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• US core durable order should come strong and support the equity market
• Dovish FOMC ignites rally for euro and sterling
• European markets swing up and down due to earning results

US futures are trading higher ahead of the US core durable good order data. By looking at the US ISM's new order index and factory output, we expect the number to be strong today. The is the last set of important economic number before we get the US advance GDP q/q reading which is due tomorrow. The bar is set higher for the US core durable number as the forecast is for 0.4% while the previous reading was at 0.3%.

Investors in European markets are not that thrilled about today's earnings outcome and swinging between gains and losses. Both; Deutsche Bank and Royal Dutch Shell, surprised the markets with their numbers. It was refining and chemical business for Shell which really helped their top line number as the oil price itself is still not strong enough. Deutsche bank reported strong profits and the second quarter profit came well ahead of the Street estimate. However the CEO of the Bank brought attention to the fact that the revenue across the group still needs more work. Facebook also made a lot of noise last after the bell yesterday by beating the revenue and with a strong forecast.

Sterling and Euro are the most flashing currencies. The euro has smashed its two year resistance and Sterling is trading near the highest level since September. Before we dive into the common denominator which has produced this move, it is vital to mention that the fresh hawkish comments by Ewald Nowotny, the ECB committee member, who said it is time to slowly go off on gas, have also helped the currency. But the main catalyst behind these strong moves is the dovish statement by the Fed.

The statement was relatively dovish despite the fact that the Fed did mention that scaling down of the balance sheet would happen soon. The statement failed to produce any life in the volatility index and it touched another low. It is central banks around the world which pushed the volatility this low. The Fed fund rate is now pricing only a 45% chance for another rate hike for this year. The main reason is that the inflation is so low and markets do not believe that the Fed will increase the interest again this year. However, this could change rapidly because all it takes is just a couple of strong economic readings and these Fed fund rates will show a completely different percentage.

The USD/CAD has been dropping significantly without any substantial retrace, finally hitting the 1.2400 zone support. On H4 chart the pair is showing the bullish divergence so there could be a push to the upside. Above 1.2450 we might see a bullish price action towards 1.2536. Sellers should be waiting at the POC and if the price gets there we might see a rejection. POC 1.2600-15 (W H3, 38.2, historical sellers). The POC zone is very close to W H4/M L4 so it adds additionally to its strength. Rejections might aim for sub 1.2400 levels, specifically 1.2360.

At this point it's important to notice the bullish divergence and possible upward move on the pair.

The FOMC statement didn't offer much on Wednesday but it was enough to send the US dollar over the technical cliff. Several major levels broke as the dollar plunged in the aftermath. We look at what's ahead. The USDX charts below are an update from our May 19th analog USDX chart.

The US dollar moves in the aftermath of the FOMC statement look like the kind of thing you would see after a major dovish disappointment but they were more about positioning and technicals than anything from the Fed.

Tweaks to the statement included saying inflation was 'below' target rather than 'somewhat below'; and that the balance sheet runoff will start 'relatively soon' which could mean later than September. With regards to the inflation tweek, it remains to be seen whether the change was simply a mark-to-market reflection or a possible sign of the Fed's plan.

What's more important is what it didn't say. There were none of the hawkish or optimistic notes that many market participants were hoping for, and evidently positioning for. In a binary sense, this decision was either going to be neutral or more hawkish and traders piled into dollar longs in the hopes of a bounce.

It didn't come and the dollar fell by more than a cent. The move got a second wind on technicals as key levels broke. EUR/USD took out its August 2015 high of 1.1714, opening up a foray into the 2014/2015 the 1.20-1.27 zone.

The 1.2461 low in USD/CAD gave way and the pair touched a two-year low. AUD/USD also hit a fresh cycle high and cable is just a few pips away from doing the same.

The CFTC positioning data has repeatedly shown a bias to dollar longs but we're finally seeing cracks in the resolve.

Looking ahead, data comes back into focus. On Thursday, the volatile US durable goods orders are due, followed by Friday's first look at US Q2 GDP. The Fed may have been given an early look at GDP and that could explain the tepid statement. Beyond that the major numbers will be inflation, but July CPI isn't due until Aug 11, so there's plenty of time (scope) for the dollar to continue lower and the 200-week MA on USDX wilbe be the talk of the town.

WTI Oil is holding high levels and pressuring $49.00 barrier on fresh extension of strong rally from $45.39 (24 July trough). Oil price maintains firm bullish sentiment which was strongly boosted on Tuesday, when oil price rallied strongly on announcement of Saudi Arabia about reducing exports in August and was reinforced by Wednesday's stronger than expected draw in US crude inventories.

Yesterday's close above daily cloud was a bullish signal, as the price is attempting to firmly break above weekly cloud (cloud top lies at $48.61).

Near-term focus turns towards targets at: $49.43 (200SMA), psychological $50.00 barrier and $50.27 (29 May high).

Bulls so far ignore strongly overbought conditions of slow stochastic, however corrective easing could be expected before the price clears 200SMA barrier.

Res: 49.00, 49.43, 49.63, 50.00
Sup: 48.51, 48.18, 47.89, 47.50

Notes/Observations

USD weakness on view that Fed lowered its inflation bar thus inflation miss is no longer viewed as transitory

German GFK Confidence data at 16 year high

Overnight

Asia:

South Korea Q2 Preliminary GDP data still looks on course for a solid expansion this year, helped by government stimulus measures (Q/Q: 0.6% v 0.6%e; Y/Y: 2.7% v 2.7%e)

Moody's revised outlook on China banking system to stable from negative

Europe:

ECB's Nowotny (Austria): Confirms discussions have begun about tightening policy; agrees that time to slow take foot off the gas due to technical reason the QE ends at year end; Talks about reducing intensity of activity will be held in autumn

Americas:

Brazil Central Bank (BCB) cut Selic Target Rate by 100bps to 9.25% for its 7th straight cut in the current easing cycle

Economic Data

(DE) Aug GfK Consumer Confidence: 10.8 v 10.6e (highest since Oct 2001)

(FI) Finland July Business Confidence: 8 v 9 prior; Consumer Confidence Index: 22.8 v 23.9 prior

(NO) Norway May AKU Unemployment Rate: 4.3% v 4.5%e

(ES) Spain Q2 Unemployment Rate: 17.2% v 17.8%e (lowest level since financial crisis)

(SE) Sweden July Consumer Confidence: 102.2 v 103.1e v 102.5 prior; Manufacturing Confidence: 120.3 v 117.1e; Economic Tendency Survey: 112.4 v 111.5e

(HU) Hungary Jun Unemployment Rate: 4.2%e v 4.4% prior

(SE) Sweden Jun Unemployment Rate: 7.4% v 7.5%e; Unemployment Rate (Seasonally Adj): 6.4% v 6.6%e

(SE) Sweden Jun Household Lending Y/Y: 7.1% v 6.9%e

(EU) Euro Zone Jun M3 Money Supply Y/Y: 5.0% v 5.0%e

Fixed Income Issuance:

(IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month Bills; Avg Yield: -0.362% v -0.372% prior; Bid-to-cover: 1.62x v 1.54x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.1% at 382.5, FTSE flat at 7449, DAX -0.5% at 12239, CAC-40 flat at 5191, IBEX-35 -0.1% at 10561, FTSE MIB +0.2% at 21613, SMI flat at 8994, S&P 500 Futures +0.2%].

Market Focal Points/Key Themes: European indices trade mixed this morning with volatility seen following a heavy day in terms of corporate earnings. The DAX under performs following weaker results from Bayer, BASF and Deutsche Bank, while in the UK Astrazeneca weighs following their results and their Mystic Lung cancer trial failed to meet primary endpoint. Drink makers Diageo and Anheuser Busch trade higher following strong results, while Telecom names Telefonica and Orange trade over 2% higher after beating views. Looking ahead to the US morning, expecting another heavy dose of earnings, namely from Verizon, Mastercard and P&G, as well as FIAT out of Europe.

Equities

Consumer discretionary [Diageo [DGE.UK] +6% (Earnings), Anheuser Busch InBev [ABI.BE] +5% (earnings), Nestle [NESN.CH] -1.3% (Earnings)]

Consumer Staples [Danone [BN.FR] +1.9% (Earnings)]

Industrials: [Volkswagen [VOW3.DE] -1% (earnings), BASF [BAS.DE] -1.6% (Earnings)]

Financials: [Lloyds [LLOY.UK] -2.2% (Earnings), Deutsche Bank [DBK.DE] -3.6% (Earnings), Allianz [ALV.DE] +1.4% (prelim results) ]

Technology: [Schneider Electric [SU.FR] +3.8% (Earnings, acquisition)]

Telecom: [Orange [ORA.FR] +2.8% (Earnings), Telefonica [TEF.ES] +2.9% (Earnings)]

Healthcare: [Bayer [BAYN.DE] -2.9% (Earnings, cuts outlook), Astrazeneca [AZN.UK] -15.7% (Earnings, Mystic trial misses primary endpoint), Roche [ROG.CH] +1.1% (Earnings)]

Real Estate: [Foxtons [FOXT.UK] -5% (Earnings)]

Speakers

EU might delay the next stage of Brexit talks until December

Financial Conduct Authority (FCA) stated that Libor to end in 2021; not enough transactions to give data

Japan Economic Adviser Takahashi: Economy does not need a stimulus package at this time; no reason for a supplementary budget

India Commerce Ministry official Manoj Dwivedi: Current-account deficit is comfortable now and there is a case for lowering import tax on gold

China Finance Leading Group's Yang Weimin: To curb risks in local govt debts in H2. China could have both deleveraging and stable growth and could not let leverage rise to boost economic growth. To keep liquidity ample in H2

Currencies

USD consolidated some of its recent weakness in the aftermath of Thursday's Fed rate decision and policy statement. The greenback was softer as dealers believed that the Fed lowered its inflation bar thus believing recent inflation miss was no longer viewed as transitory. The language on soft inflation was more explicitly than before.

EUR/USD tested a 2 1/2 year at 1.1778 before consolidating. European data continued to back up recent ECB speak as German GFK Confidence hot a fresh 16 year high. USD/JPY holding above the 111 level while the GBP/USD hovered around 1.3150 area

Fixed Income

Bund futures trade at 162.39 up 40 ticks and took out the key July 20th low of 161.55.. Resistance lies near the 162.75 level followed by 163.50. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.

Gilt futures trade at 126.44 up 54 ticks, following the rally with Bunds and T-notes. Price finds key support at the 125.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.51 region, followed by 127.50.

Thursday's liquidity report showed use of the marginal lending facility rose to €1.2B from €496M prior.

Corporate issuance saw $1B come to market via 1issuer, Suntrust's senior unsecured note offering.

Looking Ahead

(CA) Canada July CFIB Business Barometer: No est v 60.9 prior

(BR) Brazil Jun Govt Budget Balance (BRL): -19.8Be v -29.4B prior

(ES) Spain Jun YTD Budget Balance: No est v -€16.2B prior

05:30 (ZA) South Africa Jun PPI M/M: 0.1%e v 0.5% prior; Y/Y: 4.4%e v 4.8% prior

05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills

05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds

06:00 (UK) July CBI Retailing Reported Sales: 10e v 12 prior; Total Distribution 15e v 17 prior

06:00 (IL) Israel Jun Unemployment Rate: No est v 4.5% prior

06:00 (RO) Romania to sell 3.4% 2022 Bonds

06:45 (US) Daily Libor Fixing

07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to keep key rates unchanged; Expected to leave Benchmark Repurchase unchanged at 8.00%; Expected to leave Overnight Lending Rate unchanged at 9.25%; Expected to leave Overnight Borrowing Rate unchanged at 7.25%; Expected to leave Late Liquidity Lending Rate unchanged at 12.25%

08:00 (BR) Brazil Jun PPI Manufacturing M/M: No est v 0.6% prior; Y/Y: No est v 2.1% prior

08:00 (UK) Baltic Dry Bulk Index

08:30 (US) Jun Preliminary Durable Goods Orders: +3.5%e v -0.8% prior; Durables Ex Transportation: 0.4%e v 0.3% prior; Capital Goods Orders (Non-defense/ex-aircraft): 0.3%e v 0.2% prior; Capital Goods Shipments (Non-defense/ex-aircraft): 0.3%e v 0.1% prior; Durables Ex-defense: No est v -0.5% prior

08:30 (US) Initial Jobless Claims: 240Ke v 233K prior; Continuing Claims: 1.96Me v 1.98M prior

08:30 (US) Jun Advance Goods Trade Balance: -$65.5Be v -66.3B prior (revised from -$65.9B)

08:30 (US) Jun Preliminary Wholesale Inventories M/M: 0.3%e v 0.4% prior; Retail Inventories M/M: No est v 0.6% prior

08:30 (US) Jun Chicago Fed National Activity Index: +0.35e v -0.26 prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (RU) Russia Gold and Forex Reserve w/e July 21st: No est v $412.6B prior

09:00 (MX) Mexico Jun Trade Balance: -$0.3Be v -$1.1B prior

09:30 (BR) Brazil Jun Total Outstanding Loans (BRL): No est v 3.065B prior; M/M: No est v -0.2% prior; Personal Loan Default Rate: No est v 5.9% prior

10:30 (US) Weekly EIA Natural Gas Inventories

11:00 (US) July Kansas City Fed Manufacturing Activity Index: 11e v 11 prior

11:00 (BR) Brazil to sell 2023 LFT bills

11:00 (BR) Brazil to sell 2018, 2019 and 2022 LTN Bills

12:00 (CA) Canada to sell 10-Year Bonds

13:00 US) Treasuries to sell 7-Year Notes

15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 25bps to 5.50%

The Aussie dollar pulled back from fresh 26-month high at 0.8065 posted in Asia, but dips on profit-taking were so far contained at 0.8000 zone.

Daily close above former high at 0.7988 on Wednesday was bullish signal for continuation of broader uptrend which took a breather on 0.7988/0.7874 consolidation. Bulls need close above 0.8000 handle for confirmation and extension towards next target at 0.8161 (14 May 2015 high / 50% retracement of larger 0.9503/0.6825 downtrend).

However, downside remains vulnerable as overbought daily RSI and bearish divergence on slow stochastic warn of pullback. We look for today’s close, which would increase downside risk on close below 0.8000.

Res: 0.8065, 0.8100, 0.8161, 0.8200
Sup: 0.8000, 0.7988, 0.7956, 0.7923

The common European currency was positioned to suffer losses against the US Dollar on Wednesday morning. However, that did not occur, as due to the US Federal Reserve the EUR/USD currency exchange rate jumped at 18:00 GMT on Wednesday. As a result of the move the currency pair traded just below the 1.1750 mark on Thursday morning. The rate was squeezed in between the weekly R1 at 1.1753 from the upside and the support of the upper trend line of the now broken ascending channel pattern. Most likely the resistance of the weekly R1 will be broken. As a result of such move the currency exchange rate would jump up to the 1.1842 mark. At that level the next notable resistance would be located at, as the weekly R2 is at that level.

Contrary to the relatively flat movement sideways that was apparent during the last two trading days, the Pound surged against the US Dollar mid-Wednesday after not being able to pass through the weekly PP at 1.3019. Along the way, the rate was supported by the 55– and 200-hour SMAs and the weekly R1 until the upper boundary of the ascending wedge circa 1.3160 was reached on Thursday morning. It seems that the previous momentum upwards has lost some ground, indicating to a possible reversal south. However, the Pound may still test either the monthly R1 or the weekly R2 at 1.3177 and 1.3211, respectively. In general, the rate should trade lower, thus respecting the bounds of the aforementioned wedge at least until the 1.3040/80 area where the up-trend line is located.

Thursday's morning started relatively calm, as USD/JPY was driven by low volatility for most of the session. It met resistance at the 200-hour SMA which was eventually breached, thus allowing the US Dollar to approach the upper boundary of a symmetrical triangle. However, strong downside risks pressured the rate for a plunge down to the lower boundary of this pattern. The Greenback subsequently made a U-turn, demonstrating its willingness to edge higher once again. The closest resistance cluster is formed by the monthly PP and the 100-hour SMA circa 111.40, while the 20-, 55– and 200-hour SMAs are not distant either. In case nothing shakes the market unexpectedly, the pair is likely to push up to the 200-hour SMA where it may meet hindrance or even halt its upward motion. Bottom limit—110.50.

Most patterns and technical analysis in general has become obsolete on the XAU/USD chart. As the FOMC Statement was released, the US Dollar fell all across the trading board. In regards to the price of the yellow metal, the commodity price jumped from levels below the 1,250 mark and reached above the 1,264 level. Although a surge was previously expected, such sharp jump was not expected. Due to the changes in the fundamental situation first a consolidation period will begin, which means that the metal's price might decline by the end of Thursday's trading session. Afterwards the Dukascopy Research team will do a full review of the technical situation on the metal's charts.