BRAZIL: USDBRL Maintains Bearish Tone, Justice Moraes Speaks On Sanctions

European curves bull flattened Monday.

• The EGB / Gilt rally started overnight following a weekend Bloomberg report that the EU was set to formulate a plan to retaliate against the US in case of a "no deal" scenario on tariffs by the White House-set Aug 1 deadline.
• This followed Friday's FT report that US President Trump was seeking a minimum 15-20% EU tariff.
• Indeed the trade conflict appeared to be a broader undercurrent, with some anticipation of the swiftly-approaching Aug 1 date more broadly boosting long-end FI and weakening the USD (although a rise in equities appeared to be an outlier in this move).
• Helping the bullish move follow through in mid-afternoon was a well-received BoE long-end  APF sale which saw bull flattening extend.
• Carrying on from last week's trend, Gilts underperformed, but both the UK and German curves bull flattened on the day.
• Periphery and semi-core EGB spreads tightened, with 10Y OAT/Bund down more than 2bp.
• This week's calendar highlights include flash PMIs and of course the ECB decision Thursday - our preview of the latter will be out Tuesday.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 4.6bps at 1.824%, 5-Yr is down 7.2bps at 2.168%, 10-Yr is down 8.2bps at 2.613%, and 30-Yr is down 9.3bps at 3.139%.
• UK: The 2-Yr yield is down 3.3bps at 3.869%, 5-Yr is down 5.4bps at 4.035%, 10-Yr is down 7.1bps at 4.603%, and 30-Yr is down 8.3bps at 5.428%.
• Italian BTP spread down 1.8bps at 83.7bps / French OAT down 2.5bps at 67.9bps  

• MNI interviews British Columbia's energy minister on energy sector projects -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com

• RES 4: 1.3835 High Oct 20 2021
• RES 3: 1.3800 Round number resistance
• RES 2: 1.3681/3789 High Jul 04 / 01 and the bull trigger
• RES 1: 1.3519 20-day EMA
• PRICE: 1.3494 @ 17:00 BST Jul 21
• SUP 1: 1.3365 Low Jul 16
• SUP 2: 1.3335 Low May 20
• SUP 3: 1.3245 Low May 19
• SUP 4: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle   

Prices rallied Monday, prompting GBPUSD to entirely reverse the weakness off Friday highs. This kept the pair clear of any test on recent lows. Nonetheless, last week’s extension lower resulted in a breach of  trendline support currently at 1.3470 - drawn from the Jan 13 low. The breach strengthens a bearish threat, exposing 1.3335 next, the May 20 low. On the upside, initial firm resistance to watch is 1.3519, the 20-day EMA. A clear break of this average is required to highlight a potential base.