbers in the second quarter have been mixed, and inflation remains well below the Fed target of 2.%. Given these economic conditions, investors remain skeptical as to whether the Fed will raise rates in December, with the odds currently at 47%, according to the CME Group. Analysts will be looking for nuances in the language of the statement, and a dovish tilt from the Fed could hurt the dollar and boost the red-hot euro. Another issue for Fed policymakers is the $4.2 trillion bond portfolio, a result of the aggressive quantitative easing program which was put in place after the financial crisis in 2008. In June, the Fed outlined plans to reduce its bloated balance sheet, with experts circling September as the start date of the reduction.

The euro has ticked higher in the Tuesday session. Currently, EUR/USD is trading at 1.1650. On the release front, German Ifo Business Climate climbed to 116.0 points, beating the estimate of 114.9 points. In the US, today’s key event is CB Consumer Confidence, which is expected to slip to 116.9 points. On Wednesday, the US releases New Home Sales and the Federal Reserve will publish its rate statement.

German Ifo Business Climate impressed in July, as the indicator strengthened for a sixth straight month. The indicator hit another record high of 116.0, surprising the markets which had forecast a small drop from the previous reading. Clements Fuest, president of the Ifo Institute, continues to use superlatives to describe the German economy, calling sentiment in the business sector “euphoric”. Fuest added that optimism in the business sector is at its highest since Germany’s reunification. German data continues to point upwards, and the robust economy has been the locomotive behind a reinvigorated eurozone economy. The marked improvement in economic conditions in the eurozone has sent the euro soaring, as the currency is up 9.8% since March 1.

The Federal Reserve is holding its monthly policy meeting on Tuesday and Wednesday, With the odds of a rate hike at just 3%, the markets will be focused on the Fed’s rate statement, which will be released on Wednesday. US numbers in the second quarter have been mixed, and inflation remains well below the Fed target of 2.%. Given these economic conditions, investors are unsure if the Fed will raise rates in December, with the odds currently at 47%, according to the CME Group. Analysts will be looking for nuances in the language of the statement, and a dovish tilt from the Fed could hurt the dollar and boost the red-hot euro. Another issue for Fed policymakers is the $4.2 trillion bond portfolio, a result of the aggressive quantitative easing program which was put in place after the financial crisis in 2008. In June, the Fed outlined plans to reduce its bloated balance sheet, with experts circling September as the start date of the reduction.