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Notes/Observations

European Equities rise, FTSE outperforms on dovish BoE Broadbent comments

EURGBP rises to 8 month highs

UK jobs number slightly better than expected; Real wages in 3 month to May fall to the lowest in 3 years

Eurozone data continues its improving trend

Overnight

Asia:

Chinese and Hong Kong banks rose again for the second day after the PBOC injected funds through OMO for the second day after an extended stretch of no action

Europe:

UK Jobs numbers were largely in line with expectations with a slight beat in Weekly earnings ex bonus. Real wages ex Bonus in 3 months to May fall 0.7%, the lowest since August 2014.

UK BoE member Broadbent not ready to support a rate hike yet noting too many imponderables to back a rate hike

Euro Zone industrial data ahead of expectations continuing the recent bout of better data

Americas

US Fed Chair Yellen to give testimony later today

Comments from Fed’s Mester (hawkish, non-voter) overnight noting reversing QE sooner rather than later is preferable

Fed’s Brainard (Voter) made overnight comments saying appropriate to reduce balance sheet soon if economic data holds up; should move cautiously on further rate increases to help boost inflation back to 2% target

Oil

(SA) Saudi Oil exports to fall to lowest level this year at 6.6M bpd; To cut oul shipments to customers by more than 600K bpd in August due to rise i demand at home - press

(IR) Iran Deputy Petroleum Minister Zamaninia: Expects to reach oil output of 4M b/d by the end of 2017

Economic Data

(UK) MAY AVERAGE WEEKLY EARNINGS 3M/Y/Y: 1.8% V 1.8%E; WEEKLY EARNINGS (EX BONUS) 3M/Y/Y: +2.0% V 1.9%E

(UK) JUN JOBLESS CLAIMS CHANGE: 6.0K V 7.3K PRIOR; CLAIMANT COUNT RATE: 2.3% V 2.3% PRIOR

(EU) EURO ZONE MAY INDUSTRIAL PRODUCTION M/M: 1.3% V 1.0%E; Y/Y: 4.0% V 3.5%E

(UK) May ILO Unemployment Rate 3M/3M: 4.5% v 4.6%e

(DE) GERMANY JUN WHOLESALE PRICE INDEX M/M: 0.0% V -0.7% PRIOR; Y/Y: 2.5% V 3.1% PRIOR

(CZ) CZECH JUN CPI M/M: 0.0% V 0.0%E; Y/Y: 2.3% V 2.3%E

Fixed Income Issuance:

(IT) Italy Debt Agency (Tesoro) sells €6.75B vs. €6.75B indicated in 12-month Bills; Avg yield: -0.352% v -0.351% prior; Bid-to-cover: 1.65x v 1.58x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.6% at 3,484, FTSE +0.8% at 7,387, DAX +0.4% at 7,384, CAC-40 +0.8% at 5,180, IBEX-35 +0.4% at 10,495, FTSE MIB +0.8% at 21,280, SMI +0.7% at 8,935, S&P futures +0.03%]

Market Focal Points/Key Themes: European stocks opened higher and maintained momentum; Burberry helped support luxury stocks; energy stocks supported by an increase in oil prices; better data didn't offset political concerns in terms of risk sentiment; UK Serious Fraud Office opens investigation into Amec Foster Wheeler, impacting stock performance of John Wood Group, though both companies say probe won't affect merger; attention on central bank policy; upcoming US earnings include NRG, Fastenal and Barnes & Noble

Equities

Consumer discretionary [Stora Enso STERV.FI +3.2% (analyst action), Pearson PSON.UK -5.0% (analyst action), Burberry BRBY.UK +2.8% (earnings), Bang & Olufsen BO.DK -6.5% (earnings)]

Energy [Premier Oil PMO.UK +30.8% (discovery), Amec Foster Wheeler AMFW.UK -8.0% (SFO probe)]

Financials [DNB DNB.NO 4.0% (earnings), Amundi AMUN.FR +1.1% (analyst action), Banca Carige CRGI.IT -1.4% (asset sale, potential merger)]

Healthcare [Barratt Developments BDEV.UK 0.8% (trading update), Lundbeck LUN.DK 3.4% (analyst action)]

Industrials [Valeo FR.FR +2.3% (asset sale), Bilfinger Berger GBF.DE +1.9% (profit waring)]

Technology [Siltronic WAF.DE +2.9% (outlook), Ordina ORDI.NL +2.0% (results)]

Speakers

(UK) BOE's Broadbent: Not ready to support a rate hike; too many imponderables to back a rate hike - Scottish press

(IR) Iran Deputy Ptroleum Minister Zamaninia: Expects to reach oil output of 4M b/d by the end of 2017

Currencies

GBPUSDrecovers from 2 week lows at 1.2810 after initial weakness from BoE Broadbent comments, Cable currently trades at 128.57 after a fall in the jobless rate. EURGBP pulls back to 0.8911 after trading an 8 month high of 0.8949 this morning.

EUR/USD trades 1.1459 off the overnight high of 1.1488 which marked the highest level seen since August 2016. Dealers look to 1.1480 initially to retest the high, with 1.16 the next target, May 2016 high.

Fixed Income

Bund futures trade at 161.09 up 21 ticks and back towards Monday’s high. Resistance lies near the 161.50 level followed by 162.10. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.

Gilt futures trade at 125.42 higher by 2 ticks and off the session highs following Weekly Average Earnings decline and lowest ILO unemployment rate since 1975. Price finds key support at the 124.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.00 region, followed by 126.72.

Wednesday’s liquidity report showed ECB €258M borrowed in overnight loan facility vs. €153M prior; €621.4B parked in deposit facility vs. €629.7B prior

Corporate issuance saw $10.5B come to market via 5 issuers headlines by Bank of Nova Scotia $1.5B 2-part senior unsecured offering and Banque Federative du Credit Mutuel $2.5B 4-part senior unsecured notes

Looking Ahead

06:00 (PT) Portugal Jun CPI M/M: No est v -0.2% prior; Y/Y: No est v 1.5% prior

07:00 (US) MBA Mortgage Applications w/e July 7th: No est v +1.4% prior

08:00 (IN) India Jun CPI Y/Y: No est v 2.2% prior

08:00 (IN) India May Industrial Production Y/Y: No est v 3.1% prior

08:00 (BR) Brazil May Retail Sales M/M: No est v 1.0% prior; Y/Y: No est v 1.9% prior

08:00 (PL) Poland Jun CPI Core M/M: %e v -0.1% prior; Y/Y: %e v 0.8% prior

08:30 (CA) Canada Jun Teranet/National Bank HPI M/M: No est v 2.2% prior; Y/Y: No est v 13.9% prior

08:30 (CL) Chile Central Bank's Traders Survey

09:00 (RU) Russia May Trade Balance: $8.8Be v $8.0B prior

09:00 (MX) Mexico May Industrial Production M/M: No est v -0.3% prior; Y/Y: No est v -4.4% prior

10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to raise Interest Rates by 25bps to 0.75%

10:00 (CA) Bank of Canada (BOC) releases July Monetary Policy Report

10:30 (US) Weekly DOE Crude Oil Inventories

12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report

14:00 (US) Beige Book

The GBP/JPY dropped for more than 200 pips yesterday during the BOE's Ben Broadbent speech in Aberdeen. However today's UK data has favored the GBP and the pair could see another push to the upside from the POC zone 145-50-65 (D L4, 50.0, trend line W L4, ATR pivot). MACD also shows a positive momentum change impending so 146.06 should be next. If the pair makes a 1h/4h close above 146.06 next should be 146.50-70. Continuation above 146.70 targets 147.18.

The breakout out of the descending triangle pattern did not occur to the downside. Instead the EUR/USD currency exchange rate has jumped. The currency pair signalled that it will move to the upside, as it slowly moved out of the triangle and fluctuated below the 55-hour SMA. Afterwards, the Euro appreciated sharply against the US Dollar until the pair reached the 1.1490 mark. Due to the fact that during the just described move the pair broke the first weekly resistance, which is located at the 1.1458 mark, the rate is set for additional gains. The next resistance, which is going to be targeted, will be the second weekly resistance level at the 1.1513 level. However, the 1.15 mark might prove itself as a psychological level.

The low volatility apparent on Tuesday morning shifted tremendously when the GBP/USD currency pair surged and tested the weekly PP at 1.2926. Subsequently, it fell down to the bottom channel boundary circa 1.2840. The sudden plunge that started at 0600GMT today pushed the rate in the strongly oversold territory and even past the weekly S1 at 1.2828. This level is unlikely to hold; thus, the Sterling should be forced to make a U-turn. Upside risks may guide the pair towards a resistance area formed by the 55-hour SMA and the weekly PP near 1.2880 or even higher if bulls remain active thorough this session. By and large, significant fundamentals scheduled for today are very likely to disrupt technical predictions and push the pair either direction.

Contrary to expectations, the US Dollar failed to overcome the 114.50 level on Tuesday. As a result, the American currency was driven by strong downside risks until Wednesday morning when the weekly PP and the 200-hour SMA circa 113.40 were reached. In case the US Dollar breaches the latter and reverses near the 113.10 mark, it will confirm the existence of a broadening wedge pattern. From technical point of view, the rate should try to form retracement from the bottom channel boundary in the 113.80/114.00 area. Thus, it is more likely that the rate tests the monthly R1 at 113.94 and remains slightly below the given level until Wednesday morning. Nevertheless, traders should be very attentive in this session due to important fundamentals that are likely to pressure the rate.

The forecasted scenario of a surge of the yellow metal has become reality. As it was expected, an ascending short term pattern has revealed itself. In accordance with the pattern the commodity price is set to continue the surge. Meanwhile, in the near future, the bullion's price is set to be supported by the 55 and 100-hour SMAs, respectively, at 1,213.26 and 1,217.12 marks. However, during the reveal of the pattern the metal bounced off the resistance of the monthly S1, which is located at the 1,220.50 mark. During Wednesday's trading session the course of the metal is quite unclear, as it is set to decline down to the lower trend line of the ascending channel. Although, the course of the upcoming short lived bullion's fall is quite hard to pinpoint due to the existence of the various moving support levels

GOLD Targeting support at 1195.

Gold's is trading lower towards strong support given at 1214 (09/05/2017 low). Hourly resistance can be found at 1258 (23/06/2017 high). Expected to show continued weakness.

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 Short-squeeze.

Silver is bouncing higher from hourly support 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 further decline.

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 Renewed bullish pressures.

Crude oil is trading above $44. Hourly support is given at 43.65 (10/07/2017 low). Expected to show continued short-term bullish improvement.

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).

USD/CHF Sideways price action.

USD/CHF is trading mixed in a slight 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).

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 Consolidating around 1.2900.

USD/CAD is now trading mixed. Support is given at 1.2913 (04/07/2017 low). Resistance is located at 1.3014 (02/15/2017). Expected to show renewed 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 Strengthening.

AUD/USD's technical structure is bullish since early May despite some consolidation move. The pair should further head back towards resistance at 0.7712 (30/06/2017 high). However, a break of support at 0.7520 (09/06/2017 low) would nonetheless indicate a renewed bearish trend.

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/JPY Bearish momentum continues.

EUR/JPY is consolidating above 130 for the first time in a year and half. Hourly support can be found at 127.10 (30/06/2017). Next support is given at 122.56 (18/05/2017 low). Further upside is favored.

In the longer term, the technical structure validates a medium-term succession of lower highs and lower lows. As a result, the resistance at 149.78 (08/12/2014 high) has likely marked the end of the rise that started in July 2012. Strong support at 94.12 (24/07/2012 low) looks nonetheless far away.

EUR/GBP Strong buying demand.

EUR/GBP is testing for the third time in two months resistance area around 0.8900. Hourly support is given at 0.8719 (16/06/2017 low). Expected to show further buying pressures.

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 Surging.

EUR/CHF is now trading above psychological level at 1.1000. Selling pressures will definitely be important at this point. 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/USD Bullish!!

EUR/USD bearish pressures are definitely weak and the pair has broken resistance at 1.1445 (29/06/2017 high). Hourly support can be found at 1.1292 (28/06/2017 low). Stronger support lies at 1.1076 (18/05/2017 low).

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 Bearish breakout.

GBP/USD's weakness continues. The pair keeps on heading lower towards hourly support given at 1.2794. Stron resistance can be found at 1.3046 (18/05/2017 high). The road is wide-open for further weakness.

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 Profit-taking.

USD/JPY has exited symmetrical triangle. yet, ongoing move seems that profits are currently taken. Hourly support can be found at 112.83 (05/07/2017 low). Stronger support is located at 108.13 (17/04/2017 low). Expected to show renewed bullish 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).