• ECB meeting: What to expect The highlight of the day will be the ECB policy meeting. Although the Bank is widely expected to hold off on any new stimulus measures or rate cuts, there has been speculation recently that it could “tweak” its bond buying program. This includes raising the limit of how much of corporate non-bank assets it can buy and perhaps broadening the universe of eligible assets in case of a shortage of papers. The fact that the Bank’s TLTRO II operations and the corporate bonds purchasing program were implemented in June though, enhances the case for officials to be patient for now. In the aftermath of the UK vote, the bloc’s 5-year inflation expectations plunged to a new all-time low level. They currently stand at levels lower than those in March, when the Bank unleashed its aggressive salvo of easing measures. We therefore expect the combination of “Brexit” uncertainties and the latest decline in 5-year inflation expectations to prompt ECB officials into action, albeit not immediately. Recent comments by ECB Vice President Vitor Constancio that the Bank has to “wait a little bit” to see how “Brexit” is going to affect the Eurozone before assessing whether further stimulus is needed, most likely represent the general consensus of the Board. The reaction in EUR at this meeting is highly ambiguous, with a dovish statement alongside hints of further rate cuts needed to weaken the EUR at this level, in our view.

• BoE post-Brexit survey shows a less downbeat tone The British pound added to its strong jobs report gains after a survey from the Bank of England showed a less downbeat tone among UK businesses than other reports. The survey found that most of the companies asked after the vote did not plan to cut hiring or investment. Also, no clear evidence was found of a sharp Brexit-brought economic slowdown. In addition, BoE member Kristin Forbes said that the Bank should not rush into a decision to cut interest rates, echoing recent remarks by another MPC member, Martin Weale, that further evidence of the vote impact is needed before moving on rates. The statement of the Bank’s latest policy meeting showed that most of the nine members of the Committee supported boosting the economy, but the recent rhetoric by these two members points to the opposite. In our view, the focus remains on tomorrow’s preliminary PMI data for July, which will be the first set of data that will reflect the post-Brexit era and will probably set the tone for sterling’s near-term bias.

• RBNZ: More easing likely needed Overnight, the Reserve Bank of New Zealand issued a brief update on its economic assessment because of a longer-than usual period between policy decisions. In this unscheduled economic outlook update, the Bank noted that the higher than previously expected trade-weighted exchange rate is holding down tradable goods inflation. This makes it difficult to for the Bank to meet its inflation objective and a decline in exchange rate is needed. Policymakers concluded that at this stage further policy easing will be required. NZD/USD dropped on the news, falling below 0.70. Given that it is almost certain that the Bank will cut rates at its next policy meeting, we would expect NZD to remain under selling interest.

• As for today’s indicators, we get the UK retail sales for June and expectations are for headline sales to have fallen 0.6% mom, after rising 0.9% in May. Core retail sales are expected to have also fallen. The forecast is also supported by the BRC retail sales gauge, which showed a 0.54% fall during the month. We are not surprised by the forecasts as it looks more than normal for spending decisions to be delayed a few days ahead of the UK membership referendum. A decline in retail sales may cause the pound to reverse some of its Wednesday’s gains made following the solid employment report for May. • In the US, initial jobless claims for the week ended on the 15th of July, are forecast to have risen to 265k from 254k, but this will leave the 4wk moving average more or less unchanged. Existing home sales are forecast to have declined in June, but the fact that housing starts and the more forward looking building permits improved during the month, leaves little room for questioning the US housing market. The Philly Fed business activity index for July is also coming out.

EUR/USD rebounds ahead of the ECB policy meeting
EUR/USD rebounds ahead of the ECB policy meeting

• EUR/USD traded somewhat lower on Wednesday, but failed to reach the 1.0970 (S2) territory and rebounded to trade back above 1.1020 (S1). Given that the rate is back within the sideways range between 1.1020 (S1) and 1.1185 (R3), I would switch my stance back to flat for now. Shifting my attention to our short-term oscillators, I see that the RSI edged north after it hit support near its 30 line. It now looks ready to move above 50, while the MACD, although negative, has bottomed and could cross above its trigger line soon. These indicators support that the current rebound may continue for a while, perhaps to challenge the 1.1090 (R1) resistance zone. However, today the ECB meets to decide on monetary policy and although we don’t expect any action today, we believe that they will hint further easing in coming months. This is likely to prove negative for the common currency and perhaps push EUR/USD back below 1.1020 (S1). As for the bigger picture, as long as the pair is trading within the sideways range between 1.0800 and 1.1500, I would maintain my flat stance as far as the longer-term trend is concerned.

• Support: 1.1020 (S1), 1.0970 (S2), 1.0900 (S3)

• Resistance: 1.1090 (R1), 1.1150 (R2), 1.1185 (R3)

NZD/USD slides on RBNZ’s economic outlook
NZD/USD slides on RBNZ’s economic outlook

• NZD/USD tumbled during the Asian morning Thursday after the RBNZ noted that a decline in the exchange rate is needed and that more easing is likely required to return inflation to target. The pair fell below the psychological zone of 0.7000 (R1) at the release and hit support slightly below 0.6965 (S1). The price structure on the 4-hour chart suggests a short-term downtrend and as a result, I would expect a decisive dip below 0.6965 (S1) to open the way for our next support obstacle of 0.6900 (S2). However, taking a look at our short-term oscillators, I see signs that a corrective bounce may be on the cards before the next negative leg. The RSI rebounded from near its 30 line, while the MACD, although negative, shows signs of bottoming. What is more, there is positive divergence between both these indicators and the price action. Zooming out to the daily chart, I see that the rate is still trading above the medium-term uptrend line taken from back at the low of the 20th of January. As a result, the short-term downtrend appears like a corrective phase of that medium-term upside path for now.

• Support: 0.6965 (S1), 0.6900 (S2), 0.6845 (S3)

• Resistance: 0.7000 (R1), 0.7065 (R2), 0.7125 (R3)

Gold tumbles and falls below 1323
Gold tumbles and falls below 1323

• Gold slid on Wednesday, falling below the support (now turned into resistance) territory of 1323 (R1) to stop near the 1313 (S1) obstacle. In my opinion, the dip below 1323 (R1) signaled the continuation of the short-term downtrend started on the 7th of July. I would now expect another dip below 1313 (S1) to challenge the 1305 (S2) line, marked by the low of the 28th of June. Our short-term oscillators reveal downside speed and corroborate somewhat my view for further declines. The RSI edged down and hit support near it 30 line, while the MACD, already negative, has topped and fallen below its trigger line. Switching to the daily chart, I see that the metal is trading above the uptrend line taken from back at the low of the 17th of December. In my view, this keeps the longer-term picture cautiously positive. I would treat any further declines that stay limited above that line as a corrective phase of that longer-term uptrend.

• Support: 1313 (S1), 1305 (S2), 1300 (S3)

• Resistance: 1323 (R1), 1340 (R2), 1348 (R3)

USDJPY breaks above 106.60
USDJPY breaks above 106.60

• USD/JPY edged north during the Asian morning Thursday, braking above the resistance (now turned into support) barrier 106.60 (S1). Nevertheless, the advance was stopped near the 107.30 (R1) resistance zone and then it pulled back. In my view, the break above 106.60 (S1) has confirmed a forthcoming higher high on the 4-hour chart and signaled the continuation of the short-term uptrend. I would now expect another attempt above 107.30 (R1) to open the way for the next resistance hurdle of 108.00 (R2). Our short-term oscillators detect upside momentum and support the trend resumption. The RSI moved up and hit resistance near its 70 line, while the MACD, already positive, has bottomed and crossed above its trigger line. However, given that the RSI has turned down after it hit its 70 line, I would be careful of further setback before the bulls decide to take the reins again. Switching to the daily chart, the longer-term trend still looks negative. As a result, I would treat the short-term uptrend as a corrective phase of that broader negative path for now.

• Support: 106.60 (S1), 105.65 (S2), 104.65 (S3)

• Resistance: 107.30 (R1), 108.00 (R2), 108.60 (R3)

WTI rebounds from near 43.80
WTI rebounds from near 43.80

• WTI traded lower on Wednesday, fell below the 44.50 (S1) zone, but triggered some buy orders near the 43.80 (S2) support and rebounded back above 44.50 (S1). The fact that the price is trading below the uptrend line taken from the low of the 11th of February, and also below the downtrend line drawn from the peak of the 9th of June, keeps the short-term outlook negative in my view. As a result, I would expect the bears to take control again soon and push the price below 44.50 (S1), perhaps for another test near 43.80 (S2). Looking at our short-term oscillators though, I see signs that further upside correction is likely. The RSI rebounded from its 30 line, while the MACD, although negative, has bottomed and appears ready to cross above its trigger line. As for the broader trend, the break below the uptrend line taken from the low of the 11th of February brings into question the uptrend started back in January. The fact that the price closed below 46.00 on the 7th of July may have brought a medium-term trend reversal.

• Support: 44.50 (S1), 43.80 (S2), 43.30 (S3)

• Resistance: 45.00 (R1), 45.65 (R2), 46.30 (R3)

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