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The UK Conservative Party has reached an agreement with the Democratic Unionists, helping it win support for Theresa May's minority government as the DUP gets an additional £1bn for Northern Ireland over the next two years.The geopolitical thermometer is quickly rising in the Middle East as Saudi Arabia squeezes Qatar with toughened demands in a development the oil market can't ignore forever. European bourses rally across the board after Italy led a 17 billion euro bailout to clean up two failed banks. US durables data is next. There are 9 Premium trades in progress; 5 in FX, 2 in indices & 2 in commodities.

On Friday, Saudi negotiators presented a list of 13 demands to Qatar including cutting relations with Iran, shuttering all media, reparations and closing a Turkish military base under construction. The demands came with a 10-day deadline to comply without mentioning the consequences of defiance. They strike us impossible to fulfill. Qatar has already responded that they are unjustified and Turkey said they're illegal.

Whether Saudi Arabia is more eager to test Qatar's resolve rather than easing the situation in the Gulf remains to be seen as new Crown Price Bin-Salman manoeuvers to further bolster his position in and out of the region. Others see more-dangerous motives.

There are no answers yet but the lack of a response in oil can't last. Crude has fallen nearly 20% in the past month and declined for five straight weeks. Qatar isn't a significant oil producer but a more assertive Saudi Arabia is a step towards direct or indirect confrontation with Iran and that's the ultimate possible buy-signal for oil.

In addition, WTI and Brent are both near support at the November lows so shorts could be looking to cover anyway. If crude can get some momentum to the upside, the Canadian dollar is especially well positioned as it threatens to break out against USD and JPY.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

• EUR +45K vs +79K prior
• GBP -38K vs -39K prior
• JPY -50K vs -51K prior
• CHF -3K vs -14K prior
• CAD -82K vs -88K prior
• AUD +15K vs -1K prior
• NZD +21K vs +1K prior

A portion of the euro bull gave up quickly after soft inflation data. There were hopes for a V-shaped reversal in ECB policy in the year ahead but there is increasing talk about a U-shaped shift if not a L-shaped one where rates stay at zero for years.

What also stands out is the rush into antipodean currencies, especially the kiwi. It had held a strong bid recently and the flood of specs helps to explain why.

World stocks regained some of their composure during Monday's trading session with most markets edging higher after investors nursed their wounds from last week's oil sell-off, which weighed on sentiment and soured risk appetite. Asian stocks marched into the green territory as participants diverted their attention away from depressed oil to optimism over global growth. The upside momentum from Asia has already boosted European equities with Wall Street potentially finding some support this afternoon. Although the current stock market resilience may be viewed positively, stocks still remain exposed to downside risks, especially when considering how Brexit developments, continued uncertainty in Washington and depressed oil continue to weigh on sentiment.

Sterling bulls display exhaustion

Rising speculation of a potential rate hike from the BoE and reports of Prime Minister Theresa May reaching an agreement with the Democratic Union Party to form a government did little to support Sterling during Monday's trading session. Price action suggests that the ongoing Brexit developments have left investors increasingly jittery and sellers have exploited this anxiety to drive prices lower. Although Sterling was initially gifted a minor lifeline after Theresa May secured a £1 billion deal with the DUP, the upside is likely to be limited by the Brexit negotiations. With uncertainty still the name of the game when dealing with Brexit and Sterling, further downside should be expected moving forward. Technical traders may utilize the 1.2775 resistance level on the GBPUSD to drive the pair lower towards 1.2600.

Dollar oscillates in the background

Dollar bullish investors were lacking the inspiration to support the Greenback on Monday amidst the absence of confidence of another US interest rate increase in 2017. Although Federal Reserve officials have consistently displayed optimism over the US economy and rate hike timings, the markets still remain unconvinced. Investors may direct their focus towards the pending Core Durable Goods Orders report this afternoon, which may pressure the Dollar further if numbers fail market expectations. From a technical standpoint, the Dollar Index is still at risk of trading lower if bulls fail to break above 98.00.

Commodity spotlight - WTI Oil

Oil prices struggled to maintain gains during Monday's trading session as oversupply woes continued to haunt investor attraction towards the commodity. Although some of the major oil producing players have stepped forward and expressed willingness to maintain the current output cuts, this has fallen on deaf ears with WTI Crude finding comfort at depressed levels. As the oversupply woes remain a dominant theme in the oil markets, any appreciation in prices may be treated as a technical bounce for sellers to start renewed rounds of selling. From a technical standpoint, a breakdown below $43 should open a path towards $42 and $40 respectively.

Currency spotlight - EURUSD

The EURUSD has been trapped in a 100 pip range for the past three weeks with support at 1.1130 and resistance at 1.1230. Although the current absence of political risk in Europe offered a solid boost to the Euro, bullish traders are seeking fresh inspiration to send prices higher. With the ECB's President Mario Draghi speaking this evening, the EURUSD could turn volatile especially if he reiterates his dovish mantra on ultra-loose monetary policy. From a technical standpoint, a break above the 1.1230 resistance or below the 1.1130 support level should determine the EURUSD's future trajectory.

EURUSD touched a new high two weeks ago, but then turned sharply lower from 1.1300 area that we highlighted as an important resistance region. The 4h count shows an ending diagonal placed in wave C; a powerful reversal pattern that already caused a strong drop from end of blue wave C towards 1.1126 labeled as wave A)/1), first part of a reversal. That being said, currently we see price displaying a sideways movement so wave 2)/B) can be in the making and can retest 1.1200 area, before making a new drop lower.

EURUSD, 4H

USDJPY - The pair is now see a move higher with more strength envisaged. On the downside, support comes in at the 111.00 level where a break if seen will aim at the 110.50 level. A cut through here will turn focus to the 110.00 level and possibly lower towards the 109.50 level. On the upside, resistance resides at the 112.00 level. Further out, we envisage a possible move towards the 112.50 level. Further out, resistance resides at the 113.00 level with a turn above here aiming at the 113.50 level. On the whole, USDJPY looks vulnerable to the downside.

The Canadian dollar took a hit on Friday, following the release of Canada's CPI figures for May. Both the headline and the core rates declined notably, with the core falling for the 3rd consecutive month and reaching its lowest level since 2011. The soft readings probably poured cold water on recent speculation regarding a more hawkish stance by the BoC soon, which arose after Deputy Governor Wilkins noted that the Bank will assess whether all the monetary stimulus currently in place is still needed.

Having said this though, we remain somewhat optimistic on the Loonie's short-term outlook, despite slowing inflation. Canada's broader economy remains solid, as the labor market continues to tighten, while there are signs that Q2 GDP growth may be stronger than previously expected. In addition, there is the prospect for a rebound in oil prices, following several weeks of declines and rising political tensions in the Middle East between Saudi Arabia and Qatar, which increase the risk of supply disruptions in the near-future.

USD/CAD edged north on Friday after the slide in Canada's inflation rates. The pair rebounded from the lower bound of the flag formation that has been containing the price action since the 14th of June, so we prefer to stay neutral for now. However, given that the rate is still trading below the downtrend line taken from the peak of the 11th of May, we believe that the prevailing short-term trend remains cautiously to the downside. A clear break below the crossroad of 1.3210 (S1) and the lower bound of the flag could signal the continuation of that trend and could initially aim for our next support of 1.3160 (S2), marked by the low of the 14th of June. Another dip below the latter level will confirm a forthcoming lower low and may open the way for the 1.3080 (S3) obstacle, a support defined by the low of the 27th of February.

Today's highlights:

During the European day, we get Germany's Ifo survey for June. Expectations are for an uptick in the current conditions index and a downtick in the expectations figure. Nonetheless, even if the expectations index comes down slightly, we don't expect that to be particularly worrisome for ECB policymakers, considering that the composite Ifo index reached a fresh all-time high in May.

In the US, durable goods orders for May are coming out. The forecast is for headline orders to have fallen again, but at a slower pace than previously, while the core rate that excludes transportation equipment is expected to have turned positive. The New Orders sub-index of the ISM manufacturing PMI showed a rebound in the month, which supports the core forecast. We believe that investors may focus primarily on the core print, which excludes volatile items. Thus, a potential rebound in core orders may bring the greenback under renewed buying interest.

USD/JPY has been trading in a quiet mode since the 22nd of June, staying between the 111.00 (S1) and 111.45 (R1) barriers. However, despite the recent trendless action, the rate continues to trade above the prior downtrend line drawn from the peak of the 10th of May. Therefore, we remain cautiously optimistic on the pair and we expect the bulls to take the reins again soon. A break above 111.45 (R1) could target the 111.75 (R2) hurdle first. Another break above 111.75 (R2) could set the stage for the 112.15 (R3) zone.

As for the rest of the week:

On Tuesday, the only event that could attract some attention is a speech by Fed Chair Yellen that will focus on global economic issues. On Wednesday, we have a relatively quiet day with nothing major on the agenda, while on Thursday, the UK Parliament is expected to vote on the Queen's Speech. We think that the vote could keep investors on the edge of their seats, as it will determine whether May keeps her position as the UK PM. As for the economic indicators, we get Germany's preliminary CPI data for June. Finally on Friday, during the Asian morning, we get Japan's CPI data for May and China's official manufacturing and non-manufacturing PMIs for June. In Eurozone, preliminary CPI data for June are due out, while from the US, we get personal income, personal spending, as well as the core PCE price index, all for May.

USD/CAD

Support: 1.3210 (S1), 1.3160 (S2), 1.3080 (S3)

Resistance: 1.3270 (R1), 1.3310 (R2), 1.3345 (R3)

USD/JPY

Support: 111.00 (S1), 110.65 (S2), 110.30 (S3)

Resistance: 111.45 (R1), 111.75 (R2), 112.15 (R3)

• GBP bounces on Prime Minister's comments
• US data likely to support USD

Well that was a weekend of controversy. The BBC coverage of Glastonbury was sponsored by a certain J Corbyn who will - according to J Corbyn - be Prime Minister in 6 months. John McDonnell claimed the victims of the Grenfell Tower fire were "murdered by political decisions", Vettel rammed Hamilton and an AirAsia flight from Perth to Kuala Lumpur had to turn back after an engine started vibrating the plane like a washing machine on spin mode. The pilot then told the passengers to 'pray for survival'. That's not a call you want to hear from a pilot is it.

The financial markets were a little calmer but there is a lot going on. The seemingly endless stream of views over Brexit is not adding any real knowledge at this stage. Negotiations are at the preliminary level and firm facts are as rare as well dressed rappers. That doesn't stop the speculation and it is just that speculation that is moving Sterling around. The Pound has bounced a little on Theresa May's announcement that she was in favour of EU residents with 5 years of residency in the UK being granted the right to stay as long as the EU does likewise with the million or so UK citizens in the EU. Does that mean the EU will owe the UK for supporting those on benefits then? It's worth asking isn't it.

Whilst today is quiet on the UK front, the week brings the vote on the Queen's speech in Parliament; something J Corbyn said he would vote against. That'll be interesting. We will also get retail sector data, mortgage figures, consumer confidence, and the final economic growth data for Q1. All could be market moving and the emphasis on the consumer data will put the Bank of England's mixed messages into context.

Eurozone data is also a bit sparse this week but we will get German business confidence data and Eurozone inflation to ponder. The Euro itself is sitting in doldrums territory in the meantime.

US data is a little more plentiful. The final Q1 GDP data will be the highlight but personal income and expenditure figures are always interesting numbers for the Federal Reserve; especially after their recent interest rate hike. There are always enough Fed speakers to hear as well, so we won't be short of comment.

This week also brings the New Zealand Trade Balance and the NZ business confidence index. The Kiwi Dollar has been a little stronger of late, much to the chagrin of the Reserve Bank of New Zealand. A weaker currency would be very helpful for exports but they are not in a position to cut their base rate to make that happen. They need to see improvement elsewhere to weaken their currency. They may be waiting some time for that.

We will also see Canadian growth data on Friday. That is forecast to be rather upbeat, so CAD buyers may seek to mitigate the risk of a stronger Canadian Dollar by trading earlier in the week.

Have a great week as we walk out of June and the 2nd quarter of the year and the first half of the year. That tends to bring volatility as traders settle up their positions, so be aware of the potential and manage the risk. Call if you would like some pointers on that.

Joke

A 75 year old marries his 5th wife. She is 28 years old and stunningly beautiful.

"Hey Richard," said his friend, "You old dog you. This is the 5th beautiful wife you have married. How have you managed that?"

"I just change my name," said Richard. "When I introduce myself, I say, 'Hello, I'm Rich."

The euro has inched lower in the Monday session. Currently, EUR/USD is trading just below the 1.12 line. On the release front, German Ifo Business Climate improved to 115.1, above the estimate of 114.6. Later in the day, ECB President Mario Draghi will speak at the ECB Forum on Central Banking in Portugal. In the US, today's key event is Core Durable Goods Orders, which is expected to rebound and gain 0.4%. On Tuesday, Draghi will again address the ECB Forum event. The US will publish CB Consumer Confidence and Federal Reserve Chair Janet Yellen will deliver remarks at an event in London.

The German economy is performing well, and the business sector is full of optimism, according to a key survey released on Monday. Ifo Business Climate hit a record high in June, climbing to 115.1. The indicator has improved for five consecutive months, pointing to stronger optimism among German businesses. Ifo chief Clemens Fuest said that the German business sector was in a “jubilant” mood, and expected business conditions to continue to improve. Major economic institutes and the German central bank have revised upwards their forecast for German growth in 2017 and 2018. German GDP grew 0.6% in the first quarter, and has been the locomotive which has boosted growth in the eurozone. Analysts are closely monitoring how the ECB plans to respond to stronger economic conditions in the euro-area. So far, the central bank has dismissed calls to tighten monetary policy, saying that it will not make any moves until inflation moves closer to the ECB's target of 2.0%. ECB President Mario Draghi will address the ECB Forum on Central Banking on Monday and Tuesday, and any hints about ECB monetary policy could move the euro.

There was positive news last week from the US construction industry. On Friday, New Home Sales jumped to 610 thousand, above the forecast of 599 thousand. Earlier in the week, Existing Home Sales improved to 5.62 million, beating the estimate of 5.54 million. There had been concerns about construction numbers, as Building Permits and Housing Starts both missed expectations in the May releases. Later in the week, the economy receives a report card, with the release of Final GDP for the first quarter. Preliminary GDP, which was released in May, came in at 1.2%, and this is the forecast for Final GDP. Will weak inflation and consumer spending result in a weaker than expected GDP report? If so, the US dollar could be a casualty and lose ground against its rivals.

• Deal for Veneto banks lifts sentiment in Europe;
• GBP pops higher as DUP agrees to support minority Conservative government;
• Gold under pressure as $1,240 is tested;
• Oil higher but still looks weak.

It's been another slow start to trading on Monday, with markets largely picking up where they left off on Friday in the absence of any major news flow over the weekend.

The one notable piece of news over the weekend came from Italy where an agreement was reached that will avoid winding down two Italian banks, the good assets of which will be transferred to Intesa Sanpaolo. The resolution seems to have appeased both the European Commission and the Italian government, both of which have been at loggerheads as to how to deal with the failing banks, as well as investors with financials across the board being boosted by the announcement.

Reports this morning of an agreement between the Conservatives and Northern Ireland's DUP have seen the pound pop higher, albeit only marginally given that the deal has been widely anticipated and doesn't offer the kind of stability that a majority or even full coalition would. The deal will see Northern Ireland receive an extra £1 billion over the next two years in exchange for the DUPs support for May's minority government. With the deal now agreed, the next question is whether May will remain in charge throughout that period.

The improved sentiment in the market is weighing on safe haven assets, particularly Gold which is down more than 1% on the day. Gold recovered back towards $1,260 towards the end of last week but has been sold heavily this morning, hitting its lowest level since the middle of May at one point. A sustained break below $1,240 could trigger a move back towards $1,220, which has been a very notable level on numerous occasions this year.

Oil is trading higher for a third consecutive session on Monday as it continues to pare losses suffered over the last month which came after producers announced an extension to their output cut. While this may give some cause for optimism, I'm seeing little to convince me that this is anything other than a dead cat bounce, with both Brent and WTI this morning already running into resistance at the first time of asking.

The first test comes from the prior lows which could offer early insight into whether there's anything in these gains and in both cases, we appear to be falling short. A failure here is quite a bearish signal and could point to further downside in the gains ahead. That said, a break above $44.50 in WTI and $47 in Brent may suggest we're seeing a broader correction, something that at this stage is looking unlikely.

While it may have been a slow start to trading, we will get durable goods numbers from the US ahead of the open on Wall Street. ECB President Mario Draghi will also appear later on as he delivers opening remarks at a forum on central banking in Portugal.

The pair rallied around 60 pips on Monday, bringing bulls back to play after four consecutive descending long-legged daily candles last week, which signaled hesitation of broader bulls ahead of daily cloud barrier. Thin daily cloud which twists on Tuesday continued to attract for fresh attacks and today's rally came just ticks ahead of it. Plethora of strong supports provided by daily MA's (which also made a multiple bull-crosses and contained last week's easing) continues to underpin the action for final break above daily cloud / 100 SMA pivots at 111.80 zone and further retracement of 114.36/108.80 descend. Corrective easing from today's high at 111.71 should ideally find support at 111.48 (Fibo 38.2% of today's 111.11/71 rally) with extended dips to be contained at 111.34 (hourly cloud top) to keep fresh near-term bulls in play.

Res: 111.71, 111.80, 112.00, 112.25
Sup: 111.57, 111.48, 111.34, 111.24

The Euro is holding between 10 and 20SMA’s (1.1174/1.1203 respectively) after upside attempts were repeatedly capped by 20SMA).

Overall picture remains bullishly aligned and sees scope for fresh upside on sustained break above 20SMA that would open way for extension towards $1.1228.

On the other side, weaker near–term tone could be expected on break below 10SMA support (also Fibo 38.2% of 1.1118/1.1208 upleg) which would expose supports at 1.1263/53 (Fibo 50% and 61.8% retracement of 1.1118/1.1208).

However, overall bullish tone is expected to remain in play while key near-term supports at 1.1118/09 stay intact.

ECB President Mario Draghi’s speech, due on Tuesday is in focus for fresh signals.

Res: 1.1187, 1.1200, 1.1208, 1.1212
Sup: 1.1174, 1.1163, 1.1153, 1.1140