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Analysts at Rabobank suggest that this week?s main highlights are manufacturing PMIs tomorrow, Aussie CPI and the German IFO survey Wednesday, US dura

Analysts at Rabobank suggest that this week’s main highlights are manufacturing PMIs tomorrow, Aussie CPI and the German IFO survey Wednesday, US durable goods Thursday, and then Q2 US GDP on Friday.

Key Quotes

“The GDP number in particular could be extremely interesting given the expectations of a 4.3% print, which while no doubt representing the near-term high-water mark of Trumpety-Trumpism, would also likely see further yield-curve flattening and USD strength.”

FX Strategists at UOB Group noted the pair?s outlook remains mixed in the near term. Key Quotes 24-hour view: ?The strong rebound in GBP last Friday

FX Strategists at UOB Group noted the pair’s outlook remains mixed in the near term.

Key Quotes

24-hour view: “The strong rebound in GBP last Friday appears to be running ahead of itself. That said, there is scope for the recovery to extend higher even though a clear break above 1.3210 would come as a surprise (1.3180 is already a relatively strong resistance). Support is at 1.3110 followed by 1.3080”.

Next 1-3 weeks: “While GBP broke the major 1.3040/50 support zone last week, the decline was short-lived as it staged a robust rebound after touching a low of 1.2958 last Thursday (19 Jul). The choppy price action has resulted in a mixed outlook and we continue to hold a neutral stance for now and expect GBP to continue to trade in a relatively volatile manner, likely within a broad 1.3050/1.3250 range”.

Turkey Consumer Confidence up to 73.1 in July from previous 70.3
According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, further declines are likely while below 1.1790. Key Quotes ?EUR/USD last w

According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, further declines are likely while below 1.1790.

Key Quotes

EUR/USD last week eased back from the 55 day ma at 1.1711, but this is being eroded today and the market is currently sidelined and possibly basing. For now we will assume while below 1.1790, a downside bias remains, however the market is more or less side lined currently. Attention stays on the 1.1510/08 recent lows and below here lies the 200 week ma at 1.1379”.

“A recovery above 1.1790 will target 1.1855. Above 1.1855 we look for a deeper retracement to the 1.1937 55 week ma, with scope for the 1.1981 200 day ma, where we suspect that it will fail”.

? Trump?s comments keep exerting downward pressure on the USD. ? Fed rate hike expectations might help limit further downside. The USD/JPY p

   •  Trump’s comments keep exerting downward pressure on the USD.
   •  Fed rate hike expectations might help limit further downside.

The USD/JPY pair remained under some selling pressure at the start of a new trading week and fell below the 111.00 handle, or 1-1/2 week lows.

The pair extended last week's sharp retracement slide from six-month tops and continued losing ground for the third consecutive session amid persistent US Dollar weakness, triggered by the US President Donald Trump's comments. 

During an interview with CNBC, Trump upped the ante on the trade war front and said that he was prepared to impose tariffs on all $505 billion in Chinese goods imported to the US. Trump also criticized the Fed's monetary tightening and showed displeasure over the recent USD strength. 

Market participants, however, remain convinced that the Fed will stick to its plan to raise interest rates at least two more time in 2018 and the same was evident from the US Treasury bond yields. In fact, the benchmark 10-year yield held around the three-week high level of 2.89% and might now contribute towards limiting further downside. 

Technical outlook 

Omkar Godbole, Analyst and Editor at FXStreet writes: “A close below the rising trendline would only validate the bearish Doji reversal and indicate the rally from the March 26 low od 104.63 has ended. As a result, the spot risks falling to 110.52 (ascending 50-day MA) and may test demand at the 200-day MA support of 110.10.”

“A strong rebound from the trendline support would and a close above 111.40 (May 21 high) would shift risk in favor of a re-test of 113.17 (Thursday's high),” he adds further.
 

The latest data released by the China Customs on Monday showed that the value of China?s total trade with North Korea fell 56.1 percent in the first h

The latest data released by the China Customs on Monday showed that the value of China’s total trade with North Korea fell 56.1 percent in the first half of this year to USD 1.1 billion.

Key Highlights (via Reuters):

“Imports from North Korea dropped sharply by 87.9 percent on-year to $107.3 million, while exports were down 38.8 percent to $997.3 million.

China’s June total trade with North Korea was valued at $217.16 million, down from $230.87 million in the previous month.

China’s exports to North Korea were $204.19 million in June while imports from North Korea were $12.97 million, the data showed.”

Analysts at ANZ point out that New Zealand?s June quarter inflation was stronger than they expected at both the headline level and in spirit, with mea

Analysts at ANZ point out that New Zealand’s June quarter inflation was stronger than they expected at both the headline level and in spirit, with measures of core inflation clearly ticking a little higher.

Key Quotes

“With that in mind, now is a useful time to revisit where we see inflation heading from here and the key judgements underpinning this view. We expect headline inflation to gradually pick up to 2% by Q2 2019. In light of the Q2 surprise, this is one quarter earlier than our previous forecasts.”

“Underpinning this is an ongoing gradual acceleration in non-tradables inflation, and some near-term strength in tradables inflation. On balance, the risks to this outlook are skewed a little to the upside in the near term, but to the downside in the medium term, reflecting a deceleration in economic activity. This week is quiet on the data front, with just trade data and ANZ Consumer Confidence out.”

EUR/USD navigates a narrow range at the beginning of the week, so far managing well to keep business above the key 1.1700 handle. EUR/USD looks to US
  • The pair is up smalls and gyrates around the 1.1720 region.
  • The greenback finds some support in the 94.20 area.
  • Markets’ focus remain on Trump and trade disputes.

EUR/USD navigates a narrow range at the beginning of the week, so far managing well to keep business above the key 1.1700 handle.

EUR/USD looks to USD-dynamics for direction

Spot alternates gains with losses on Monday against the backdrop of a flat performance around the greenback.

Recent comments by President Trump dented the positive sentiment that has been surrounding the buck in past sessions, motivating the US Dollar Index to recede from YTD tops in the 95.60/65 band.

In addition, it appears EUR/USD has formed a base just above 11-month lows around 1.1500 the figure, retaking both key barriers at 1.1600 and 1.1700 helped by short covering and the already mentioned USD weakness.

On the positioning front, EUR speculative net longs retreated to yearly lows in the week ended on July 17, as per the latest CFTC report.

Looking ahead, US Existing Home Sales will be the sole event today, although market participants should remain focused on the US-China trade spat and occasional Trump headlines.

EUR/USD levels to watch

At the moment, the pair is gaining 0.09% at 1.1731 facing the next hurdle at 1.1748 (high Jul.17) followed by 1.1792 (high Jul.9) and finally 1.1853 (high Jun.14). On the downside, a breakdown of 1.1690 (10-day sma) would target 1.1676 (21-day sma) and then 1.1575 (low Jul.19).

Italy's Head of the budget committee at the Lower HouseClaudio Borghi was on the wires earlier today, via Republicca, commenting on the European Unio

Italy's Head of the budget committee at the Lower House Claudio Borghi was on the wires earlier today, via Republicca, commenting on the European Union’s (EU) budget rule.

Key Headlines:

Italy needs expansive economic policies.

Italian companies want lower tax burden.

Asks why Italy can't overlook the EU budget rule.

Separately, Italy’s Deputy Prime Minister Salvini was reported, as saying that he urges the EU to review the budget rules.

Analysts at Danske Bank suggest that the markets will digest the G20 Finance minister meeting over the weekend and not least comments on the currency

Analysts at Danske Bank suggest that the markets will digest the G20 Finance minister meeting over the weekend and not least comments on the currency front after Trump's tweets criticising the strengthening of the USD and repeating that China and the EU have been 'manipulating their currencies.

Key Quotes

“Trump seems increasingly keen on taking on a big battle with the EU and China and it seems more evident that the US-China trade war is here to stay for some time. Tariffs on autos could still hit the EU (not least Germany).”

“On the data front, we have euro consumer confidence and US existing home sales today. Especially, US home sales may attract some attention after weak housing starts and permits last week flagged a potential housing slowdown.”

“For the rest of the week, we have euro Flash PMI and German Ifo (Tuesday), the ECB rate meeting, US durable goods orders (Thursday) and Q2 GDP for the US (Friday).”

 

The GBP/USD major pair is shifting its feet near 1.3140 as GBP traders await fresh headlines concerning Brexit ahead of a quiet Monday on the calendar
  • Sterling set to defend the early session's mild gains as London traders get set to digest the latest Brexit rejection from Europe.
  • A limited economic calendar this week will be seeing Brexit headlines take center stage once again.

The GBP/USD major pair is shifting its feet near 1.3140 as GBP traders await fresh headlines concerning Brexit ahead of a quiet Monday on the calendar.

The latest Brexit proposal from Prime Minister Theresa May, after much bickering and several close votes within the UK parliament, has been flatly rejected by EU leaders in Brussels, as the 'third option' Brexit proposal would require a sacrifice of European autonomy, a move that is held unacceptable by Brexit negotiators on the EU side. Under PM May's hopeful proposal, the City of London would enjoy unfettered access to European financial markets, a privilege that the European Council maintains strict control over, and intends to retain the right to withdraw that access at any time.

With the latest Brexit proposal dead in the water, Pound traders will be looking for reactions from the UK government through Monday, and will be waiting to see the Prime Minister's next move in an ongoing negotiation between EU leadership in Brussels and hard-line leavers within the UK which see little middle ground being reached between the two sides.

It's going to be a quiet Monday on the economic calendar, with only a speech from the Bank of England's (BoE) MPC Member Haldane due later in the day at 17:00 GMT, and the rest of the week is looking equally inconsequential, with little meaningful data slated for the British Sterling, which may be a welcome reprieve after bulls got hammered in last week's sell-off, pushed further into the red by a raft of disappointing economic figures for the UK's economy, which pushes the chances of an already-dubious rate hike from the BoE out even further.

GBP/USD Technical Analysis

The Sterling-Dollar's hourly candles show a bearish divergence between current swing highs and the Relative Strength Index, while hourly Stochastics have rolled over into sell signals and are beginning to drift back into short-side territory. With weakening intraday technicals coming in for a landing ahead of Monday's London market session, key resistance from the 200-hour moving average near 1.3155 can be expected to hold for the next little while.

GBP/USD Chart, 15-Minute

Spot rate:  1.3136
Relative change:  0.10%
High:  1.3156
Low:  1.3114
   
Trend: Flat to bearish
   
Support 1:  1.3114 (current day low)
Support 2:  1.3080 (38.2% Fibo retracement level)
Support 3:  1.2994 (Friday low)
   
Resistance 1:  1.3156 (current day high)
Resistance 2:  1.3235 (R2 daily pivot)
Resistance 3:  1.3267 (July 17th swing high)

 

Denmark Consumer Confidence dipped from previous 10.6to 9.7 in July
China?s Securities Times is out with the latest headlines, citing that China is considering easing limits in stock index futures trading, Livesquawk r

China’s Securities Times is out with the latest headlines, citing that China is considering easing limits in stock index futures trading, Livesquawk reports.

No further details have been mentioned on the same.

Key Notes:

Asian stocks back in the red on trade fears, protectionism sapping risk appetite

Monday's continuation of trade angst sees Japan's Nikkei 225 index down around 1.3% so far, while the Tokyo Topix index is relatively unharmed at -0.14%; Shanghai's CSI 300 index is in the red for -0.15%, and Hong Kong's Hang Seng index is down -0.2% for Monday. 

USD/CNY fades drop to 6.74, focus on today’s close

The oversold Chinese Yuan extended Friday’s gains in early trade, but the resulting dip in the USD/CNY to 6.74 was short-lived. 

Analysts at Nomura expect the BEA to report this Friday that US real GDP increased at an annualized pace of 4.6% q-o-q in Q2. Key Quotes ?Part of th

Analysts at Nomura expect the BEA to report this Friday that US real GDP increased at an annualized pace of 4.6% q-o-q in Q2.

Key Quotes

“Part of the strength is related to a sharp pickup in exports as imports slowed. However, a substantial amount of the firming in Q2 stems from accelerating consumer spending.”

“We expect GDP growth to moderate for the rest of this year but to remain well-above potential as rising federal spending and tax cuts continue to propel the US economy.”

“Incoming data last week indicates strong momentum heading into Q3, albeit at a level slightly below that of Q2. Industrial production rebounded in June as factory activity picked up during the month. In addition, early indicators on manufacturer sentiment during July point to continued growth from the manufacturing sector despite some concern in the forward looking indicators. On the downside, core (“control”) retail sales moderated somewhat in June despite overall retail sales increasing at a solid pace.”

FXoption expiries for July 23 NY cut at10:00Eastern Time, via DTCC, can be found below. EUR/USD: EUR amounts 1.1570 560m 1.1600 642m 1.1650 5

FX option expiries for July 23 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

  • 1.1570 560m
  • 1.1600 642m
  • 1.1650 519m
  • 1.1700 2.1bn
  • 1.1750 1.1bn

GBP/USD: GBP amounts

  • 1.3060 209m
  • 1.3115 252m
  • 1.3260 400m

USD/JPY: USD amounts

  • 109.75 440m
  • 109.90 400m
  • 111.70 745m
  • 112.00 570m
  • 112.50 895m

AUD/USD: AUD amounts

  • 0.7355 556m
The AUD/USD is chained to recent highs set late last week, cycling near 0.7430 as traders look down the barrel of a week that sees a thin data schedul
  • The Aussie's bull-run from Friday appears over as the AUD/USD sheds its upwards momentum with traders awaiting fresh trade headlines.
  • A weak economic calendar will have AUD traders looking forward to Wednesday's Aussie CPI figures.

The AUD/USD is chained to recent highs set late last week, cycling near 0.7430 as traders look down the barrel of a week that sees a thin data schedule and tensions on the rise across the globe with trade spats continuing to simmer.

Last week saw the Aussie whipping against the US Dollar, dropping into consecutive fresh lows before rebounding into near-term highs, and Friday's last bullish push on USD selling may face new challenges in the upcoming trading week as traders grapple with a thin economic calendar which will be leaving broader markets exposed to swings in market sentiment as the US-China trade war continues to edge closer to a new level, with further tariffs being promised by both sides and little action seen at the negotiation table.

Wednesday will be delivering Consumer Price Index figures for Australia, and the median market forecast is expecting a mild tick higher from 0.4% to 0.% for the headline q/q CPI reading for Q2 2018, but a lack of meaningful data before then will be seeing the AUD likely to be left in a weak position should wider fx markets resume bidding up the Greenback.

AUD/USD Technical Analysis

With the pair hesitating at medium-term resistance and bulls lacking the conviction to push the AUD/USD past the 0.7450 level, traders should keep an eye out for a fresh bearish slant to market action to bring the Aussie back down against the US Dollar as fx markets continue to be dominated by moves in the Greenback. Aussie bulls will be looking to mount a strong push from the 38.2% Fibo retracement level nearby, though a lack of momentum for the new week has the advantage going to sellers.

AUD/USD Chart, 15-Minute

Spot rate:  0.7426
Relative change:  0.16%
High:  0.7436
Low:  0.7414
   
Trend:  Flat to bearish
Support 1:  0.7391 (38.2% Fibo retracement level)
Support 2:  0.7353 (common constraint level)
Support 3:  0.7317 (previous week low)
   
Resistance 1:  0.7440 (July 19th swing high)
Resistance 2:  0.7483 (July high)
Resistance 3:  0.7504 (R2 daily pivot)
Hourly chart Current price: $1,232 Daily High: $1,235 Daily Low: $1,230 Trend: Pullback to be short-lived Resistance R1: $1,235 (200-hour movi
  • Gold's corrective rally from the 12-month low of $1,211 is running out of steam.
  • The yellow metal has created a rising wedge-like pattern on the hourly chart and the 14-hour relative strength index (RSI) has rolled over from the overbought territory.
  • Hence, a minor price pullback could be in the offing before technical recovery gains more ground, as indicated by the bullish price-RSI and bullish price-stochastic divergence.

Hourly chart

Current price: $1,232

Daily High: $1,235

Daily Low: $1,230

Trend: Pullback to be short-lived

Resistance

R1: $1,235 (200-hour moving average)

R2: $1,238 (July 3 low)

R3: $1,245 (July 17 high hurdle on the hourly chart)

Support

S1: $1,227 (100-hour moving average)

S2: $1,224.50 (rising wedge support + 50-hour moving average)

S3: $1,211 (July 19 low)

Risk-off sentiment emerged the underlying theme in Asia at the start of a new week, with G20 meetings concluding over differences on the trade issues

Risk-off sentiment emerged the underlying theme in Asia at the start of a new week, with G20 meetings concluding over differences on the trade issues while the renewed political risks between Iran and the US propped following Iran’s President Rouhani warning to the US. More so, Trump’s comments on fx manipulation also fuelled the risks of a trade war now converting into a currency war.

 Markets reacted with a sense of cautious, as the safe-havens such as the Yen, gold and Swiss franc were heavily underpinned at the expense of the risk assets – Asian equities, oil prices and Treasury yields. The US dollar fell to a fresh nine-day low at 94.21 against its major peers, lifting the sentiment around most majors. The Yen outperformed amid risk-aversion and the latest BoJ speculation that the central bank may tweak its monetary policy stimulus at its monetary policy meeting scheduled next week. The USD/JPY pair dropped to two-week lows at 110.75 before bouncing-back towards the 111 handle. The Antipodeans traded with mild gains, as the upside remained capped amid reduced appetite for risk.

Main topics in Asia

Weekend headlines: Brexit plan proposal rejected by EU & G20 risks to growth heightened due to trade and geopolitical tensions

European Council rep: No need to remove tariffs for EU-US talks - Reuters

Iran's Rouhani warns Trump that war with Iran is "mother of all wars" - Reuters

China Commerce Ministry to launch anti-dumping probe

BoJ: No bids tendered for Monday’s fixed-rate operation

China central bank unexpectedly injects CNY 502 billion – Reuters

Trump to Rouhani: ‘Never, ever threaten the US again or you will suffer consequences’

Asian stocks back in the red on trade fears, protectionism sapping risk appetite

New Zealand’s acting PM Peters: Inflation not sole issue facing the economy

Key Focus ahead

We have a quiet start to the week, in terms of the economic releases, with absolutely no macro data reported in the Asian session. The EUR calendar also follows suit and hence, the focus remains on the German Bundesbank (Buba) monthly report.

Meanwhile, the NA session is expected to be relatively busy, as the Canadian wholesales will be reported at 1230 GMT, followed by the Eurozone consumer confidence and the US existing home sales data dropping in at 1400 GMT. However, the Bank of England (BOE) MPC member Broadbent’s speech will hog the limelight in the NY session today.

Broadbent is due to speak about the history and future of quantitative easing at the Society of Professional Economists, in London.

EUR/USD: Put demand eases ahead of the ECB

The demand for the EUR puts has dropped sharply in the run-up to this Thursday’s European Central bank (ECB) rate decision and Draghi presser. 

GBP/USD cautiously pushing into 1.3150 despite fresh Brexit concerns

Monday is a thinly-populated schedule for economic data, with little of note for both the Sterling and the Greenback, though a speech from the Bank of England's MPC Member Haldane is expected later in the day at 17:00 GMT.

Gold Price Forecast: Yellow metal could regain some poise

The gold price has recovered 1.5 percent from the one-year low of $1,211, boosting the odds of a strong corrective rally, technical charts indicate.

Australia: Headline CPI to tick up to 0.5% q/q in Q2 - ANZ

Analysts at Australia and New Zealand Banking Group (ANZ) offer their insights on the Australian Q2 CPI report due out this Wednesday at 0130 GMT.

 

Analysts at TD Securities point out that the BoE Deputy Governor Broadbent will speak at 6pm BST on the history and future of QE and will be a key eve

Analysts at TD Securities point out that the BoE Deputy Governor Broadbent will speak at 6pm BST on the history and future of QE and will be a key event for today’s session.

Key Quotes

“We think it's unlikely that he delivers any clear hints about the August rate decision, unless there's a feeling on the MPC that market pricing is not consistent at all with where they're leaning.”

“Broadbent's remarks may be interesting though for what he says on the future of QE, and any indication around how the BoE will treat its balance sheet going forward.”

Bill Evans, Research Analyst at Westpac, suggests that their forecasts for the US Federal Funds rate have been consistently above market expectations.

Bill Evans, Research Analyst at Westpac, suggests that their forecasts for the US Federal Funds rate have been consistently above market expectations.

Key Quotes

“Our analysis of the current market pricing is for around 65 basis points of further tightening through 2018 and 2019. We have expected a total of 75 basis points over that period with one 25 bps hike in September, followed by a pause, and then 25 bps hikes in March and June with the rate peaking at 2.625% in mid–2019.”

“We have expected that signs of the US economy slowing into the second half of 2019 (partly under the weight of a sharp slowdown in government spending) would see the FED curtailing its tightening cycle in anticipation of eventually cutting rates from 2021.”

“That sum of 75 basis points of hikes from the FED was still slightly above market expectations but we now believe we need to be even more bold on the FED forecasts.
Trends in core inflation; wages; and employment are increasingly casting doubt on a FED pause between September and March.”

“On a six month annualised basis, the core PCE is now running at 2.3% (to May) and the Employment Cost Index is rising at 2.9% (to March). This pace is somewhat faster than we had expected providing the FED with ample justification for not pausing.”

“In that regard we note that the FED has emphasised the symmetrical nature of its inflation objective and therefore not indicating any immediate concern that the momentum in the core PCE is running above the 2% target. As such, we are still expecting the gradual (3 month intervals) approach to the tightening cycle.”

 

Analysts at TD Securities suggest that markets will be watchful for forecast changes as the BoJ reviews its forecasts at the meeting on 31 July. Key

Analysts at TD Securities suggest that markets will be watchful for forecast changes as the BoJ reviews its forecasts at the meeting on 31 July.

Key Quotes

“As indicated by the Tankan survey, firms’ expectations of future inflation remain benign and it is likely that the BoJ lowers its inflation forecasts as a result. Sources reportedly suggest that the projection for core CPI will be cut to 1.0% from the 1.3% current forecast for this fiscal year.”

“BoJ fixed rate operation says a lot about what they are thinking. 1) They were not happy with talk about any shift in policy towards a more hawkish tilt, 2) They were not happy with the move in JGB yields and 3) at the meeting on 31 July it seems unlikely that they will shift to a less dovish stance.”

“USDJPY will likely struggle to move lower in the near term on the back of this announcement.”

The USD/JPY one month 25 delta risk reversals (JPY1MRR) fell to -1.35 today - the lowest level since June 29 vs from -0.65 seen on last Tuesday,indic
  • USD/JPY risk reversals have hit three-week lows. 
  • The confirmation of short-term bearish reversal in USD/JPY seems to have revived interest in JPY calls. 

The USD/JPY one month 25 delta risk reversals (JPY1MRR) fell to -1.35 today - the lowest level since June 29 vs from -0.65 seen on last Tuesday, indicating a sharp rise in the demand or implied volatility premium for the JPY puts. 

The data suggests the short-term bearish doji reversal in the USD/JPY spot has likely triggered fears of a deeper pullback and hence the investors are seeking downside protection (JPY calls or USD/JPY puts). 

JPY1MRR

Singapore Consumer Price Index (YoY) increased to 0.6 in June from previous 0.4
EUR/USD Chart, 15-Minute Spot rate: 1.1735 Relative change: 0.10% High: 1.1750 Low: 1.1720
  • The Euro's Friday rally has seen the EUR/USD drift into a high-risk turnaround zone with key resistance points scattered from 1.1750 to 1.1790, leaving the major pair open to an extended slide back into recent lows.
  • The economic calendar for Monday is a thin affair, and market sentiment is squarely in the driver's seat.
  • Daily candles have the pair constrained in lower highs and higher lows, and traders should keep an eye out for decisive breaks in either direction to determine a new medium-term trend.

EUR/USD Chart, 15-Minute

Spot rate:  1.1735
Relative change:  0.10%
High:  1.1750
Low:  1.1720
   
Trend:  Strong potential for pullback
   
Support 1:  1.1683 (38.2% Fibo retracement level)
Support 2:  1.1625 (Friday swing low)
Support 3:  1.1574 (previous week low)
   
Resistance 1:  1.1750 (current day high)
Resistance 2:  1.1790 (two-week high)
Resistance 3:  1.1878 (R3 daily pivot)

 

Bill Evans, Research Analyst at Westpac, suggests that markets are now broadly pricing in Westpac?s view on the outlook for the RBA cash rate with onl

Bill Evans, Research Analyst at Westpac, suggests that markets are now broadly pricing in Westpac’s view on the outlook for the RBA cash rate with only around a 50% chance of a rate hike by the end of 2019.

Key Quotes

“That is in stark contrast to a year ago when our call that rates would remain on hold in 2018 and 2019 was well out of market with markets anticipating around 75 basis points of tightening by the end of 2019.”

“A weakening housing market; soft inflation and wages growth; an uncertain consumer and pressures on funding have all conspired to cool markets’ expectations. That key dynamic around an uncertain consumer facing constraints on income growth with a falling savings rate always stood out as a key constraint on the ability of the household sector to lift spending in the way anticipated by the markets.”

“While markets have moved largely to embrace our view, the Reserve Bank still expects to be raising rates over the course of 2018 and 2019. I think that is apparent in their ongoing above trend growth forecasts for 2018 and 2019. But, as we have argued before, the Bank does not have a perfect track record with its forecasts (as none of us in the economics community do) and it will react to any differences between its forecasts and “reality” in a timely fashion.”

A Bank of Japan (BoJ) was reported by Reuters, as saying that today's special operation was conducted in response to a sharp rise in JGB yields. The

A Bank of Japan (BoJ) was reported by Reuters, as saying that today's special operation was conducted in response to a sharp rise in JGB yields.

The BoJ offered to buy JGBs at a fixed rate unlimited amount in the 5 - 10 years at 0.11% yield. However, the Japanese central bank stated that no bids were tendered for Monday’s fixed-rate operation.

In the US,the Bureau of Economic Analysis will publish its advance estimate of Q2 GDP growth and analysts at National Bank Financial anticipate stron

In the US, the Bureau of Economic Analysis will publish its advance estimate of Q2 GDP growth and analysts at National Bank Financial anticipate strong contributions from both consumption and trade based on already published data on retail sales and exports/imports.

Key Quotes

“Business investment may also have provided some lift to the economy as shipments of non-defense capital goods excluding aircraft continued their advance. Residential investment, for its part, may not add much to Q2’s print, reflecting lackluster housing starts data.”

“All told, GDP may have expanded a solid 4.5% in annualized terms in the second quarter. That would be the steepest progression since 2014Q3.”

“The week will also provide important information about the housing market. To start with, existing home sales may have stalled in June, hampered by the extremely low number of homes available on the market. Sales of new homes, meanwhile, likely fell following an outsized jump the prior month.”

“Also in June, durable goods orders may have rebounded strongly, in line with the surge registered in civilian plane orders. The preliminary reading of July’s composite PMI will also be released by Markit.”

Hourly chart Spot Rate: 1.3144 Daily High: 1.3157 Daily Low: 1.3120 Trend: mildy bearish Resistance R1: 1.3162 (10-day moving average) R2: 1.
  • GBP/USD hourly chart shows a bearish divergence of the relative strength index (RSI). The stochastic has generated a sell signal and is about to roll over from the overbought territory in favor of the bears.
  • As a result, the resistance at 1.3155 (200-hour moving average) will likely hold at least for the next few hours. 

Hourly chart

Spot Rate: 1.3144

Daily High: 1.3157

Daily Low: 1.3120

Trend: mildy bearish

Resistance

R1: 1.3162 (10-day moving average)

R2: 1.3276 (50-day moving average)

R3: 1.3293 (July 16 high)

Support

S1: 1.3120 (session low)

S2: 1.3190 (5-day moving average)

S3: 1.3089 (100-hour moving average)

 

 

 

Analysts at Nomura point out that in his testimony to the House Banking Committee on 18 July, Federal Reserve Chair Powell was asked about the implica

Analysts at Nomura point out that in his testimony to the House Banking Committee on 18 July, Federal Reserve Chair Powell was asked about the implications of recent movements in the yield curve for the outlook for the economy and monetary policy and his answer was revealing.

Key Quotes

“Powell focused on what long-term interest rates are telling us about how the neutral rate of interest is likely to evolve. Because term premia have remained very low, the rise in long-term interest rates over the past year seems to reflect an increase in the expected path of short-term interest rates. That may imply that the neutral rate of interest is likely higher, or will be higher, than previously thought.”

“A higher neutral rate would imply that the FOMC will need to raise short-term interest rates more than previously thought to contain the US economy’s considerable momentum.”

“Powell may have been signaling that he expects the FOMC to raise shortterm interest rates more over the next year or two than market participants currently expect.”

The GBP/USD pairing is drifting towards the high side, testing into 1.3150 after taking out Friday's highs in early Asia-session trading, despite a be
  • Dollar-selling in the wider market is seeing the GBP/USD pair on the rise, but Brexit concerns continue to eat away at confidence in the Pound.
  • A thinly-populated economic calendar for Monday will see Brexit woes in control of the major pair's overall directional bias as the new week opens up.

The GBP/USD pairing is drifting towards the high side, testing into 1.3150 after taking out Friday's highs in early Asia-session trading, despite a bearish knockback to kick the week off as the latest Brexit proposal from the UK sees little traction with EU leaders.

European Union leaders in Brussels have flat-out rejected UK Prime Minister Theresa May's latest "third option" Brexit proposal; under PM May's hopeful middle-ground proposal, the city of London would have enjoyed permanent access to European financial markets, which would rob the EU of decision-making autonomy, as market access to EU-wide markets is a privilege that the broader EU holds the right to rescind at any time. With the latest hotly-debated Brexit proposal now dead in the water with European leaders, Brexiteers are back to the drawing board as PM May struggles to find an acceptable common ground between hard-line Euroskeptics in the UK's parliament, and the keyholders of the European Union, who have little need to make concessions to the UK's demands.

Monday is a thinly-populated schedule for economic data, with little of note for both the Sterling and the Greenback, though a speech from the Bank of England's MPC Member Haldane is expected later in the day at 17:00 GMT, while m/m June Existing Home Sales figures for the US are expected at 14:00 GMT, and expected to improve slightly to 5.47 million, slightly higher than the previous reading of 5.43 million.

GBP/USD Levels to watch

A steeply-bearish British Pound continues to be hampered by Brexit concerns, abd broad-market USD-selling is seeing the pair rise, as opposed to intrinsic strength from GBP bids, which remains non-existent. According to FXStreet's Chief Analyst, Valeria Bednarik: "the daily chart indicates that bears are still in control of the pair, as the latest recovery stalled below its 20 DMA, while technical indicators have managed to recover some ground, but remain in negative territory. In the 4 hours chart, the pair settled above a sharply bearish 20 SMA, still some 150 pips below the 200 EMA, while technical indicators stand well above their midlines, but lost their upward strength. The pair could continue advancing on a break above 1.3155, the immediate resistance, although the first line of sellers should appear around the 1.3200 figure. Renewed selling pressure below the 1.3100 level, on the other hand, will likely favor additional declines for this Monday, toward the key 1.3000 psychological threshold."

Support levels: 1.3100 1.3065 1.3030

Resistance levels: 1.3155  1.3195 1.3240

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