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Daily Pivots: (S1) 1.1759; (P) 1.1828; (R1) 1.1828; More...

Further fall is expected in GBP/USD with 1.1966 minor resistance holds. Current down trend is in progress for 100% projection of 1.2666 to 1.1932 from 1.2405 at 1.1671. Decisive break there will target a test on 1.1409 long term support. On the upside, above 1.1966 minor resistance will turn intraday bias to the upside for stronger rebound.

In the bigger picture, fall from 1.4248 (2018 high) could be a leg inside the pattern from 1.1409 (2020 low), or resuming the longer term down trend. Deeper decline is expected as long as 1.2666 resistance holds. Next target is 1.1409 low. However, firm break of 1.2666 will bring stronger rise back to 55 week EMA (now at 1.3065).

Daily Pivots: (S1) 0.9960; (P) 1.0013; (R1) 1.0074; More...

Intraday bias in EUR/USD is turned neutral with current recovery. On the upside, firm break of 1.0121 minor resistance will indicate short term bottoming at 0.9951. Intraday bias will be back on the upside for strong rebound back to 1.0348 support turned resistance. On the downside, sustained break of 100% projection of 1.1184 to 1.0348 from 1.0773 at 0.9937 will extend larger down trend to 161.8% projection at 0.9420.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, outlook will stay bearish as long as 1.0773 resistance holds, in case of rebound.

Dollar is starting to pare back this week's gains in early US session, after retail sales data were not materially stronger than expectations. It looks like EUR/USD could close the week above parity, and may start to stabilize for the near term. US futures are trading higher after the data and could point to a rebound in stocks. There is prospect of stronger rebound for Aussie and Loonie for the rest of the session.

Technically, before the close of the week, some attention could be on EUR/JPY, which is pressing 139.78 minor resistance. Firm break there will argue that that pull back from 144.26 has completed, and would bring retest of this high next week, probably with up trend resumption later in the month. Rebound is stocks would help EUR/JPY achieve it.

In Europe, at the time of writing, FTSE is up 0.86%. DAX is up 1.31%. CAC is up 0.32%. Germany 10-year yield is down -0.029 at 1.150. Earlier in Asia, Nikkei rose 0.54%. Hong Kong HSI dropped -2.19%. China Shanghai SSE dropped -1.64%. Singapore Strait Times rose 0.28%. Japan 10-year JGB yield dropped -0.0002 to 0.235.

US retail sales rose 1% mom in Jun, ex-auto sales up 1%

US retail sales rose 1.0% mom to USD 680.6B in June, above expectation of 0.8% mom. Ex-auto sales rose 1.0% mom, above expectation of 0.6% mom. Ex-gasoline sales rose 0.7% mom. Ex-auto, ex-gasoline sales rose 0.7% mom. Retail trade rose 1.0% mom. Gasoline sales rose 3.6% mom. Total sales for the three months through June were up 8.1% yoy.

Eurozone exports rose 28.9% yoy in May, imports rose 52% yoy

Eurozone exports of goods to the rest of the world rose 28.9% yoy to EUR 248.5B in May. Imports of goods rose 52.0% yoy to EUR 274.8B. Trade deficit came in at EUR -26.3B. Intra-eurozone trade rose 33.0% yoy to EUR 231.6B.

In seasonally adjusted term, exports rose 4.8% mom to EUR 241.8B. Imports rose 2.0% mom to EUR 267.8B. Trade deficit narrowed from April's EUR -31.8B to EUR -26.0B, slightly smaller than expectation of EUR -26.3B. Intra-eurozone trade rose from EUR 217.2B to EUR 221.4B.

NZ BusinessNZ manufacturing dropped to 49.7, sector remains in struggle street

New Zealand BusinessNZ Performance of Manufacturing Index dropped from 52.9 to 49.7 in June. Production dropped from 52.6 to 47.8. Employment dropped from 52.8 to 51.2. New orders dropped fro 52.3 to 47.8. Finished stocks dropped from 52.8 to 50.0. Deliveries dropped from 55.1 to 51.7.

BusinessNZ's Director, Advocacy Catherine Beard said that the drop in activity levels for June highlights the fact that the sector remains in struggle street to get back to long-term activity levels.

"The key sub index values of Production (47.8) and New Orders (47.8) both recorded the same level of contraction, which had a combined negative effect on the overall Index.  As mentioned in previous months, a strong and consistent activity level for both these key sub index values will be the only way to push the PMI towards better results."

China GDP grew only 0.4% yoy in Q2, but Jun data improved

China GDP grew only 0.4% yoy in Q2, missing even the expectation of 1.0% yoy. For June, industrial production rose 3.9% yoy, below expectation of 4.3% yoy/. Nevertheless, retail sales rose 3.1% yoy, above expectation of 0.4% yoy. Fixed asset investment rose 6.1% ytd yoy, versus expectation of 6.0%.

"Domestically, the impact of the epidemic is lingering," NBS spokesman Fu Linghui said. "Economic growth is still much lower than its potential, as the fear of Covid outbreaks continues to hurt consumer and corporate sentiment... Even accounting for June's strength, the data are consistent with negative year-on-year growth last quarter," he added.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 0.9960; (P) 1.0013; (R1) 1.0074; More...

Intraday bias in EUR/USD is turned neutral with current recovery. On the upside, firm break of 1.0121 minor resistance will indicate short term bottoming at 0.9951. Intraday bias will be back on the upside for strong rebound back to 1.0348 support turned resistance. On the downside, sustained break of 100% projection of 1.1184 to 1.0348 from 1.0773 at 0.9937 will extend larger down trend to 161.8% projection at 0.9420.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, outlook will stay bearish as long as 1.0773 resistance holds, in case of rebound.

Economic Indicators Update

US retail sales rose 1.0% mom to USD 680.6B in June, above expectation of 0.8% mom. Ex-auto sales rose 1.0% mom, above expectation of 0.6% mom. Ex-gasoline sales rose 0.7% mom. Ex-auto, ex-gasoline sales rose 0.7% mom. Retail trade rose 1.0% mom. Gasoline sales rose 3.6% mom. Total sales for the three months through June were up 8.1% yoy.

Full release here.

The dollar index is trading just under new highest since Sep 2002, hit on Thursday’s acceleration above 109.00 mark.

The greenback remains well supported by strong risk aversion on global economic and political uncertainty, while the latest talks that the Fed may opt for a super-sized 1% rate hike in its July 26-27 policy meeting, following the latest US inflation report which showed that consumer prices continue to rise.

In addition, data showed that Chinese economy sharply slowed in the second quarter, while political crisis in Italy is deepening and US banking earning season started on a weak tone that adds to negative outlook and further boosts safe-haven flows that supports the US currency.

On the other side, calmer tones come from some Fed policymakers, who favor another 0.75% hike this month that could cool down euphoric sentiment on expectations for more aggressive steps from the US central bank.

The dollar index is on track for the third consecutive week of gains that is positive signal, but daily studies started to point lower and warn of correction.

Daily stochastic emerged from overbought territory and stretched 14-d momentum is starting to turn south.

The price adjustment is likely to be limited and offer better levels to re-enter strong uptrend, but traders may become more aggressive sellers if the Fed disappoints high expectations.
Dips should stay above rising 10DMA (107.21) and a trendline support (106.98) to keep larger bulls intact.

Res: 108.56; 109.12; 109.67; 110.00
Sup: 108.08; 107.21; 106.98; 106.51

The euro continues to trade close to the parity line, after breaking below this symbolic level during the week. It marked the first time that EUR/USD fell below parity since 2002. On Thursday, EUR/USD dropped to a low of 0.9952, as the US dollar showed some broad strength. However, the euro has managed to claw its way back above the parity line.

There are no tier-1 events in the eurozone today, which means the market’s attention will be directed to the US, with the release of retail sales and UoM consumer sentiment.

Will US retail sales rebound?

Retail sales is expected to bounce back after a disappointing reading of -0.3% in June. The consensus for June stands at 0.8%, but some economists are forecasting another decline due to surging inflation, which the Fed hasn’t succeeded in lowering. Another decline would reinforce fears of a recession, which could reduce the likelihood of the Fed delivering a massive 1.00% hike. According to the CME’s Fed Watch, the likelihood of a 1.00% hike has jumped to 50/50, with inflation rising to 9.1%, meaning it’s a tossup between a hike of 0.75% or 1.00%. If retail sales is stronger than expected, the Fed will have a clearer path to a 1.00% move, which would be good news for the US dollar.

US consumer confidence has eroded badly in recent months as inflation continues to accelerate and the cost of living crisis gets worse. The UoM consumer sentiment index is expected to drop to 49.9 in July. This would be a small move from the 50.0 reading in June but would be nonetheless significant, as the index hasn’t contracted for over a decade. Weak consumer confidence can quickly translate into decreased consumer spending, a key driver of economic growth. With growing fears that the US economy is close to a recession, the last thing needed is for consumers to cut back on spending.

EUR/USD Technical

• EUR/USD is testing support at 1.0018. Below, there is support at 0.9889
•  There is resistance at 1.0124 and 1.0242

NZ Manufacturing PMI contracts

The New Zealand dollar has edged higher on Friday. The currency yawned as New Zealand’s Manufacturing PMI fell into contraction territory in June, for the first time since August 2021, during the last national lockdown in the country. The PMI slipped to 49.7, down from 52.6 in May. A reading above 50.0 points to expansion. Manufacturers highlighted the usual suspects affecting the sector – worker shortages and supply chain disruptions. The contraction adds to concerns about the economic outlook, as the RBZN moves ahead with an aggressive rate-tightening cycle.

As expected, the Reserve Bank of New Zealand raised rates by 0.50% earlier in the week, bringing the cash rate to 2.50%. The New Zealand dollar responded with a mere shrug, indicative of the move being priced in by the markets. It wasn’t all that long ago that a 50bp increase was considered a massive move and grabbed the headlines, but now such moves from central banks barely raise an eyebrow, as was the case with the RBNZ decision. With central banks raising rates fast and furiously in order to curb runaway inflation, large rate hikes have become the norm.

The week wraps up with US retail sales later today. This release is always important and will be closely watched as the Fed must decide whether to raise rates by 0.75% or 1.00%  at the meeting in late July. There was some relief in the financial markets on Thursday after FOMC members Waller and Buller said that they were leaning towards a 0.75% rate hike, but at the same time both members qualified their remarks as being dependent on “incoming data”.

Today’s retail sales certainly fits that bill and if retail sales outperforms, the likelihood of a 1.00% hike will recede, which would be bearish for the US dollar. Conversely, a weak reading will raise the likelihood of a 1.00% move, making the US dollar more attractive to investors.

NZD/USD Technical

• NZD/USD is testing resistance at 0.6125. Above, there is resistance at 0.6189
• There is support at 0.6062 and 0.5998

The Euro started a fresh decline below the 1.0100 support zone against the US Dollar. The EUR/USD pair even traded below the 1.0050 level to move into a bearish zone.

Moreover, there was a spike below the key parity level. A low is formed near 0.9953 and the pair is now correcting losses. It recently cleared a connecting bearish trend line with resistance near 1.0030 on the hourly chart.

On the upside, the first major resistance is near the 1.0050 level. A break above the 1.0050 and 1.0070 resistance levels could start a decent recovery wave. In the stated case, it could even surpass 1.0100 on FXOpen.

An immediate support is near the 1.0000 level. The next key support is near 0.9980, below the pair could decline towards the 0.9950 level in the near term. Any more losses might send the pair towards the 0.9920 level.

Eurozone exports of goods to the rest of the world rose 28.9% yoy to EUR 248.5B in May. Imports of goods rose 52.0% yoy to EUR 274.8B. Trade deficit came in at EUR -26.3B. Intra-eurozone trade rose 33.0% yoy to EUR 231.6B.

In seasonally adjusted term, exports rose 4.8% mom to EUR 241.8B. Imports rose 2.0% mom to EUR 267.8B. Trade deficit narrowed from April's EUR -31.8B to EUR -26.0B, slightly smaller than expectation of EUR -26.3B. Intra-eurozone trade rose from EUR 217.2B to EUR 221.4B.

Full release here.

Daily Pivots: (S1) 163.22; (P) 164.20; (R1) 165.32; More...

Intraday bias in GBP/JPY remains neutral for the moment. On the upside, firm break of 165.26 minor resistance will argue that corrective pattern from 168.67 has completed. Further rise should be seen to retest 168.67 high next. On the downside, break of 160.37 will bring deeper fall back towards 155.57 support.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 155.57 support holds, even in case of deep pull back.