eFXplus DATA

• Rounding top shot to pieces by a strong two-day rally to new trend highs
• Clear beak of 0.9000 and focus returns to the early January high of 0.9102
• Possibility longs are looking to levels ahead of the high to book profits
• Our 0.8895 bid left behind: now looking for reversal signs as trend matures
• Potential for cross to enter a new, higher range between 0.8830 and 0.9130
• 21DMA, 0.89587, pivotal support defining underlying bull trend since May
• The overall bias is up, below market bids redundant, worth waiting for a top

• AUD/USD met fresh headwind pre-0.7050 (option barrier level) in Asia
• 0.7028 = subsequent low, with dovish message from RBA minutes helping weigh
• RBA ready to cut rates again "if needed" nL4N24H0OB nL4N24H0N6
• Offers ahead of 0.7050 also capped AUD/USD gains on July 4
• U.S. June retail sales data is due at 1230GMT, +0.1% f/c vs +0.5% in May
• Unexpectedly negative number could re-inflate AUD/USD towards 0.7050

• EUR/GBP hits 0.9015 after selling of the pound since the European open
• 0.9015 is the highest level since Jan 11 (0.9010 was last week's peak)
• GBP selling has been fuelled by rising fears of a no-deal Brexit
• On Monday, Johnson and Hunt hardened their language on any future UK/EU deal
• See: nL8N24G5E5. One of them will succeed May as Britain's PM next week
• UK data due 0830GMT; earnings f/c 3.1%, employment f/c +45k

• Cable hits 1.2493 after dropping through 1.2500 since the European open
• 1.2493 is GBP/USD low since greenback fell on Powell's dovish steer July 10
• No-deal Brexit fear hurts GBP. Bbg-New Brexit talks take turn for the worse
• PM candidates set high bar for Brexit talks: no Irish backstop nL8N24G5E5
• UK earnings/jobs data due 0830GMT; earnings f/c 3.1%, employment f/c +45k
• Data misses could further depress cable towards 1.2439 (recent 6-month low)

• A messy bullish continuation pattern or a bull run that has run its course
• A tough call as price slips into a bout of tighter consolidation
• 21 and 55DMAs are flattening out and contain price action
• A thickening and rising ichimoku cloud gives a directional pointer
• However, momentum remains strongly negative: reflects Jun 28-Jul 9 slide
• We maintain a 1.1235 bid for 1.1320 200DMA: may revise on topside breakout
• On balance a bullish advantage but this being eroded

• RBA minutes no surprise nL4N24H0OB, NZ CPI as forecast nL4N24G43S
• Despite no surprise AUD/NZD -0.25%, bearish chart - 5, 10 & 21 DMAs falling
• Cross targets the July 1.0428 low with 1.0381 below, 76.4% April/May rise
• Positive AUD charts, and bearish AUD/NZD suggest the Kiwi provides value
• NZD/USD has broken 0.6717 200 DMA; momentum studies, 5, 10 & 21 DMAs climb
• Close above 0.6737 July high would be a strong bullish Kiwi signal
• First stop 0.6764, 61.8% March/May fall, then the 0.6830 76.4%

EUR/USD: 

24-HOUR VIEW EUR is expected to trade sideways, likely within a 1.1240/1.1280. EUR traded sideways between 1.1251 and 1.1284 yesterday, a narrower range than our expected 1.1245/1.1290. The quiet price action offers no fresh clue and further sideway trading is expected, albeit likely at a lower range of 1.1240/1.1280.

1-3 WEEKS VIEW EUR is expected to trade sideways. No change in view from yesterday, see reproduced update below.

EUR did not do much last Friday, dipping to 1.1236 before recovering to end the day slightly higher at 1.1269 (+0.15%). For now, we continue to hold the same view from last Thursday (11 Jul, spot at 1.1255) wherein EUR is expected to trade sideways between 1.1200 and 1.1310. At this stage, there is no early indication on which side of the range is more ‘vulnerable’.

GBP/USD: 

24-HOUR VIEW GBP could edge lower but is unlikely to threaten the strong 1.2470 support. Expectation for GBP to “test 1.2600” did not materialize as it slipped to an overnight low of 1.2510 (high of 1.2581 during early Asian hours). While the decline lacks momentum, there is scope for GBP to edge lower even though the strong 1.2470 support is unlikely to come under threat (minor support at 1.2490). Resistance is at 1.2540 followed by 1.2570. The 1.2581 top is not expected to come into the picture for today.

1-3 WEEKS VIEW GBP is expected to trade sideways. GBP snapped a 3-day advance and dropped to an overnight low of 1.2515. The price action is line with our view from last Friday (12 Jul, spot at 1.2525) wherein GBP is “expected to trade sideways”. The high of 1.2580 last Friday was not far below the top of our expected 1.2470/1.2600 range and now it appears GBP is ready to test the bottom of the range. A dip below 1.2470 is not ruled but GBP has to register a NY closing below 1.2440 in order to indicate that it is ready to move below the year-to-date low near 1.2410. At this stage, the prospect for such a scenario is not high.

AUD/USD: 

24-HOUR VIEW AUD could move above 0.7050 but the next resistance at is likely out of reach for today. Our view yesterday was that there is “scope for AUD to test the major 0.7050 resistance but a sustained rise above this level is unlikely”. AUD subsequently rose to 0.7041 before ending the day on a solid note (NY close of 0.7041). In view of the vastly improved momentum, a move above 0.7050 from here would not be surprising but the next resistance at 0.7070 is likely out of reach for today. On the downside, a breach of 0.7015 would indicate that the current upward pressure has eased.

1-3 WEEKS VIEW Sustained AUD strength is only likely if it can move and stay above the major 0.7050/70 resistance zone. AUD continues with its advance and registered a 4-day gain of 1.62% yesterday (15 Jul), the largest since January. While upward momentum has improved, we have doubts about the sustainability of the current advance. As highlighted yesterday, AUD has to break above the major 0.7050/70 resistance zone in order to indicate that it is ready to move higher in a sustained manner. 0.7050 was near the high registered earlier this month (and in early May) while 0.7070 is the minor peak in late April as well as a declining trend-line resistance (not visible in the chart below). In other words, the levels between 0.7050 and 0.7070 are solid resistance levels and at this stage, the risk for a clear break of this zone is not high. That said, only a move below 0.6980 (level was at 0.6960 yesterday) would indicate that the upside risk has diminished. Looking ahead, if AUD were to move and stay above 0.7070, it would suggest last month’s 0.6832 low could be a significant bottom.

USD/JPY:

24-HOUR VIEW USD is expected to trade sideways, likely within a 107.70/108.10 range. Our expectation for USD to “extend its decline and test the strong support at 107.50” did not materialize as it traded in relatively muted manner and within a tight range of 107.78/108.10. Momentum indicators have turned mostly ‘neutral’ with the quiet price action and USD is likely to continue to trade sideways. Expected range for today, 107.70/108.10.

1-3 WEEKS VIEW USD is expected to trade sideways. No change in view from yesterday, see reproduced update below.

Despite the relative sharp decline last Friday (107.89, -0.54%), we continue to hold the same view as from last Thursday (11 Jul, 108.30) wherein USD is expected to trade sideways within a relatively broad 107.50/108.95 range. A test of the bottom of the range would not be surprising but a sustained decline below the next support at 107.20 is unlikely.

• AUD/USD barely moving after RBA Minutes fails to provide fresh clues
• RBA says will adjsut policy if needed, as was stated in July statement
• Focus shifts to Thursday's Aus jobs data, as RBA emphasizes its importance
• RBA Minutes references the AUD/USD - saying lower rates keeping it low
• Resistance at July 1 high at 0.7048 and break targets 200-day MA at 0.7091

• Touch firmer after opening off 0.1%, as summer markets get into full swing
• 1.1215 380M, 1.1235-45 600M, 1.1250BLN and 1.1310 588M close strikes
• EU executive vote - Von der Leyen tried to appease sceptics nL8N24G5KV
• Charts have conflicting momentum studies, 5, 10 & 21 DMAs, neutral setup
• Familiar territory, in the middle of the 1.1100/1.1400 April/July range
• Perhaps, as liquidity fades in summer markets, we may see more volatility
• NY 1.1252 low and London 1.1284 high initial support/resistance

• NZ Q2 CPI comes in exactly as expected nAZN000247
• Resistance at the July 1 high at 0.6737 with 0.6735 high on Monday
• NZD/USD is trending higher in the short-term and is maintaining bid tone
• Support at ascending 10-day MA and break below would ease upward momentum

• USD/JPY rally attempts beaten back on entrenched Fed rate cut expectations
• Fall in long-dated US yields cap; US retail sales, IP Tues key for direction
• Beige Book on US economic conditions Wed also eyed for Fed rate clues
• Summer lull & huge option hedging strangles pre-Fed volatility
• Groping for new tools, c.banks look at Japan's yield controls
• Strong support 107.55-60, resistance 108.10, 108.30; 107.50-109.00 into Fed?

TD Research discusses the current market conditions and notes that the market has started to shift its attention towards growth and inflation.

"We look at growth, inflation, and risk sentiment and how they tie back to the USD. These factors suggest that the market has started to shift its attention towards growth and inflation - traditional meat and potatoes macro. We think the revolving narrative related to growth, inflation, and a possible pivot in the central bank regime offers some clues to the importance of these market themes," TD argues. 

"It too shows US growth and inflation signals lagging the G10 - important to note ahead of retail sales and Fed speak this week. That's not recession territory, but it offers evidence of some new slack.

More critical for FX, perhaps, the US is starting to show the most severe signs of stress, reflecting the loss of momentum and the scope for a "corporate" recession," TD adds. 

• GBP/USD drips lower -0.52% at 1.2513; NorAm range 1.2551-1.2510
• UK politics and Brexit concerns keep downward pressure on the pound
• GBP/USD dragged down as Brexit, lower rate view weigh
• Lower lows, lower highs a concern for GBP bulls, 2019 low 1.2409 in view
• GBP net shorts on IMM grow as GBP sellers outstrip steady long component
• EUR/GBP +0.44% at 0.8995, lingering Brexit fears eye trend high 0.9010

GBP/USD weakness is outpacing other developed market currencies as the expected election of hard-line Brexiteer Boris Johnson is set to usher in heightened potential for a no-deal Brexit on October 31.
Despite recent dovish Fed tones, which had reversed USD gains near 2019 highs, the lingering opaque trade, growth and inflation outlook has seen a muted DM reaction.
This as global central banks are expected to join the Fed in providing increasing accommodation.
This rising dovish tide has hit the pound harder than other DM's as until recently the BoE had been eyeing gradual hikes.
However, BoE chief Carney has dialed this back as Brexit uncertainties mount and UK economic data underwhelms.
For GBP/USD bulls this makes the road ahead a bit more challenging.
Fed Chief Powell’s dovish tilt boosted the pound to highs at 1.2784 in late June, but these gains were short-lived as bears took the opportunity to sell into strength.
Though IMM short positioning has risen over the past few reporting periods, increasing the chance of short-covering rallies, with little positive news on rates or Brexit, any such push may be underwhelming putting 2019 lows at 1.2409 and Jan 2017 lows sub-1.20 in sharper focus.

Bank of America Merrill Lynch Global Research discusses the FX/oil relationship.

"Although intuitively, a stronger USD should be related to lower oil prices, we have seen this positive relationship diminishing over the past few years. We still build our EUR-USD outlook on longer-term valuation metrics, with an expectation that US and China can avert the worst of the trade war," BofAML notes. 

"Our EUR-USD forecasts and oil forecasts are somewhat divergent, despite how they have often moved together historically. Our EUR-USD forecast for the end of this year is 1.17 and 1.25 for the end of next year, while our commodities team expects oil prices to cool towards the end of 2020. Moreover, the growth of US oil production is often thought to be USD-positive," BofAML adds. 

• Early US$ lift on NY Fed mfg nN9N23A015 fades, jobs component a concern
• UST yields sink, chance of Fed cuts rise, 50bps cut near 24% FEDWATCH
• Into end-2019 mkt expects 68bps of Fed cuts & 24bps for RBA RABWATCH
• More aggressive Fed should trump RBA, AUD/USD likely to remain buoyed
• AUD/USD pierces daily cloud top, threatens resistance into 0.7050
• Apr 30 high & 200-DMA eyed if rally extends, 0.7140/60 targeted thereafter

MUFG Research discusses GBP outlook and highlights more signs of dovish policy shift in BoE policy thinking .

"The pound continues to trade on the defensive in the near-term with EUR/GBP trading just below the 0.9000-level and cable just above the 1.2500-level. The pound closed higher last week against the euro for the first time in ten weeks although we doubt that it marks the beginning of sustained reversal ," MUFG notes. 

"Heightened Brexit risk, weak growth in the UK, and an ongoing dovish shift in BoE policy should all keep the pound under downward pressure," MUFG adds. 

• Germany's July ZEW released tomorrow seen weaker at -22.3
• Range of forecasts -30.0 to -14.2. -24.7 in Oct 2018 was low since 2012
• Euro zone HICP due July 17. F/c steady at just 1.2% yy
• One core measure seen just 1.1%. last lower in early 2017
• Continuing soft patch to fuel expectations for ECB easing during quiet spell
• Quiet market force traders towards carry trade. Deeply neg rate to hurt euro

• Bear bias holding but progress slow and with potential for a 107.80 base
• 14-day momentum positive despite Frid's price drop: RSI confirms price fall
• Ichimoku cloud thickening and falling, could weigh on price
• Below 107.80 and a run at the recent 107.54 hammer low the risk
• Below here and a drop to a more major 106.78 hammer low could be seen
• 10WMA continues to define the bear trend, currently 103.40

• Cable is eliciting support from expected Fed rate cuts on July 31 and beyond
• 1.2581 was Asia peak, highest level since July 5. 1.2580 was pre-weekend top
• Mooted offers near 1.26 may cap the pair if it extends north
• GBP/USD broke below 1.26 on July 2 after dovish Carney steer nL8N2434DL
• 1.2587 was July 5 high. 1.2592 was July 4 high. 1.2600 was July 3 high
• Cable plumbed 6-month low of 1.2439 last week--before dovish Powell hurt USD