Sample Category Title

EUR/USD

Current level - 1.1851

Yesterday's peak at 1.1910 is likely to be followed by a brief consolidation pattern, before next leg upwards, to 1.2000 sentiment area. Crucial support on the downside is projected at 1.1775.

USD/JPY

Current level - 110.66

The corrective phase is still underway and there is a risk of an intraday spike to 111.50 before drowning towards 109.30 target mark. 

GBP/USD

Current level - 1.3225

My outlook remains bullish above 1.3157 support, for a rise towards 1.3350 zone.

Sterling held above 1.32 against the dollar early Thursday as traders eagerly awaitthe Bank of England's policy meeting today. Bond yields declined from July highs but remained elevated, as some market participants believe that the BoE maysurprise, with a 25-basis point rate hike.

Although the central bank kept policy unchanged on 15 June, three MPC members voted to hike interest rates. This was followed by hawkish remarks from BoE's Governor Mark Carney and chief economist Andy Haldane, that a rate increase may be needed despite a weakening economy. The shift in policy stance led to repricing of U.K. assets, sparking the 4% rally in GBPUSD, which was also supported by a broadly weaker dollar.

I do not expect the outcome of todays' meeting to result in a rate hike. Firstly because consumer prices slipped from 2.9% to 2.6% in June, suggesting that the central bank may need to assess whether prices will ease further, after topping out in May. Secondly, there's still no clear transition deal for Britain's relationship with the E.U. after Brexit. I believe these two factors will keep the BoE on hold for now, but this does not necessarily mean the rally in GBP is over.

Kristin Forbes' departure from the BoE will likely lead to a 6-2 vote in favor of keeping interest rates unchanged today, with Ian McCafferty and Michael Saunders to remain the two dissenters. Silvana Tenreyro, who replaced Forbes is most likely to join the doves for now. The most interesting member to watch is Haldane. If he decides to join the hawks and vote for a rate hike, this would lead to further appreciation in both bond yields and the pound.

Another element traders should focus on, is the quarterly Inflation Report. If the BoE wants to prepare markets for policy normalization, this needs to be reflected in the Inflation Report, which is released along with the interest rate decision. In May, the BoE forecasted the economy will expand 1.9% in 2017, and inflation will increase to 2.7%. Since the release of the report, Q1 GDP was revised lower to 0.2% and Q3 GDP picked up only slightly by 0.3%. Real wage growth continued to decline, consumer confidence dropped, and most PMI's indicated slower activity. The only bright spot was unemployment falling further, to 4.5% from 4.6%. As a result, I think the BoE will lower their GDP forecast for the rest of the year, and probably inflation, which could dampen rate hike expectations for the months to come.

If there are no major surprises from the votes or quarterly inflation report, Carney's press conference will decide which direction the pound will take. Back in June, Mark Carney said that he was prepared to raise rates if U.K. business activity increased. If he sends a similar message at today's press conference, this would be another signal for bulls to jump in.

USDJPY maintains a bearish market structure in the short-term after retracing more than half of the uptrend that took place from the June 14 low of 108.80 to the July 11 high of 114.49. The pair is under pressure with strong resistance at 110.96 – the 61.8% Fibonacci retracement level of this recent upleg.

The risk is to the downside to target the key 110.00 level, which recently acted as support. A break here would see a re-test of the 108.80 low with scope to reach 108.00. A deeper decline below this level would start to change the bigger picture and bring about a bearish outlook from the current neutral one.

USDJPY has been in a neutral phase since April and has been trading in a range between 108.00 and 115.00 following an uptrend that took place from October 2016 until January this year.

Downside momentum in the near-term remains, giving scope for another extension lower since RSI is below 50 in bearish territory and USDJPY is trading below both the 50 and 200-day moving averages. Only a clear break above the 50% Fibonacci resistance at 111.63 would shift the focus back to the upside and dampen the bearish view.

The bearish crossover of the 50-day with the 200-day MA on July 18 is keeping the bearish short-term view in play while the medium-term outlook is still neutral.

Weekly

    •    Last Candlesticks pattern: Long white candlestick
    •    Time of formation: 24 Jul 2017
    •    Trend bias: Up

Daily

    •    Last Candlesticks pattern: Morning doji
    •    Time of formation: 25 Jul 2017
    •    Trend bias: Up

EUR/CHF – 1.1477

As recent upmove has accelerated after early anticipated resumption of medium term upmove from 1.0622 (2016 low), adding credence to our bullish view and upside bias remains for this move to extend further gain to 1.1550, then 1.1600-10, however, near term overbought condition should prevent sharp move beyond 1.1700, reckon 1.1770-80 would hold from here, risk from there has increased for a retreat to take place later this month.

On the downside, whilst initial pullback to 1.1400-10 cannot be ruled out, reckon downside would be limited to 1.1330-35 and bring another upmove later. A daily close below the Tenkan-Sen (now at 1.1266) would defer and bring test of the Kijun-Sen (now at 1.1221) but break there is needed to signal top is formed, bring retracement of recent rally to 1.1150-55, then towards 1.1100 but price should stay well above support at 1.1007 and the single currency shall head north again from there. 

Recommendation: Buy again at 1.1335 for 1.1535 with stop below 1.1235.

On the weekly chart, last week’s rally formed a long white candlestick, adding credence to our bullish view that recent rise from 1.0622 is still in progress and the breach of previous resistance at 1.1201 suggests the major rise from 0.8426 low is still in progress and may extend headway to 1.1590-00, then towards 1.1700-10, however, near term overbought condition should prevent sharp move beyond 1.1800 and reckon 1.1900-10 would hold from here, risk from there has increased for a retreat to take place later this month.  

On the downside, although initial pullback to 1.1400, then 1.1330-40 cannot be ruled out, reckon the Tenkan-Sen (now at 1.1179) would contain downside and bring another rise later. A weekly close below the Tenkan-Sen would defer and bring correction to 1.1100 but reckon the Kijun-Sen (now at 1.1078) would limit downside and support at 1.1007 should remain intact, bring another rise in late Q3. 

GBP/JPY moves in range on the Daily chart, we’ll have a clear direction after a valid breakout from the chart pattern. Could start a broader drop if will fail to breakout above the down sloping red line. A valid breakdown below the 150% Fibonacci line (ascending dotted line) will confirm a sharp drop, while a valid breakout above the red line will signal an increase at least towards the lower median line (LML).

USD/JPY needs a spark to be able to start a significant move. Continues to move in range on the short term, is located above the 110.50 level and is fighting hard to increase. We don’t have a clear direction because the Nikkei is narrowing near 20058 major horizontal resistance. We don’t have any trading opportunity at this moment, but we may have one if will come down to retest the 50% retracement level and the warning line (wl1).

Price changed little in the morning ahead of the BOE, but most likely we'll have some volatility later, after the UK and US data will be released. GBP/USD stays higher and continues to pressure an important dynamic resistance, we'll see if we'll have a break or a bounce.

Is trading around the 1.3225 level, you should be careful because the fundamental factors will take the lead in the upcoming hours. Technically, the rate has found strong resistance again and could slip lower, but remains to see what impact will have the economic figures.

The Bank of England will release the Official Bank Rate later, which is expected to remain unchanged at 0.25%, while the Asset Purchase Facility should stay steady at 435B as the MPC members are expected to vote unanimously for this decision.

BOE Gov Carney's speech could bring life on the GBP/USD, the Cable could drop on a dovish speech, but is premature to say what will really happen

GBP/USD has found temporary resistance at the upside line of the ascending channel (up sloping red line) and now looks undecided. Don't worry because the economic data will bring us a clear direction. Looks like that the rate has developed a minor Rising Wedge pattern, but this is far from being confirmed, so the perspective remains bullish despite a minor drop.

A rejection from the up sloping red line will send the rate towards the warning line (wl1), where is expected to find support again. However a breakout above the red line will confirm a further upside movement, the next upside target will be at the lower median line (lml).

On Wednesday, St. Louis Federal Reserve President Bullard (a non-voting member of the FOMC) stated in an interview that he, 'is opposed to further U.S. interest rate increases by the Federal Reserve' and warned 'that more hikes could hinder domestic inflation from achieving the Fed's 2% goal'. Also on Wednesday, Cleveland Fed President Mester (another non-voting FOMC member) commented that 'the Fed is tightening monetary policy at such a gradual pace that it doesn't have to change course even with signs of weakness in economic and inflation data'. Such comments add further confirmation to the markets that USD will remain under pressure as many central banks (excluding non-voting FOMC members!) are looking to move away from easy monetary policies. There may be some respite for USD today, as the markets await several key economic data releases (see below) ahead of Friday's, always impactful, Non-Farm Payrolls.

EURUSD hit new 2-and-a-half-year highs on Wednesday, trading up to a high of 1.19089, before retracing lower. EURUSD is trading around 1.1850.

USDJPY gained 0.4% on Wednesday, reaching a high of 110.977, before retracing as the session closed. Currently, USDJPY is trading around 110.70.

GBPUSD advanced 0.3% to reach an 11-month high of 1.32496 on Wednesday. The markets will be paying attention to GBP on this 'Super Thursday', with a host of UK data releases and BoE Governor Carney due to speak. Currently, GBPUSD is trading around 1.3230.

Gold improved 0.3% on Wednesday to trade as high as $1,272.69. Overnight, Gold has given back much of its recent gains to currently trade around $1,263.

Oil prices rebounded on Wednesday, after falling toward session lows of $48.61pb on data that showed a smaller drawdown in US crude inventories than the market had expected. The drawdown of 1.527 million bettered the expected drawdown of 2.957 million, indicating demand is still relatively strong. WTI is currently trading around $49.50pb.

At 12:00 BST a plethora of UK data will be released from the Bank of England; Asset Purchase Facility, Monetary Policy Statement, Quarterly Inflation Report and MPC Vote information. The markets are not expecting any major monetary changes, although will be looking for any hawkish comments and the timing of future rate hikes.

At 12:30 BST, Bank of England Governor Carney is scheduled to make a statement following the release of the above reports. Again, markets will be looking for any change in 'tone' as an indication as to future UK Monetary Policy.

At 13:30 BST, the US Department of Labor will release Initial Jobless Claims (Jul 28) & Continuing Jobless Claims (Jul 21). Initial Jobless Claims are forecast to come in at 242K (previously 244K) and should provide support to a steadily growing US job market. A higher release will likely cause more USD selling, whereas the markets will only react favourably to USD if the release is significantly lower.

At 14:45 BST, the US Services Purchasing Managers Index (PMI) will be released. The consensus calls for an unchanged release of 54.2. The markets will hope to see an improvement as a suggestion that the US economy is growing.

At 15:00 BST, the US Census Bureau will release Factory Orders (MoM) (Jun). The consensus calls for a significant improvement on the previous release of -0.8% to 2.8%. A reading higher than 2.8% will give credibility to a strengthening US economy. If the release is lower the market will take a bearish stance on USD.

Asia Summary

Equities markets opened slightly lower across the region. AUD/USD saw some weakness falling to 0.7915 after June trade balance figures came in at a lower than expected surplus or A$856M, exports also fell 1%. China Caixin services PMI slightly fell m/m to 51.5 while composite rose to 51.9 form 51.1. The PBOC adjusted its open market operations (OMO) by just injecting 7-day reverse repos and skipped 14-day operations. Costco SSS, ex-gas rose 5.3%. S&P warned that there is more risk to Australia's sovereign rating than in the past; reminder S&P Has Australia sovereign rating at AAA, outlook negative.

Markets seem to be cautious ahead of BOE rate decision later today and US jobs report Friday morning. In tomorrow’s session Australia will release RBA’s statement on monetary policy, with the key focus to be on the wording about the A$ and its impact on the economy and inflation.

Key economic data

(AU) AUSTRALIA JUN TRADE BALANCE (AUD): 856M V 1.8BE (8TH CONSECUTIVE SURPLUS)

(CN) CHINA JULY CAIXIN PMI SERVICES: 51.5 V 51.6 PRIOR; PMI COMPOSITE: 51.9 V 51.1 PRIOR

(KR) South Korea Jun Current Account Balance: $7.0B v $5.9B prior; Balance of Goods (BOP): $9.7B v $8.8B prior

(AU) AUSTRALIA JULY AIG PERFORMANCE OF SERVICES INDEX: 56.4 V 54.8 PRIOR

(JP) JAPAN JULY PMI SERVICES: 52.0 V 53.3 PRIOR; PMI COMPOSITE: 51.8 V 52.9 PRIOR

(NZ) New Zealand July ANZ Commodity Price: -0.8% v 2.1% prior

Speakers and Press

China

(CN) China insurance regulator CIRC: No plan for Anbang to sell overseas assets

(CN) China Finance Ministry (MOF) has become concerned public-private partnerships (PPPs) for infrastructure investment are being used to disguise local government borrowing – FT

(CN) China may accelerate debt to equity swaps in H2 - Financial News

(CN) China Commerce Ministry (MOFCOM) Gao: Hope China and the US can continue on a path of cooperation; Reminder: Am un-named US government official said President Trump’s administration may be on the cusp of increasing its threats against China on trade

Japan

(JP) Japan Fin Min Aso: The economy is not bad, oil prices are bringing down inflation

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.2%, Hang Seng -0.1%, Shanghai Composite -0.2%, ASX200 -0.4%, Kospi -1.5%

Equity Futures: S&P500 -0.1%; Nasdaq100 0.0%, Dax -0.1%, FTSE100 -0.2%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.1858-1.1834; JPY 110.83-110.57; AUD 0.7967-0.7914; NZD 0.7430-0.7392

Aug Gold -0.8% at 1,261/oz; Sept Crude Oil -0.3% at $49.44/brl; Sept Copper +0.2% at $2.89/lb

USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6. 7211 V 6.7205 PRIOR

(CN) China PBOC OMO injects CNY60B in 7-day reverse repos v CNY120B prior in 7-day and 14-day reverse repos

JGB (JP) Japan MoF sells ¥400B v ¥400B indicated in 10-yr 0.10% inflation-indexed bonds, bid to cover 3.19x

Equities notable movers

Hong Kong/China

Standard Chartered, 2888.HK, Reports H1 adj pretax profit $1.92B v $1.81Be, op income $7.2B v $7.23Be; Declares no dividend; -6.9%

Japan

Furukawa Electric, 5801.JP Reports Q1 Net ¥6.8B v ¥2.3B y/y; Op ¥10.4B v ¥4.7B y/y; Rev ¥224.9B v ¥196.2B y/y; +12.6%

Korea

GS Retail,007070.KR Reports Q2 (KRW) Net 42.0B v 59.8Be; Op 53.1B v 74.4Be; Rev 2.09T v 2.09Te; -12.8%

Australia

Suncorp, SUN.AU Reports FY17 Net profit A$1.08B v A$1.13Be, Cash profit A$1.15B v A$1.20Be; -6.5%

Commonwealth Bank of Australia, CBA.AU Austrac initiated civil penalty proceedings in federal court against CBA for “serious and systemic non-compliance” with anti-money laundering and counter-terrorism financing laws; +0.5%

US markets on close: Dow +0.2%, S&P500 +0.1%, Nasdaq flat, Russell -1.1%

Market movers today

Focus today will be on the Bank of England (BoE) meeting, with the subsequent press conference of Governor Carney and the publication of a new Inflation Report . We expect the BOE to vote 6-2 in favour of keeping the Bank Rate unchanged and west ill do not expect a rate hike before some time in 2019. We believe the BoE will revise down its optimistic GDP growth projection and we also expect it to announce that the Term Funding Scheme (TFS) will end in February 2018.

After the decline in the UK Construction PMI released yesterday, today's Services PMI for July will be watched closely for further signs of the expected economic slowdown in the UK.

In the US, non-manufacturing ISM is due out and weestimate the index to have moderated slight ly to 56.5 in July, in line with the observed drop in the manufacturing ISM.

In Scandinavia, the Services PMI in Sweden is due to be released. Norwegian house prices will also be watched closely for any further signs of weakness, which could prompt speculation on further Norges Bank stimulus.

Selected market news

The highlight of the week will be the US labour report tomorrow. Yesterday, we got the ADP report which can sometimes give an indication of the direction of the report. The ADP report showed solid job growth of 178,000 in July and June was revised higher from 158,000 to 191,000. It bodes well for the labour market on Friday, but remember that the ADP report is not always the best indicator of actual job growth.

After a strong Tuesday in global equity markets, we saw some profit taking in Europe yesterday, and most indices ended the day in the red. The sentiment was slightly better in the US as the 5% gain in Apple led indices higher. The Dow jones index closed above 22,000 for the first time ever.

The market is following Fed comments closely as the FOMC is widely expected to start reducing its balance this autumn. The Fed's James Bullard on the one side who is a known ‘dove' said yesterday that he is concerned about the soft inflation data. On the other side, we had less ‘dovish' comments from the Fed's John Williams and Loretta Mester, who both argue that inflation will reach the 2% target over the coming years.

The US debtceiling is an ongoing concern for the US market . The US Treasury said yesterday in its Q3 refunding statement that it is able to fund the government until the end of September. Treasury Secretary Steven Mnuchin said a few days ago in a letter to Congress that it was critical to act no later than 29 September. In respect of the refunding statement , note that it was said at the press conference that the US Treasury is still looking at the possible introduction of ultralong bonds (50Y bonds), but there was no announcement on the topic.