Sample Category Title

Daily Pivots: (S1) 1.0366; (P) 1.0428 (R1) 1.0489; More...

Intraday bias in EUR/USD stays neutral for the moment. Further decline is expected as long as 1.0614 resistance holds. On the downside, sustained break of 1.0339/48 will resume larger down trend. Next target is long term projection level at 1.0090. On the upside, above 1.0614 will turn bias back to the upside for 1.0786 resistance instead.

In the bigger picture, focus stays on 1.0339 long term support (2017 low). Decisive break there will resume whole down trend from 1.6039 (2008 high). Next target is 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090. However, firm break of 1.0805 support turned resistance will delay this bearish case, and bring stronger rebound first.

Daily Pivots: (S1) 1.1990; (P) 1.2087; (R1) 1.2197; More...

Intraday bias in GBP/USD remains neutral for the moment. Further fall is mildly in favor with 1.2187 minor resistance intact. Break of 1.1932 will resume larger down trend from 1.4248. However, on the upside, above 1.2187 minor resistance will turn bias back to the upside for 55 day EMA (now at 1.2467) instead.

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 1.31403).

Daily Pivots: (S1) 134.66; (P) 135.33; (R1) 135.90; More...

USD/JPY is staying in consolidation below 136.99 and intraday bias stays neutral first. Considering bearish divergence condition in 4 hour and daily MACD, a deeper correction could be imminent. On the downside, break of 134.25 support will confirm short term topping at 136.99. Intraday bias will be back on the downside for 131.34 support resistance turned support. Nevertheless, firm break of 136.99 will resume larger up trend to 100% projection of 114.40 to 131.34 from 126.35 at 143.29.

In the bigger picture, current rally is seen as part of the long term up trend from 75.56 (2011 low). Next target is 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, which is close to 147.68 (1998 high). This will remain the favored case as long as 126.35 support holds.

Daily Pivots: (S1) 0.9543; (P) 0.9593; (R1) 0.9644; More...

Intraday bias in USD/CHF stays neutral and outlook is unchanged. Price actions from 1.0063 are still seen as a consolidation pattern. On the upside, break of 0.9731 resistance will argue that such consolidation has completed and bring stronger rally back to retest 1.0063 high. However, another fall below 0.9493 will dampen this view and target 0.9459 resistance turned support.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Next target is 1.0237/0342 resistance zone. This will remain the favored case as long as 0.9471 resistance turned support holds. However, sustained break of 0.9471 will extend long term range trading with another falling leg.

Australian Dollar recovers broadly today, following recovery in European markets. Meanwhile, traders are also preparing for tomorrow's RBA rate hike. New Zealand Dollar is also mildly firmer. On other hand, Yen is turning softer with Swiss Franc and Dollar. Euro and Sterling are mixed for now. Overall, trading is subdued with US on holiday.

Technically, for Aussie, eyes will be on 0.6918 minor resistance in AUD/USD and 1.5059 minor support in EUR/AUD. Break of these levels will but a sign of short term bottoming in Aussie. In that case, stronger rebound would likely be seen broadly. Reactions to tomorrow's RBA will be the key to the move.

In Europe, at the time of writing, FTSE is up 1.22%. DAX is up 0.24%. CAC is up 0.85%. Germany 10-year yield is up 0.1081 at 1.341. Earlier in Asia, Nikkei rose 0.84%. Hong Kong HSI dropped -0.13%. China Shanghai SSE rose 0.53%. Singapore Strait Times rose 0.80%. Japan 10-year JGB yield rose 0.0056 to 0.226.

Eurozone Sentix investor confidence dropped to -26.4, dynamics reminiscent of crisis year 2008

Eurozone Sentix Investor Confidence dropped from -15.8 to -26.4 in July, worse than expectation of -20.0. That's the lowest level since May 2020. Current situation index dropped from -7.3 to -16.5, worst since March 2021. Expectations index dropped from -24.0 to -35.8, lowest since December 2008.

Sentix said: "In every respect, the dynamics are reminiscent of the crisis year 2008, and what was then the collapse of the financial system is now the danger of the collapse of the European energy supply. While the financial system essentially consists of money, which can be printed by its own central bank in any amount as needed, a lack of gas is not so easy to replace.

"Moreover, practically all sectors of the economy would be negatively affected by a gas or electricity blackout. So it is time for governments to realise the gravity of the situation and take effective countermeasures. One way or another, they cannot rely on the ECB this time. Rather, the states should rely on war diplomacy".

Eurozone PPI up 0.7% mom, 36.3% yoy in May

Eurozone PPI rose 0.7% mom, 36.3% yoy in May, versus expectation of 1.0% mom, 36.7% yoy. For the month, industrial producer prices increased by 1.7% for intermediate goods, by 1.3% for non-durable consumer goods, by 0.9% for durable consumer goods and by 0.6% for capital goods, while they decreased by -0.2% in the energy sector. Prices in total industry excluding energy increased by 1.3%.

EU PPI rose 0.8% mom, 36.4% yoy. Among Member States for which data are available, the highest monthly increases in industrial producer prices were recorded in Finland (+5.5%), Estonia (+5.4%) and Lithuania (+4.9%). Decreases were observed in Ireland (-19.4%), Slovakia (-4.4%), the Netherlands (-0.8%), Bulgaria and France (-0.1% both).

Swiss CPI accelerated to 3.5% yoy in Jun, highest since 2008

Swiss CPI rose 0.5% mom in June, above expectation of 0.3% mom. The monthly rise was due to several factors including rising prices for fuel, heating oil, and fruiting vegetables. Over the 12-month period, CPI accelerated from 2.9% yoy to 3.4% yoy, above expectation of 3.2% yoy. That's also the highest level since July 2008.

Looking at some more details, core inflation rose 0.2% mom, 1.9% yoy. Domestic products inflation rose 0.3% mom, 1.7% yoy. Imported production inflation rose 1.2% mom, 8.5% yoy.

Australia expects resource and energy export earnings to make successive records this year and next

Australia's Department of Industry, Science and Resources said in a new quarterly report that resources and energy exports earnings are expected deliver two successive record years in 2021-2022 and 2022-2023, before falling slightly in 2023-24 to a third highest ever figure.

Resources and energy export earnings are estimated to be at AUD 405B in 2021-22, AUD 419B in 2022-23, and then notably lower at AUD 338B in 2023-24. The growth was mainly driven by higher prices as volume would remain below 2019-20 high throughout the forecast period.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9543; (P) 0.9593; (R1) 0.9644; More...

Intraday bias in USD/CHF stays neutral and outlook is unchanged. Price actions from 1.0063 are still seen as a consolidation pattern. On the upside, break of 0.9731 resistance will argue that such consolidation has completed and bring stronger rally back to retest 1.0063 high. However, another fall below 0.9493 will dampen this view and target 0.9459 resistance turned support.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Next target is 1.0237/0342 resistance zone. This will remain the favored case as long as 0.9471 resistance turned support holds. However, sustained break of 0.9471 will extend long term range trading with another falling leg.

Economic Indicators Update

WTI closed last week with minor changes, close to $107. The dynamics of the previous two weeks indicate a timid attempt to return to the bullish trend after the correction. However, there are more signs of an end to the bullish trend so far, despite the rebound.

The US oil producers are expanding their drilling activity. Baker Hughes reported last Friday that 595 oil production rigs are operating across the country, up 1 for the week and +219 for the year. It takes about half a year from drilling to production, and that’s a substantial margin for the future.

The production dynamics suggest that there are enough wells already in operation to replace those that have run out and ramp up supply. Production last week was 12.1m BPD. More oil than America has produced in its history for only 13 months since March 2019. So, a lot of oil is already supplied, some of which the US can export.

Meanwhile, the strategic reserve continues to sell off at a record pace, dropping to levels where it last was in 1986. Interestingly, these government interventions are sufficient to stabilise commercial reserves.

The US is no longer short of oil and petroleum products, conditionally sending the surplus through overseas sales from reserves. Initial logistical difficulties and seemingly endless production force majeure in OPEC countries (the new incident in Libya at the weekend) are holding back the fall in quotations.

Oil trader Vitol, before that Trafigura, spoke of signs of oil demand destruction at current prices. Previously, after 2010, oil prices above $100 were also holding back economic growth and could only hold higher for as long as monetary or government stimulus was in effect and crashed as soon as conditions started to tighten. That is precisely the situation we are now in.

The technical analysis of the charts, in our view, remains on the side of the bears. The WTI price has failed to break above the former uptrend support line and remains below the 50-day moving average.

Should the oil price fall below last month’s low of $101, it would signal that the bears are gaining an increasing advantage, and further declines could accelerate sharply. A complete correction of the latest bullish rally could be a return to $92. However, a deeper slide towards $80-85 cannot be ruled out if economic data worsens further and inflation requires further decisive rate hikes.

AUDUSD switched to a bullish mode after stepping again on the bottom line of the 2021 bearish channel at 0.6765 last Friday.

The pair has almost recouped Friday’s loss ahead of the RBA rate decision due on Tuesday at 04:30 GMT, but the 50-period simple moving average (SMA) on the four-hour chart, which has been a key constraining zone since the start of June, is still overhead at 0.6890. Note that the 23.6% Fibonacci retracement of the 0.7282 – 0.6763 downleg is sitting around the same level too.

On the other hand, the fast progress in the RSI, which is looking to exit the bearish area, and the growth in the MACD, which has climbed back above its red signal line, is boosting optimism that the pair may extend its recovery in the short term. The 38.2% Fibonacci of 0.6961 may come first into view in this case. A more aggressive rally could even reach the 0.6993 resistance, where a close higher could see another test near the 200-period SMA and the 50% Fibonacci of 0.7022.

In the bearish scenario, where the price flips back below the nearby support of 0.6850, the way will clear again towards the channel’s lower boundary seen around 0.6765. Failure to bounce here could trigger a quick decline towards the 0.6565 handle taken from April-May 2020.

All in all, although the short-term bias is improving for AUDUSD, buyers may wisely wait for a close above the familiar barrier of 0.6885 before they drive the price towards 0.6961.

We are seeing plenty of volatility from the Australian dollar. AUD/USD is trading at 0.6883 in European trade, up 0.98% on the day. The Australian dollar has recovered most of its losses from Friday, when the pair slipped 1.28%.

RBA set to hike, but by how much?

All eyes are on the RBA, which holds its monthly policy meeting on Tuesday. The meeting is live, as it’s not clear if the Bank will raise rates by 25bp or 50bp. The most likely scenario is a 50-bp move, with the cash rate at a low 0.85%. A supersize 75bp move is a possibility but unlikely, and would likely give the Aussie a short-lived jump – the markets remain jittery in the current environment which will make it difficult for AUD/USD to claw back to the symbolic 70 level.

Inflation remains the RBA’s paramount concern. The inflation rate of 5.1% is among the lowest in the OECD and well below the UK and US, which are running close to double digits. Still, there is no sign of Australia’s inflation peaking, and that has the RBA worried about inflation expectations becoming unanchored. There are no indications of a recession, but GDP in Q1 slowed significantly to 0.8%, compared to a robust 3.6% in the fourth quarter. If the RBA continues to deliver 50bp rate hikes, economic activity will slow and negative growth would become a very real possibility.

US markets are closed for a holiday, but things will heat up during the week, with the FOMC releasing the minutes of its June meeting. The Fed appears intent on continuing to raise rates aggressively, with Fed Chair Powell saying last week that curbing inflation was his primary task right now. Last week Powell said it was important to prevent inflation expectations from becoming anchored, adding that restoring price stability was paramount, even if that mean negative growth. On Friday, the Atlanta Fed GDP tracker indicated that the US is likely already in a recession, with the economy contracting by 2.1% in Q2, which together with the Q1 decline of 1.6% would mean the economy is in recession.

AUD/USD Technical

• AUD/USD is testing resistance at 0.6849. Above, there is resistance at 0.6933
• There is support at 0.6732 and 0.6648

Eurozone Sentix Investor Confidence dropped from -15.8 to -26.4 in July, worse than expectation of -20.0. That's the lowest level since May 2020. Current situation index dropped from -7.3 to -16.5, worst since March 2021. Expectations index dropped from -24.0 to -35.8, lowest since December 2008.

Sentix said: "In every respect, the dynamics are reminiscent of the crisis year 2008, and what was then the collapse of the financial system is now the danger of the collapse of the European energy supply. While the financial system essentially consists of money, which can be printed by its own central bank in any amount as needed, a lack of gas is not so easy to replace.

"Moreover, practically all sectors of the economy would be negatively affected by a gas or electricity blackout. So it is time for governments to realise the gravity of the situation and take effective countermeasures. One way or another, they cannot rely on the ECB this time. Rather, the states should rely on war diplomacy".

Full release here.

EURUSD managed to stay afloat above the downtrend’s bottom line of 1.0348 for the third time despite its bearish weekly close. Nevertheless, negative risks keep lingering in the background.

Particularly, the 20-day simple moving average (SMA) has resumed its negative slope after failing to cross above the 50-day SMA, while the RSI and the MACD are also pointing to the downside, with the former distancing itself below its 50 neutral level and the latter deviating beneath its red signal line.

In the event the price tumbles below the 1.0348 floor, breaching the 2017 low of 1.0339 too, the sell-off may intensify towards the crucial 1.0200 psychological level, where the pair changed direction twice during 2002. That might be the last opportunity for a rebound before the pair reach parity. Additional bearish actions from here may next test the 0.9900 number.

On the upside, the 1.0480 – 1.0520 territory and the 20-day SMA appeared as hurdles last week. Hence, a successful extension above that bar could provide direct access to the descending trendline and the 23.6% Fibonacci extension of the 1.1494 – 1.0348 downleg at 1.0620. Higher, the recovery is expected to pick up steam towards the 38.2% Fibonacci of 1.0789, where any violation would put the negative trend at risk.

In brief, although EURUSD maintains a neutral short-term trajectory above May’s 5½-year lows, technical signals remain bearish. Traders may wait for a move below 1.0348 or above 1.0620 before they act accordingly.