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After a robust pace in the first quarter of the year, inflation in New Zealand lost steam in the second quarter, rising less than expected. Since the newly released data indicated that consumer prices are not going to pick up soon, the Reserve Bank of New Zealand will be in no rush to raise interest rates in the short-term. Meanwhile, the kiwi fell below the $0.7300 key level in the Asian session following the CPI figures but managed to recover immediately.

Based on calculations from the Statistics New Zealand, consumer prices of goods and services in the country remained unchanged within the second quarter, missing the forecast of 0.2% growth. In the first quarter, inflation grew by 1%, the highest percentage increase since 2011. Despite food prices continuing to rise, lower transport costs offset this increase. On a yearly basis, prices slowed from 2.2% to 1.7% in the second quarter and were below expectations of 1.9%.

Eyes will now focus on the next RBNZ meeting on August 10, where policymakers will gather to decide on the cash rate. In their last meeting in May, the RBNZ kept rates steady at 1.75% and showed no intention to hike rates in the upcoming months as they characterized the recent steep increase in inflation as temporary due to volatility in energy and food prices. Although headline inflation was within the RBNZ’s target of 1-3%, the latest CPI numbers are expected to give fewer incentives to policymakers to adjust their accommodative monetary policy.

The release of the data sent the kiwi against the greenback immediately down by 0.80%, near to a one-week low of $0.7262, from $0.7320 traded earlier in the Asian session. However, the currency bounced back, recouping all its losses before the end of the session on the back of a weaker US dollar.

Notes/Observations

UK Jun CPI comes in below expectations (YoY: 2.6% v 2.9%e) but still above BOE target for 5th straight month

Reform momentum of the Trump administration has received another blow as 4 GOP Senators have rejected the recent proposal of the Obamacare Repeal Act

Broad based USD weakness taken hold in wake of US health care bill problems; means a delay to dealing with debt ceiling, Art of the Deal' has not worked so far in US politics (Six months in office and with no major legislation signed into law)

Overnight

Asia:

New Zealand Q2 CPI Q/Q: 0.0% v 0.2%e; Y/Y: 1.7% v 1.9%e

Reserve Bank of Australia (RBA) July Policy Meeting Minutes: current economic conditions in Australia, and the outlook for growth and inflation, meant that developments in the labor and housing markets continued to warrant careful monitoring. Steady policy stance consistent with growth/inflation targets

China PBOC affirms monetary policy to be prudent and neutral; to strengthen macro-prudential management and counter cycle adjustments; Vows to prevent systemic financial risks

Bank of Japan (BOJ) sustainability of exchange-traded funds (ETFs) said to raise concerns among some officials but saw no need for immediate action

Americas:

Two Republican senators join opposition to revised healthcare bill and delivering a serious blow to the legislation

McCain's surgery may be more serious than thought, sparking fears among Republicans over fate of Trumpcare

Energy:

Ecuador Oil Min Perez: Will be unable to honor its OPEC pledge to cut output by 26k b/d through March; planning a gradual production increase

Economic Data

(ES) Bank of Spain: May non-performing loans Ratio at 8.7% v 8.9% m/m

(UK) Jun CPI M/M: 0.0% v 0.2%e; Y/Y: 2.6% v 2.9%e; CPI Core Y/Y: 2.4% v 2.6%e; CPIH Y/Y: 2.6% v 2.7%e

(UK) Jun RPI M/M: 0.2% v 0.4%e; Y/Y: 3.5% v 3.6%e; RPI Ex Mortgage Interest Payments (RPIX) Y/Y: 3.8% v 3.8%e prior, Retail Price Index: 272.3 v 272.7e

(UK) Jun PPI Input M/M: -0.4% v -0.9%e; Y/Y: 9.9% v 9.4%e

(UK) Jun PPI Output M/M: 0.0% v 0.1%e; Y/Y: 3.3% v 3.4%e

(UK) Jun PPI Output Core M/M: 0.2% v 0.1%; Y/Y: 2.9% v 2.8%e

(UK) May ONS House Price Index Y/Y: 4.7% v 3.0%e

(HK) Hong Kong Jun Unemployment Rate: 3.1% v 3.2%e

(DE) July Zew Current Situation Survey: 86.4 v 88.0e; Expectation Survey: 17.5 v 18.0e

(EU) Euro Zone July Zew Expectations Survey: 35.6 v 37.7 prior

Fixed Income Issuance:

(EU) EFSF opened book to sell EUR-denominated 2027 and 2056 bonds

(SE) Sweden opened its book to sell $2.75B in 2-year notes; guidance seen -6bps to mid-swaps

(ES) Spain Debt Agency (Tesoro) sold total €2.985 vs. €2.5-3.5B indicated rangein 3-month and 9-month Bills

(ID) Indonesia sold total IDR7.12T vs. IDR target in 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.3% at 386, FTSE +0.1% at 7414, DAX -0.4% at 12533, CAC-40 -0.1% at 5222, IBEX-35 +0.2% at 10670, FTSE MIB +0.1% at 21503, SMI +0.4% at 9075, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European Indices have rebounded off earlier lows after a flurry of earnings notably from Ericsson which reported results which fell short of estimates. Lufthansa, Puma, Software Ag reported preliminary results, whilst Novartis beat on both the top and bottom line helping the Swiss SMI outperform. Earnings will continue to be the dominant them in the US morning with Goldman Sachs, JNJ and Bank of America all due to report.

Equities

Consumer discretionary [Lufthansa [LHA.DE] -2.0% (Prelim results), Puma [PUM.DE] +1.2% (prelim results), Royal Mail [EMG.UK] +2.9% (Q1 update), Zalando [ZALG.DE] -7% (prelim Q2)]

Materials: [Rio tinto [RIO.UK] -1.2% (Cuts outlook)]

Financials: [ IG Group [IGG.UK] +9.0% (Trading update), Gecina [GFC.FR] -1.2% (rights issue)]

Technology: [Software Ag [SOW.DE] flat (prelim Q2)]

Telecom: [Ericsson [ERICB.SE] -10% (Earnings, cost cuts)]

Healthcare: [Novartis [NOVN.CH] +2.2% (Earnings)]

Speakers

Sweden Central Bank (Riksbank) July Minutes: Several members stress that important that inflation was sustained close to 2%. International developments had improved (in-line with expectations). Government bond purchases to continue during H2

Gov Ingves: Important that future rate hikes were not pre-empted. Inflation just touching 2% short-term was not stable enough

Member Skingsley: Still signs that inflation to remain low

Member AF Jochnick: Likelihood of further cuts has decreased

German ZEW Economists noted that the outlook for German economic growth continued to be positive

ECB Bank Lending Survey: Net demand for business loans expected to increase in Q3. Banks expected easing of credit standards for business loans in Q3

Japan Chief Cabinet Sec Suga: Strong economic growth more important than a temporary deficit cut; reiterates govt view that strive for primary balance

Currencies

The European session began with broad based USD weakness in wake of US health care bill problems. Reform momentum of the Trump administration had received another blow as 4 GOP Senators have rejected the recent proposal of the Obamacare Repeal Act. EUR/USD approached the 1.1540 area before consolidating. Dealers noted that ECB chief Draghi faced the challenge of preparing markets for a gradual change in the monetary policy while, at the same time, preventing yields from continuing to surge excessively

The GBP saw its early advance dissipate after UK Jun CPI came in below expectations (YoY: 2.6% v 2.9%e). UK inflation pulled back" in the wake of sterling's recent rebound. Although the data remained above BOE target for 5th straight month dealers took note that it might have seen its peak in May. GBP/USD holding around 1.3030 after testing 1.3120 earlier in the session.

Fixed Income

Bund futures trade at 161.55 up 17 ticks and back towards the middle of July's trading range. Resistance lies near the 162.10 level followed by 162.75. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.

Gilt futures trade at 125.87 higher by 45 ticks following softer inflation data. Price finds key support at the 125.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.00 region, followed by 126.72.

Tuesday's liquidity report showed Monday's excess liquidity fell to €1.656T a drop of €13B from €1.669T prior. Use of the marginal lending facility fell to €60M from €192M prior.

Corporate issuance saw $18.55B come to market via 8 issuers headlined by Citigroup $5.75B 3-part senior unsecured offering and JP Morgan $4B 2-part senior unsecured note offering

Looking Ahead

05:30 (UK) Weekly John Lewis LFL sales data

05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender

05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

06:00 (TR) Turkey to sell 2022, 2027 bonds (3 tranches)

06:30 (EU) ESM to sell €1.5B in 6-Month Bills

06:45 (US) Daily Libor Fixing

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%

08:00 (PL) Poland Jun Employment M/M: 0.2%e v 0.0% prior; Y/Y: 4.3%e v 4.5% prior

08:00 (PL) Poland Jun Average Gross Wages M/M: +1.6%e v -2.2% prior; Y/Y: 5.0%e v 5.4% prior

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) May Import Price Index M/M: -0.2%e v -0.3% prior; Y/Y: 1.3.%e v 2.1% prior; Import Price Index (ex-petroleum) M/M: 0.2%e v 0.0% prior

08:30 (US) May Export Price M/M: 0.1%e v -0.7% prior; Y/Y: No est v 1.4% prior

08:55 (US) Weekly Redbook Sales

09:00 (EU) Weekly ECB Forex Reserves:

09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement

09:30 (UK) BOE Gov Carney introduces new 10 pound note

10:00 (US) July NAHB Housing Market Index: 67e v 67 prior

11:30 (US) Treasury to sell 4-Week and 52-week Bills

16:00 (US) May Total Net Tic Flows: No est v $65.8B prior; Long-Term Tic Flows: No est v $1.8B prior

16:30 (US) Weekly API Oil Inventories

EUR/USD

Majors started the week in slow motion, as a holiday in Japan, combined with a scarce macroeconomic calendar, sent investors to the sidelines ahead of first tied data to be released later this week, including among others, the ECB monetary policy decision. The American dollar closed mixed, although not far from its Friday's closing levels and looking vulnerable across the board. The EUR/USD pair fell to a daily low of 1.1434, but recovered towards its recent highs near 1.1490, ending the day a few pips below this last. In the data front, EU June inflation was confirmed at 1.3% yearly basis, down from 1.4% in May, remaining unchanged in the month. In the US, the Empire State manufacturing survey showed that business activity grew by less than expected in July, with the index down to 9.8 from 19.8 in July and the expected 15.0.

From a technical point of view, the pair retains its long-term positive tone, but remains unable to confirm a bullish breakout, still struggling around 1.1460, from where the pair retreated multiple times since January 2015. In the 4 hours chart, the pair met buying interest on an approach to a flat 20 SMA, while the RSI indicator aims higher, currently around 63, but the Momentum lost upward strength, holding anyway within positive territory. An upward acceleration through 1.1490 should see an upward extension towards 1.1615 May 2016 high, while beyond this last the next level to watch is 1.1713, August 2015 high.

Support levels: 1.1420 1.1380 1.1340

Resistance levels: 1.1490 1.1525 1.1560

USD/JPY

The USD/JPY pair posted a modest advance this Monday, ending the day at 112.63, and having met selling on an advance up to its 200 DMA, around 112.90. The JPY saw little action at the beginning of the week as Japan banks were closed on a local holiday, with the main event scheduled for this week being the BOJ's monetary policy meeting early Thursday, but no big surprise is expected from Kuroda this time. US Treasury yields traded marginally lower daily basis, indicating a possible yen recovery for the upcoming sessions. In the meantime, the pair continues finding support around 112.30, the 38.2% retracement of the latest bullish run, and below the mentioned 200 DMA, with the scale lean towards the downside. In the 4 hours chart, the early advance was unable to surpass a still bullish 20 SMA, while technical indicators have retreated from their mid-lines, supporting a bearish extension on a break below the mentioned Fibonacci support and with scope then to test the 111.60 region.

Support levels: 112.30 111.90 111.60

Resistance levels: 112.90 113.20 113.50

GBP/USD

The GBP/USD pair gave back some of its Friday's gains, but closed anyway well above the 1.3000 level. There were no relevant macroeconomic releases in the UK, but things will get more interesting in that front this Wednesday, with the release of inflation at consumer and factory levels for June. Additionally, BOE's Governor Mark Carney is due to  unveil the new £10 note featuring Jane Austen, in Hampshire, and while he will probably offer a speech, seems unlikely he will discuss monetary policies in such event. From a technical point of view, the intraday decline remains as corrective, as price remains above the 23.6% retracement of its latest bullish run from 1.2811 to 1.3113 at 1.3040, the immediate support and the level to break to confirm further declines during the upcoming sessions. In the 4 hours chart, technical indicators have corrected extreme overbought conditions, heading modestly lower within positive territory, whilst the 20 SMA maintains its bullish slope below the current level, converging with the 38.2% retracement of the mentioned rally at 1.2295, a probable bearish target in the case of further Pound's weakness.

Support levels: 1.3050 1.3010 1.2965

Resistance levels: 1.3120 1.3160 1.3200

GOLD

Gold prices continued advancing this Monday, with spot surging to $1,234.52, its highest since June 3rd, still backed by speculation that the US Federal Reserve will likely have to pause its rising rate policy after one more hike this year. Despite the US released just a minor manufacturing reading,  the NY Empire State index, the disappointing number was enough to feed demand for the base metal. The daily chart shows that the price advanced above a still bearish 20 DMA, while holding well below the 100 DMA, this last around 1,258.00, while technical indicators have advanced within negative territory, nearing their mid-lines, suggesting that the commodity may extend its advance on Tuesday. In the 4 hours chart,  the price has advanced above its 20 and 100 SMAs, with the shortest advancing below the largest, whilst technical indicators have turned flat after entering overbought territory, maintaining the risk towards the upside.

Support levels: 1,228.30 1,216.60 1,208.30

Resistance levels: 1,236.50 1,242.50 1,251.90

WTI CRUDE OIL

West Texas Intermediate crude oil futures trimmed all of its Friday's gains, closing the day at $46.05 a barrel, undermined by speculation of a monthly raise in US shale-oil production. The black gold advanced up 46.85 intraday, stalling short of the 50% retracement of its latest decline between 51.98 and 42.04 at 47.00, now nearing the 38.2% retracement of the same rally at 45.90, the immediate support. In the daily chart, the 20 DMA maintains its bullish slope below the current level, but technical indicators turned lower and are currently crossing their mid-lines towards the downside, indicating a possible bearish extension ahead, particularly on a break below the mentioned support. In the 4 hours chart, he price is a few cents below its 20 SMA, whilst technical indicators also retreated from near overbought readings towards their mid-lines where they lost bearish strength, also indicating that a bearish extension is likely on a break below the mentioned key support.

Support levels: 45.90 45.20 44.60

Resistance levels: 46.60 47.20 47.70

DJIA

US indexes closed mixed, but little changed this Monday, with only the Nasdaq Composite posting a modest advance of 2 points, to close at 6,314.43. The Dow Jones Industrial Average closed at 21,629.72, down by 8 points, whist the S&P ended at 2,459.14, down 0.01%. Ahead of big earnings reports releases later this week, the indexes hold near record highs, boosted by hopes that the US Federal Reserve will have to slow its tightening pace. Within the Dow, Microsoft led advancers with a 0.78% gain, while the worst performer was JP Morgan that closed down 0.98%. The daily  chart shows that the index remains far above all of its moving averages that maintain their bullish slopes, whilst technical indicators have retreated modestly, holding anyway near overbought readings. In the 4 hours chart, the 20 SMA heads north around 21,596 while technical indicators corrected overbought readings, but remain well above their mid-lines, suggesting the index may correct lower short-term, within a dominant bullish trend.

Support levels: 21,628 21,576 21,531

Resistance levels: 21,682 21,735 21,780

FTSE100

The FTSE 100 closed 25 points higher at 7,404.13, lifted by gains in the mining sector and a weaker Pound. Mining-related equities got a boost from positive news coming from China, with most big names, as Anglo American, Glencore, and BHP Billiton adding over 1%. The best performer, anyway, was Ashtead Group that added 3.42%. Imperial Brands was the worst performer, down 1.63%, followed by Experian that lost 1.51%. In the meantime, over 40% of businesses in the UK said that fears over the UK's future relationship with the EU after the Brexit has affected their investment decisions, according to a CBI survey, somehow anticipating that the latest recovery won't see follow through during the upcoming sessions. In the daily chart, the index has closed the day around a bearish 20 DMA, while technical indicators maintain a neutral stance, hovering directionless around their mid-lines. In the 4 hours chart, the outlook is also neutral, as the index is a few points above a bullish 20 SMA, while technical indicators turned lower around their mid-lines, with no clear directional strength.

Support levels: 7,362 7,333 7,304

Resistance levels: 7,413 7,439 7,482

DAX

European equities closed mixed, with the German DAX down 44 points or 0.35%, to 12,587.16. Most sectors closed lower, with only eight members up, led by Deutsche Lufthansa that added 2.28%, after the company reported earnings before interest and taxes of €1,042 million in the first half of 2017. Deutsche Boerse was the worst performer, ending the day 1.53% lower, followed by Merck that lost 1.50%. The daily chart for the index shows that it retreated towards its 20 DMA that presents a modest bearish slope, while the 100 and 200 DMAs remain well below the shortest, whilst technical indicators hover around their mid-lines, with no clear directional strength. In the 4 hours chart, the index settled above all of its moving averages, now a few points below a bullish 20 SMA, whilst technical indicator extended their slides, with the Momentum indicator having entered negative territory and the RSI indicator around 52. The index could extend its decline on a break below 12,542, Friday's low, and a strong static support area, as it presents multiple intraday highs and lows around the level in the past few weeks.

Support levels: 12,541 12,488 12,432

Resistance levels: 12,621 12,665 12,710

GOLD Short-term bullish momentum continues.

Gold's is trading higher after the precious metal reached the $1200 level. Hourly support is now given at $1204 (10/07/2017 high). Hourly resistance lies at 1238 (18/07/2017 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)

SILVER Consolidating after strong increase.

Silver is consolidating 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 road seems wide open for renewed weakness in case the commodity remains around $16.

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).

CRUDE OIL Upside pressures are growing.

Crude Oil is trading higher. Hourly support is given at 43.65 (10/07/2017 low). Expected to monitor resistance given at 47.32 (04/07/2017).

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).

The euro has posted gains in the Tuesday session. Currently, EUR/USD is trading at 1.1560. On the release front, German ZEW Economic Sentiment dropped to 17.5, short of the estimate of 17.8 points. The Eurozone ZEW Economic Sentiment also softened, coming in at 35.6 points. This reading missed the forecast of 37.2 points. There are no major US events on the schedule. On Wednesday, the focus will be on construction data, with the release of Building Permits and Housing Starts.

The euro has pushed above the 1.15 line and is trading at its highest levels since May 2016. The currency received a boost on Tuesday, following the news that the Republicans will not attempt to advance their health care proposal before Congress takes a recess in August. This decision is a major setback to President Trump, who has tried to pass a health care bill which would replace Obamacare, but opposition from some Republican lawmakers has meant that the White House does not have the votes to pass such a bill. Despite Republican control of both houses of Congress, no major legislation has been passed since Trump took over as president 6 months ago. There is growing skepticism as to whether Trump will be able to convince Congress to pass other key parts of his agenda – tax reform and fiscal spending.

Inflation levels in the US have been stubbornly low, despite a generally strong economy and a tight labor market. Still, the Federal Reserve remains convinced that it’s only a matter of time before inflation levels move higher. This stance was reiterated by Fed Chair Janet Yellen last week, as she testified before congressional and senate committees. With the labor market close to capacity and the unemployment rate at just 4.4%, economists are puzzled why this hasn’t translated into higher inflation. In her testimony, Yellen admitted that the Fed was at a loss to explain the lack of inflation, but insisted that it was “premature to conclude that the underlying inflation trend is falling well short of 2 percent”, and that with a strong labor market “the conditions are in place for inflation to move up”. Is Yellen’s argument just wishful thinking? The markets aren’t buying in, with a rate hike considered extremely unlikely in September. As for a December increase, the odds are currently at just 47%, according to the CME Group. Consumer spending and inflation numbers were soft in June, and the disappointing numbers will do little to improve market skepticism about one last rate hike this year.

EUR/GBP Failed to test strong support

EUR/GBP has failed to monitor strong support at 0.8719 (16/06/2017 low). Expected to show renewed monitoring of support given at 0.8719.

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.

EUR/CHF Buying pressures continue.

EUR/CHF is still trading above psychological level at 1.1000. Selling pressures are very weak at the moment. 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).

BITCOIN Back above $2200.

Bitcoin has recovered after the sell-off this weekend. Strong hourly resistance can be found at 2417 (13/07/2017 high) and hourly support is now given at 1852 (14/07/2017 low). Expected to show some sustained short-term bullish momentum.

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).

USD/CHF Ready to test strong support.

USD/CHF is lower and has exited the shortterm bullish trend. Hourly resistance can be found at 0.9696 (09/06/2017 high). Strong resistance is given at 1.0107 (10/04/2017 high). Hourly support is given at 0.9553 (30/06/2017 low). Expected to to show further weakness.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USD/CAD Important selling pressures.

USD/CAD is going lower and the pair remains in a strong bearish momentum. Hourly support given at 1.2681 (12/07/2017 low) has been broken. Resistance is located at 1.3014 (02/15/2017). Expected to show continued bearish pressures.

In the longer term, the pair lies in a bullish channel since a year. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low).

AUD/USD Surging.

AUD/USD's technical structure is bullish since early May despite some consolidation move. The pair has broken strong resistance at 0.7835 (21/04/2016 high). Hourly support is given at 0.7786 (18/07/2017 low).

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

EUR/USD Breaking 1.1500.

EUR/USD bullish pressures continue. Hourly resistance given at 1.1489 (12/07/2017 high) has been broken. Hourly support can be found at 1.1313 (05/07/2017 high). Stronger support lies at 1.1076 (18/05/2017 low). Expected to show continued bullish pressures.

In the longer term, the momentum is clearly negative. We favour a continued bearish bias towards parity. Key resistance holds at 1.1714 (24/08/2015 high) while strong support lies at 1.0341 (03/01/2017 low).

GBP/USD Surging again.

GBP/USD has broken the 1.3000 mark. Hourly resistance is now given at 1.3117 (16/07/2017 high). Support lies at 1.3047 (17/07/2017 low). Expected to show continued bullish pressures.

The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY Continued weakness.

USD/JPY keeps on going lower. Hourly support is given at 111.99 (18/07/2017 low). Stronger support is located at a distance at 108.13 (17/04/2017 low). Expected to show continued bearish pressures.

We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

GBP falls 100 points as U.K. CPI data comes in lower at 2.60% YoY

Well the much-vaunted CPI data from the U.K is out, and there must be collective sighs of relief at the Bank of Englands Threadneedle Street headquarters. A 2.60 % YoY print is quite a bit lower than forecast and could take the wind out of sterlings sails for now.

The short term market, which was likely long into these numbers, certainly thinks so with GBP gapping 100 points lower from 1.3120 over the data to 1.3020. As I write this short note, GBP trades at 1.3027, a veritable dead cat bounce.

• (UK) JUN CPI M/M: 0.0% V 0.2%E; Y/Y: 2.6% V 2.9%E
• CPI CORE Y/Y: 2.4% V 2.6%E – CPIH Y/Y: 2.6% v 2.7%e
• RPI M/M: 0.2% v 0.4%e; Y/Y: 3.5% v 3.6%e – RPI Ex Mortgage Interest Payments (RPIX) Y/Y: 3.8% v 3.8%e prior
• Retail Price Index: 272.3 v 272.7e

Note: above the BOE inflation target for the 5th straight month but moved off the May reading of 2.9% which was the highest level since Jun 2013.

The data may override the U.S. Dollar negative sentiment in the short term at least.

GBP has support at 1.3020 with 1.3000 being a major psychological pivot point. Below this level, we see little until the 1.2935 regions.

GBP has resistance at 1.3125, the day’s highs, with talk of 1.3300 quashed for now.

The chart below says it all, whether the GBP market has severely whipsawed itself will become clearer int he next few hours as Her Majesty’s Pound is sent to the naughty corner and all take of rate hikes is cancelled.

More healthcare bill turmoil in the U.S. sees the dollar lower, dragging down stocks. Meanwhile, AUD and NZD diverge.

Today turned into a game of three halves in the Asia session. New Zeland got the show rolling by posting disappointing flat inflation for Q2 which saw the NZD come under early pressure as traders reassessed their RBNZ rate outlook. The Kiwi made a comeback later as the U.S. fell in general. The RBA meeting minutes caused some surprises with the central bank upbeat about global growth and suggesting that policy had been very accommodating in recent years. What got tongues wagging was a mention that the neutral policy rate for Australia was 3.50%. A long way above where we are today. The AUD flew higher by some 120 points to be the best performer in the G10 space today.

It was news from the U.S. that set the tone for Europe. Two Republican Senators announcing that they would vote no on the Obamacare repeal bill this week which effectively would torpedo its chances. The Senate leader moved to damage control by announcing there would be a two year transition period but the horse had bolted. With the U.S. Congress becoming a seemingly ungovernable Bermuda Triangle for any and of the President's legislative agenda (the U.S. Government needs the money saved from Obamacare to pay for tax cuts. Do the maths.) traders threw in the U.S. dollar towel and it traded lower across the board. The stock market didn't like it either, and the U.S. futures dragged Asian bourses down with it.

The highlight in Europe today will be the U.K. CPI due shortly with the street forecasting 2.90 unchanged. A miss either way should see GBP move strongly one way or another.

FX

NZD

First of the taxi rank was the Kiwi, falling 70 points post a zero percent increase in CPI. The headline figure and the components were quite bearish implying an RBNZ on hold for most of 2018. NZD found support at 7260 and rallied all the way back to 7345 as the dollar collapsed.

NZD has resistance at 7370, multiple daily highs with a break implying a test of 7400 are on the cards. Support is found at 7260 and then 7200.

AUD

The RBA minutes were unexpectedly hawkish as mentioned above. AUD flew higher from 7785 to 7920 to be the best performing G10 currency of the day. Traders are rushing to reassess their rates outlook now on AUD which should stay stronger against the NZD and JPOY also.

AUD is now potentially poised for a move towards 8150 as it has made two-year highs today. Interim resistance is just above at 7925.

Support is at 7830, the previous high from May 2016 followed by the more important 7750 regions.

EUR

Rises 0.40% for the session, carving through 1.1500 in a bullish technical development and on high volume. 1.1500 will be an intra-day pivot point now followed by support at 1.1470. Resistance lies at 1.1540 and then 1.1620.

GOLD

Spiked to 1139.00 and supported by political turmoil in Washington and a weaker dollar and stocks. Profit taking late in the session sees it falling to 1135.00 into early Europe.

Support at 1130.00 should limit drops for now with the 100-day moving average lurking at 1147.50 the next major technical level.

INDICES

ASX

Sydney decreased by 1.10% as the prospect of higher Australian rate weighed. The U.S stock sell-off gave it another shove lower as the index fell from 5755 to 5665 before finishing at 5680.

The ASX is just above critical long term support in the shape of the 200-day moving average at 5663 followed by 5648 and 5628.

Resistance is at 5775 and then 5787, the 100-day moving average.