Summary:

• USD advances against most major currencies

• No-deal Brexit fears hit GBP

• UK100 moves significantly higher amid weak domestic currency

• RBNZ to make its decision in the late evening

The key piece of data scheduled for Wednesday has been released in the morning and concerned trade figures from the Chinese economy. However, the day is not over and DOE report as well as RBNZ decision may impact the markets in the later part of the day. Equities in Europe are trading mixed with quite a noticeable gain seen on the UK stock market as domestic companies are being boosted by weaker pound. On the other hand, Russian companies are experiencing quite a heavy sell-off. On the FX market one can name JPY and USD as leaders among majors while earlier mentioned GBP and SEK are trading lower against most of its G10 peers. As the greenback is appreciating the precious metals are moving lower. Oil prices are also declining today. Apart from that, industrial metals are trading higher on the day with copper being the sole exception.

Wednesday draws quite a pessimistic picture of the cryptocurrency market with Bitcoin’s decline below the $6500 handle in the spotlight. Over the past 24 hours major virtual currencies pushed lower sending the capitalization of the whole market to around $230 billion. At the same time, the Bitcoin market capitalization sits a notch above $110 billion.

In spite of the fact that US traders took US indices close to their highs, European markets have begun Wednesday’s trading on a softer footnote. One explanation behind such a scenario might be quite a heavy decline in the Chinese Shanghai Composite which ended the day 1.3% lower even as the country’s trade data turned out to be quite reassuring.

The US dollar is giving back its prior gains while Chinese indices are trading mixed in the morning despite another robust session on Wall Street. The paramount event of the Asian session came from China as the trade data for July were released. Notice that the numbers are the first insight into the new reality after the US tariffs on $34 billion Chinese goods came into effect on 6 July.

The Reserve Bank of New Zealand has been keeping the level of interest rates unchanged since 10 November 2016 and this streak is likely to be extended this month as well. However, at its latest meeting at the end of June the RBNZ said that a change in rates might be either up or down (despite the ongoing tightening in the other parts of the world).

 

Summary:

• Another Swiss bank will offer services for cryptocurrency companies

• Oleksandr Stelmakh, a member of the Ukraine Central Election Commission, considers using blockchain technology in elections

• Bitcoin (BITCOIN on xStation5) has broken below the $6500 handle

Wednesday draws quite a pessimistic picture of the cryptocurrency market with Bitcoin’s decline below the $6500 handle in the spotlight. Over the past 24 hours major virtual currencies pushed lower sending the capitalization of the whole market to around $230 billion. At the same time, the Bitcoin market capitalization sits a notch above $110 billion. Today’s major topics concern the plans of one of the Swiss banks and news from Ukraine.

BITCOIN has experienced a heavy sell-off yesterday. The cryptocurrency is trading around the $6450 handle at press time. However, long lower wicks of the latest candlesticks suggest that the bears may have already got exhausted. Will Bitcoin bulls use this opportunity? Source: xStation5

Let’s move to Switzerland that is currently one of the countries with most crypto-friendly approach. Maerki Baumann, a Swiss bank, is said to be the second bank in the country to provide services for cryptocurrency companies. According to International Investment report, the Zurich-based bank has agreed to form partnership with crypto-related companies. As many governments around the world decided to take bold approach towards cryptocurrencies many banking institution stayed reluctant towards servicing firms connected to the digital assets. Therefore one can see that today’s news may allow executives of the Swiss crypto-related companies to relax. Maerki Baumann is the second bank in Switzerland offering such services after Falcon Private Bank decided to do so in the previous year.

RIPPLE is trading at fresh YTD lows around $0.345 handle.. The digital currency smashed through the support zone localized around $0.425 handle on Monday. With this technical hurdle out of the way bears pushed coin’s price even lower.. While most of the major cryptocurrencies have been underperforming as of late RIPPLE along with LITECOIN are clearly the weakest ones of them as they are the only ones to trade at lowest levels of the year. Source: xStation5

Oleksandr Stelmakh, a member of the Ukraine Central Election Commission, is exploring the potential application of the blockchain technology in elections. Stelmakh is testing the blockchain voting system created in cooperation with NEM Foundation group. The tests are still on the way therefore we might have to wait some time for the results. Let us recall that in the early days of cryptomania and blockchain hype the use of technology in the elections has been hailed as one of the optimal applications of this technology.

LITECOIN, just like RIPPLE, is trading at year’s low. The latest decline seems to be eased around the $65 handle. As we can see, the coin is clearly trading below 8- and 33-period moving averages on the H4 interval (purple and yellow lines on the chart) therefore the potential bounce may be limited by these technical obstacles. Source: xStation5

 

Summary:

• Reserve Bank of New Zealand meets this evening, the NZ dollar seems to be in a position to benefit from the event
• DOE weekly release on US oil stocks should be closely watched by investors

Wednesday’s trading has been already dominated by the Asian newsflow and this is likely to continue during the rest of the day. The most important event in today’s calendar is undoubtedly the RBNZ meeting while commodity traders might eagerly look at the weekly DOE release on oil inventories.

3:30 pm BST – DOE oil inventories: Oil prices have had quite a volatile period of time. Firstly, they plunged from under $76 to below $72, and then bounced back meaningfully to around $74.5. Nevertheless, key technical levels have not been breached yet hence one may expect the price to keep moving within the broader range. On the fundamental side we got the news from the EIA that it lowered US crude production for 2019 to 11.7 mbpd from 11.8 mbpd expecting that output this year will reach 10.7 mbpd (fractionally down from 10.79 mbpd). In turn, the API reported that crude stocks slid as much as 6 million barrels exceeding the median estimate suggesting a 3.7 million barrels decrease. At the same time, gasoline inventories moved up 3.1 million barrels the number which aggravated the upbeat tone of the release. The consensus ahead of today’s release points to a 2.2 million barrels fall in terms of crude oil and a 1.8 million barrels slide when it comes to gasoline stocks.

10:00 pm BST – RBNZ meeting: The Reserve Bank of New Zealand has been keeping the level of interest rates unchanged since 10 November 2016 as this streak is likely to be extended this month as well. At its latest meeting at the end of June the RBNZ said that a change in rates might be either up or down. The most dovish line sounded as follows “the best contribution we can make to maximising sustainable employment, and maintaining low and stable inflation, is to ensure the OCR is at an expansionary level for a considerable period”. This reference influenced some NZ-based banks to change their predictions with regard to the first rate hike citing a greater degree of “dovishness”. Today’s meeting will be yet more noteworthy as it will include updated macroeconomic projections followed by the press conference of governor Orr. Given that the NZ dollar has been sold out recently one may assume that the balance of risks seems to be tilted to the upside.

Central bankers’ speeches for today:

• 1:45 pm BST – Fed’s Barkin
• 11:00 pm BST – RBNZ’s Orr

The EURNZD is trading close to its long-term resistance. Should the RBNZ surprise and deliver more hawkish remarks, the pair might correct. Source: xStation5

Summary:

• US indices have moved higher once more today
• USDTRY remains near record high
• USDCAD retests trendline support
• Will SNB allows EURCHF to break 1.15?
• Top 3 charts to watch this week

It’s been another day of steady gains for US indices so far with the US500 moving closer still to its record peak. The market is now within 1% of its all-time high and is on course for a 4th consecutive day of gains. 

Another market near its all-time high is the USDTRY as the Lira remains under pressure. The Lira looked to recover after dropping sharply yesterday but the the outlook for the currency remains fragile. The CBRT cut its reserve requirement ratio but this did little to ease the sell-off and there remains a fair chance that further downside lies ahead.

It’s a fairly quiet day on the economic calendar with the biggest release this afternoon the Canadian Ivey PMI. The figure itself was softer than expected with a reading of 61.8 well below the 64.2 expected, marking the second time in the last 3 releases that this indicator has disappointed. USDCAD has seen a bounce from a long term trendline and recent lows around 1.2960 are now a possibly key reference point.

 The Swiss franc could arguably be described as one of the most overvalued major currencies. However, in a medium term CHF’s performance depends more on risk appetite changes as well as the Swiss National Bank’s desired level than macroeconomic trends. We look more in depth at the currency here and the potential for some downside going forward.

 Our top 3 charts to watch this week focuses on the JAP225, EURUSD and Copper and can be found here. 

 

Summary:

• Ivey PMI 61.8 vs 64.2 exp
• USDCAD moves higher in the initial reaction
• The pair tests long term trendline

It’s a fairly quiet day on the economic calendar with the biggest release this afternoon the Canadian Ivey PMI. The figure itself was softer than expected with a reading of 61.8 well below the 64.2 expected, marking the second time in the last 3 releases that this indicator has disappointed. Last time out the reading was 63.1 and given the fairly good correlation between this metric and the Markit RBC PMI manufacturing equivalent, it could be seen as a sign of caution going forward. 

 The latest Ivey PMI disappointed and this could be seen as a worrying sign for the Markit RBC equivalent, given the fairly close historical correlation between the two. Source: XTB Macrobond

The Canadian dollar is trading a little lower on the day, despite some gains seen in the Oil price. Having said that the only real declines of note are seen against the AUD and EUR, with the other major currencies barring the USD making marginal gains. The fact that the Canadian dollar is a little weak may be more clearly seen by looking at the USD line on the heatmap, where it clearly shows that all other currencies are gaining more against the USD than CAD. 

 The Canadian dollar is trading lower today, with the latest Ivey PMI failing to provide any good news for the Loonie. Source: xStation

The bigger picture for the Canadian dollar against its southern counterpart is interesting at the moment, with the market bouncing from a long term trendline going back to the low seen at the start of the year at 1.2247. There is still some way to go for today’s session but a bullish hammer may be forming on D1, from the aforementioned trendline. Recent lows around 1.2960 now take on a potentially greater significance and as long as they remain in tact then a push higher may occur.  

  

 USDCAD has bounced from a rising trendline and lows around 1.2960 could now be seen as an important support level. Source: xStation 

 

Summary:

• US indices higher ahead of cash open
• US500 at 6-month high and not far from record peak at 2880
• US30 testing prior resistance around 25600

Stock markets made a quietly bullish start to the new week with the large-cap US indices moving above last week’s highs. The gains were fairly measured in the way they came, but it seems to be that more upside may lie ahead with the trading adage “don’t short a quiet market” seemingly apt as the benchmarks rise on light traded volumes. The US500 is now within 1% of its record peak of 2880 and it wouldn’t take much more upside for more records to tumble in the coming sessions.   

 

 The US500 is looking for a 4th consecutive day of gains and is now back within striking distance of its all-time peak of 2880. Source: xStation

It is now 132 trading days since the last all-time high was made, and what is worth noting about the interim period is that 131 of those days saw the US500 close above its 200 day SMA. The big picture remains one of consolidation within a prevailing uptrend and should price breach the previous peak then a sustained push higher may lie ahead. While the US500 and US100 have made significant breaks higher of late, the US30 remains something of a laggard. 

The US30 has been in a broader consolidation since the all-time high back in January with a narrowing range shown by a series of lower highs (LH) and higher lows (HL). The recent weeks have seen this possibly negated but longs will want a push above 25600 to stop a possible double top forming with the recent swing high. 

 US30.cash is lagging behind its peers a little but a clean break above 25600 could see it make a swift push higher. Source: xStation

 

Summary:

• Nikkei (JAP225) eyes a break out of the consolidation range

• EURUSD overcomes the lower bound of the triangle pattern

• COPPER struggles to find the bottom

The US equity indices continue to advance towards the all-time-highs. Meanwhile, the Japanese Nikkei (JAP225) keeps trading within the consolidation range started in a spring of this year. The trading range has narrowed as of late and the benchmark is trading close to the relevant resistance level at 23000 pts. Moreover, the 50- and 200-period moving averages are approaching and we may witness a stronger impulse in the nearby future. The first signal hinting a possible return of market bulls could be a break of the downward line drawn along the highs from May, June and July. Nevertheless, the psychological 23000 pts handle remains crucial for this equity index. A continued move higher on USDJPY could be beneficial for this benchmark but the latest hesitation of the US dollar as well as improved wage growth in Japan (which may warrant a hawkish response from Bank of Japan) pose a threat for such scenario.

Could the upcoming weeks reward investors in Japan? Source: xStation5

EURUSD may be moving closer to an impulse move as well. The main currency pair has once again moved close to the 1.15 handle. Additionally, we have witnessed a possible break lower from the triangle pattern. Triangle is normally understood as a continuation pattern so technically this 2-month consolidation could be just a break in a downward trend. Having said that, we may see that the 1.15 level still plays an important support role and may provide the last chance for the EURUSD bulls to act.  

EURUSD has broken lower from the triangle pattern but the pair managed to bounce back to the lower limit of the mentioned formation since then. Will USD bulls have enough power to give it another try? Source: xStation5

On the commodity market COPPER looks especially interesting. The industrial metal managed to halt latest decline in the vicinity of the Fibonacci node of 50% and 161.8% retracement levels. Moreover, the psychological $6000 area is additionally strengthened by local highs from early-2017. A pullback on the USD market could be beneficial for the commodity market as a whole. Moreover, the emerging markets have regained some of their shine lately and it should be noted that these economies are more dependant on the industrial metals. Taking a look at this market from the short-term perspective one can see that bulls are trying to defend the latest swing level and paint a higher low. If they manage to do so an outlook for this market in the upcoming weeks improves.

Stronger USD as well as risks associated with China exert pressure on the industrial metals prices. However, from the technical point of view, the upcoming weeks may bring attempt to move prices higher. Source: xStation5

Summary:

• Weekly API release is expected to show a significant drop in inventories
• Canadian Ivey PMI with better expectations for July
• Walt Disney (DIS.US) is forecast to report $15 billion revenue

Probably, the most observed today’s event has already taken place. Namely, in the morning investors looked at Australian central bank’s decision. It was not surprising that the Reserve Bank of Australia stayed on hold with interest rates. What’s interesting, today’s meeting produced a little more dovish tone. The economic calendar for Tuesday seems to be quite calm. The Canadian Ivey Purchasing Managers Index will draw attention this afternoon, while the weekly API release on crude oil inventories will end the day.

3:00 pm BST – Canadian Ivey PMI for July: The Canadian economy has been performing well. Today’s Ivey PMI for July could reinforce this strong outlook as a slight increase from 63.1 pts to 64.2 pts in July is expected (albeit, keep in mind that manufacturing PMIs slowed down last month hence this could be the case in Canada as well). Canadian Ivey PMI is published by Richard Ivey School of Business, and it is an indicator of Canadian economic activity. Let us notice that we have not seen Ivey PMI below 50 pts since mid-2016.

9:40 pm BST – Weekly API Crude Oil Stocks: The level of crude stocks surprised investors last week, producing a gargantuan pick-up. Will today’s data surprise market participants once again? This week crude oil stocks are expected to produce a 3.4 mb drop in comparison to last week’s a 5.6 mb increase in inventories.

Notable US companies earnings today:

• Walt Disney (DIS.US)

OIL.WTI stands a notch above the $69 handle, and it is moving around the lower bound of the ascending channel. Source: xStation5

Summary:

• Reserve Bank of Australia keeps monetary policy settings unchanged delivering a slight dovish remark
• Japanese labour cash earnings for June come in well above expectations
• BoJ was to consider hiking rates twice this year, Reuters says
• Chinese stocks bounce back, USD steadies

In line with widespread expectations the Reserve Bank of Australia kept all interest rates untouched offering a slight dovish change though. The bank said that headline inflation will be a bit lower than previously seen. Nevertheless, it is unlikely to lead to any changes in monetary policy in the foreseeable future as odds for rate cuts equal exactly zero. Therefore, one may suspect that rates in this Antipodean economy will be kept unchanged at least through mid-2019. Beside this subtle alteration the monetary authorities delivered more or less the same remarks as previously. They admitted that wage growth remains low and is likely to continue for a while, household consumption remains a source of uncertainty, housing markets have slowed in Sydney and Melbourne or the AUD remains in the range of the past couple of years. Except this (almost) negligible modification with regard to headline CPI the communique did not basically change at all. The Australian dollar is gaining 0.1% as of 6:43 am BST but such a move might stem rather from the relative USD weakness seen this morning.

Technically, the EURAUD is on the edge of a breakout, and one may expect it to happen once the cross breaks through 1.5620. Given that the shared currency is underperforming against the US dollar such a downside move looks quite probable. Source: xStation5

While the RBA’s meeting drew attention this morning there was another big event overnight – Japanese labour cash earnings data. The release showed annual wage growth accelerating in June to 3.6% and 2.8% for nominal and inflation-adjusted terms respectively. Both numbers easily beat economists’ expectations pointing to 1.7% and 0.9% respectively and made big increases from 2.1% and 1.3% produced in May. What did such a surge come from? The prime reason were higher summer bonuses contributing to the quickest pace of wage growth in more than 21 years. The data might we welcome by the Bank of Japan which once again cut its inflation forecasts at the meeting last week, and if this increase turns out to be sustainable it could help the central bank eradicate deflationary mindset. Obviously the key is repeatability as one swallow doesn’t make a spring, hence if these summer bonuses were a stirring of rising wage pressure (the labour market is already really tight) rather than one-off event it could be reasonable to assume more hawkish remarks coming from the BoJ in the months to come. Let’s also add that the yen was boosted to some extent by a Reuters report suggesting the BoJ had considered raising interest rates twice this year.

Japanese wage growth reached in June its highest yearly pace since 1997. Source: Bloomberg, XTB Research

On the other side, household spending decreased 1.2% in June recovering from its local trough at -3.9% in the prior month. In a brief comment to the data the Japanese government said that spending may turn up in July as households spend their bonuses handed out at the end of June. Nonetheless, one needs to be aware that Japanese people have quite low marginal propensity to consume (in favour of save) therefore we cannot rule out that the lump sum offered to them last month might be saved rather than spent.

Meanwhile, the US dollar is beginning the day relatively flat on balance slightly on the back foot. In turn, Chinese indices have gained quite substantially thus far with the Shanghai Composite picking up 1.6% and the Hang Seng (CHNComp) adding 1%. The Japanese NIKKEI (JAP225) is also 0.65% higher whilst the Japanese 10Y yield keeps moving around 0.11%.

The USDJPY is still moving above its local trend line and until the pair stays there one can assume that an ultimate move to the upside could take place. Source: xStation5

Summary:

• US indices make steady start to the week
• USD retests prior resistance but yields pull back
• Oil: A lot of uncertainty on the market
• First crypto company listed on LSE
• Latest bank recommendations

US stock markets are a little higher than where they ended on Friday with the US500 moving up to 2845. The European morning  brought some interesting moves in stocks with a sharp move higher in the DE30 which saw the index soar almost 200 points in less than 2 hours on no real positive news. The rally has since reversed in large part, and the move now looks like a typical summer push that occurs on low traded volumes and was likely exacerbated by algos. 

 The US dollar is also on the rise, but there are some warning signs out there for the bulls. The TNOTE looks set for a 3rd consecutive day of gains, and this pullback in US yields may weigh on any further advance for the buck. Speaking of yields, non voting Fed member Bullard said that changes in the bond market are the main focus point for investors at the moment, and that they should specifically looking at the gradient and be wary of a possible inversion in the not too distant future.

At the beginning of July we have pointed that the declines on the oil market are probably just temporary and will lead to WTI testing $65 handle. Key technical levels have not been disturbed and prices have begun to increase once again. Nevertheless, we are encountering range trading that reflects the uncertainty concerning the future of the market. Our latest in-depth analysis for this market can be found here. 

Crypto markets are pretty quiet today, althoguh Bitcoin has extended its recent decline and dropped back below the 7000 level. There’s some interesting crypto news from London where the first crypto company has gone public on the London Stock Exchange. The firm is called Argo Blockchain, and it has raised £25 million through an IPO.

It’s been a busy start to the week as far as bank recommendations are concerned with no fewer than 3 released today. They can be found, here, here and here.