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Daily Pivots: (S1) 0.8835; (P) 0.8847; (R1) 0.8860; More

EUR/GBP is still bounded in range below 0.8879 and intraday bias remains neutral. On the downside, break of 0.8718 support will argue that rise from 0.8312 has completed. In that case, intraday bias with be turned back to the downside for lower side of the range at 0.8312. Meanwhile, break of 0.8879 and sustained trading above 0.8851 will pave the way to retest 0.9304 high.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's uncertain whether it is finished yet. But in case of another fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes.

As the Asian markets were about to close for the day, the dollar continued strengthening against the yen and the euro. The Australian dollar rose for the day on strong business conditions, while pressure on oil eased, as commodity prices showed some gains.

The Australian dollar was among the rare gainers against the greenback during the Asian trading session. Supported by the newest data pointing to strong business conditions, the aussie climbed to $0.7623 ahead of the European open. Australian business conditions climbed to its highest level since early 2008, with NAB's index of business conditions rising 4 points to 15 in June and business confidence adding 1 point to 9. Also, traders were monitoring Australian home-loan approvals for May that were released today. At 1% gain, month-on-month, the figure rose for the first since January, however it missed analyst expectations of a 1.5% expansion.

The kiwi slid against the dollar half a percent to $0.7234 ahead of European trading. Annual expansion of electronic card retail sales tempered in June (gain of 4.5% vs. 5.2% in May), which pushed the kiwi lower and the currency continued trending down since.

The dollar opened firmer against the yen and subsequently followed a steady uptrend during the Asian trading hours. Dollar/yen was last trading at the 114.39 level. Hawkish comments by Federal Open Market Committee member John Williams gave a boost to the dollar in late Asian session. He still expects the Fed to raise interest rates once more this year and to start unwinding its balance sheet in the next few months. Federal Reserve Chair Janet Yellen's testimony in front of the Senate tomorrow and on Thursday will likely be the main focus of dollar traders.

The euro was down a tenth of a percent against the greenback ahead of the European session. Euro/dollar was last trading at 1.1386.

Sterling was under pressure against the dollar for most of the Asian trading hours, however the currency found support and gained just as European markets were about to open. Pound/dollar was up 0.08%, last trading at 1.2886.

Crude oil prices extended their overnight gains, even as increased drilling activity in the US and uncertainty over Libyan and Nigerian production cuts clouded the future supply outlook. WTI was last trading at $44.66 a barrel and Brent was at $47.13.

Gold edged lower during the Asian session on the firmer dollar as the market awaits cues on the path of interest rate hikes in the US ahead of the testimony by Janet Yellen. The precious metal was last trading at $1,210.22 an ounce.

Daily Pivots: (S1) 1.4965; (P) 1.4995; (R1) 1.5015; More...

Intraday bias in EUR/AUD is neutral for consolidation below 1.5073 minor support. With 1.4796 minor support intact, further rally is mildly in favor. Above 1.5073 will target 1.5226 resistance first. Break there will confirm resumption of whole rally from 1.3624. In such case, EUR/AUD would target 1.5455 fibonacci level next. However, break of 1.4796 will turn bias back to the downside for 1.4625 support instead.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed at 1.3624 after defending 1.3671 key support. Rise from 1.3642 would extend to 61.8% retracement of 1.6587 to 1.3624 at 1.5455. Sustained break there will pave the way to retest 1.6587. However, sustained break of 1.4625 support will dampen this bullish view. In that case, we'll assess the outlook later after looking at the structure and depth of the pull back.

Daily Pivots: (S1) 1.0984; (P) 1.1001; (R1) 1.1024; More...

EUR/CHF's rally continues today and reaches as high as 1.1023 so far. Intraday bias remains on the upside for 61.8% projection of 1.0652 to 1.0986 from 1.0830 at 1.1036 next. Decisive break there will target 100% projection at 1.1164. On the downside, below 1.0988 minor support will turn bias neutral and bring consolidation before staging another rally.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Such correction could have completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance should target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0830 support holds.

Daily Pivots: (S1) 146.51; (P) 146.98; (R1) 147.34; More....

With 146.03 minor support intact, further rise is expected in GBP/JPY for 148.09/42 resistance zone. Decisive break there will extend whole rally from 122.36 to long term fibonacci level at 150.43 next. Nonetheless, break of 146.03 minor support will indicate short term topping. In such case, bias will be turned back to the downside for pull back towards 55 day EMA (now at 143.44).

In the bigger picture, rise from medium term bottom at 122.36 is expected to continue to 38.2% retracement of 196.85 to 122.36 at 150.43. Decisive break there will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case the sideway pattern from 148.42 extends, we'd be looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.

AUDUSD made a sharp and strong reversal down recently, which we now see it as a start of a new bearish turn after recently broken channel support line connected from start of June. Notice that fall also appears to be impulsive so more weakness will be expected to follow after a short-term minor recovery up into wave 2/B, which can see potential resistance near the lower channel line and around the Fibonacci ratios of 38.2/61.8.
Invalidation level is at 0.7712 level, as long as price trades below this levels we are looking bearish.

AUDUSD, 4H

With the absence of any top tier news and the markets waiting for further indications on the Fed's policy when Janet Yellen testifies before Congress on Wednesday, investors and traders are currently in ‘wait and see' mode. The week kicked off with most major asset classes moving in tight ranges. The S&P 500 closed 0.1% higher on Monday, while U.S. Treasury yields fell slightly after rallying on Friday's Non-Farm Payrolls report and the dollar index remained stuck in a very narrow trading range.

It seems we will have to wait for another day for volatility to resume. The two key events on Wednesday are Yellen's semi-annual testimony and Bank of Canada's monetary policy announcement. Dollar bulls are counting on the Fed Chair's continued hawkishness, and whether she will provide more details on monetary policy becoming tighter. So far, she is still convinced that inflation weakness is temporary and expects that the sub 5% unemployment rate will eventually boost prices. However, it has been more than one year since the unemployment rate dipped below 5% and wage growth is still anemic, making it difficult for many investors to believe that interest rates will increase at the pace suggested by monetary policy makers. It will require more than retracting her latest FOMC statement to encourage bulls to jump in again, such as a more specific timing to unwind the $4.5 trillion balance sheet.

Given that other central banks have shifted towards a tighter stance, Bank of Canada's meeting on Wednesday is going to be of great interest to traders. 13 out the 30 economists recently surveyed by Reuters expect the central bank to hike rates by 25 basis points tomorrow. If BoC joins the Fed this will not only boost the Loonie, but other major currencies as well, as investors will start to anticipate similar moves by the European Central Bank, Riksbank and the Bank of England. I suggest keeping a close eye on yield differentials as they will be the major factor impacting currencies for the foreseeable future.

Pound traders will get the chance to hear again from Andrew Haldane, BoE's Chief Economist, later today. The economist who was usually on the dovish end of policymakers surprised the markets on 21 June when he joined the Hawks. Given that inflation in the U.K. breached the 2% target and the economy did not fall into recession, he thinks that beginning the process of withdrawing some of the stimulus measures provided last year would be reasonable. If he ignores the recent bunch of weak economic releases and continued supporting the idea of policy normalization, the pound will likely make another attempt towards 1.3, but a break above this psychological resistance requires strong labor data on Wednesday.

Daily Pivots: (S1) 129.70; (P) 130.04; (R1) 130.33; More...

EUR/JPY's rally continues today even though it's losing upside momentum. Intraday bias remains on the upside. Current rally should target 100% projection of 114.84 to 125.80 from 122.39 at 133.35 next. On the downside, break of 127.99 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 would now target 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will remain bullish as long as 122.39 support holds.

Yen remains generally weak today but it's weakest spot was overtaken by New Zealand Dollar. Meanwhile, Dollar, Euro and Sterling are staying in recently established range against each other. Economic calendar is rather light and traders are generally holding their bets ahead of the key events later this week. In particular, BoC rate hike tomorrow will catch as much attention as Fed chair Janet Yellen's testimony. Meanwhile, Euro could stay mixed until there are fresh inspirations about ECB's timing for tapering. In other markets, gold recovered ahead of 1200 handle but struggled to find follow through buying above 1210. WTI crude oil is trying to regain 45 after dipping through 44 last week.

Fed Williams still expected another hike and balance sheet unwinding this year

San Francisco Fed President John Williams spoke in an event in Sydney today and reiterated his expectation of one more rate hike this year. Also, He expects Fed to start shrinking the balance sheet this year too. He noted that job data showed that US economy is strong and the slow down in inflation is transitory. However, he emphasized that if inflation did not accelerate as expected, Fed should adopt a slower rate path. The main focus for US will be on Fed chair Janet Yellen's testimony to Senate Banking Committee on Wednesday.

Staying in US, it's reported that Republicans are working on bringing up a revised version of the Senate healthcare bill later this week. And there could be a vote on the bill next week. The vote bill to replace Obamacare was forced to postpone due to insufficient support. And it remains unclear whether the new version would have enough vote to be passed. The issue has been dragging on US President Donald Trump's work on tax reforms and other economic policies.

Australia business condition back to pre-crisis level, but confidence lags

Australia NAB business confidence rose 1 point to 9 in June. Business conditions gauge improved 4 points to 15. Most industrial performed well with strongest gains in wholesale, construction and manufacturing. On the other hand, mining was the worst performer due to falling commodity prices. The business conditions index is indicate back at pre-financial crisis level. But confidence lagged behind and recorded slower rise in recent months. NAB noted that "we continue to be pleasantly surprised by just how upbeat the business sector is, given the context of a fairly beleaguered household sector that has been weighed down by limited wages growth and record levels of debt". However, it also warned that long term outlook could easily "underperform the RBA's upbeat expectations as important growth drivers (LNG exports, commodity prices and housing construction) begin to fade". Also from Australia, home loans rose 1.0% in May.

Kiwi tumbles after data

New Zealand dollar tumbles today as government data showed retail spending on credit and debit cards was unchanged in June. Some economists pointed out that's an import miss as there was expectations of a boost from the British and Irish Lions' rugby tour. The sharp fall in NZD/USD today, with daily MACD diving deeper below signal line, suggests short term topping at 0.7345. And that could be seen as rejection fro 0.7374 resistance too. Near term focus is back on 0.7961 support. Break will send NZD/USD to 55 day EMA (now at 0.7155) and below.

Elsewhere, UK BRC retail sales monitor rose 1.2% yoy in June. Japan M2 rose 3.9% yoy in June, machine tools orders rose 31.1% in June. Canada will release housing starts later today.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 129.70; (P) 130.04; (R1) 130.33; More...

EUR/JPY's rally continues today even though it's losing upside momentum. Intraday bias remains on the upside. Current rally should target 100% projection of 114.84 to 125.80 from 122.39 at 133.35 next. On the downside, break of 127.99 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 would now target 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will remain bullish as long as 122.39 support holds.

Economic Indicators Update

The markets were trading flat yesterday on lack of any clear data to drive the markets. The US dollar remained broadly unchanged, holding on to the meager gains from last Friday's payrolls data.

Earlier, the San Francisco Fed chief, Williams told a panel of experts in Sydney that the pace of US wage growth and inflation are around where he expected them to be. Williams said that another rate hike remained a reasonable base case as well as normalization of the Fed's balance sheet.

In Germany, the trade data reached new highs as the total export of goods increased 1.4% marking a fifth consecutive month over month increase.

Looking ahead, Lael Brainard from the FOMC will be speaking today ahead of further Fed speeches lined up this week. The economic calendar continues to remain quiet today with Canadian housing starts and Japan PPI data lined up over the day.

EURUSD intraday analysis

EURUSD (1.1390): The EURUSD closed flat yesterday just a few pips below the $1.1400 handle. Price action is expected to remain trading subdued ahead of the Janet Yellen testimony starting tomorrow. On the 4-hour chart, the bias remains flat with support seen at 1.1357 and 1.1300. Further declines can be anticipated only on a break down below this support. In this case, expect further declines to see EURUSD test the support at 1.1190 level where there is a potential for a head and shoulders neckline support to be established.

GBPUSD intraday analysis

GBPUSD (1.2877): The GBPUSD also closed rather flat yesterday slowing the momentum of the declines from last week. Any near-term retracement could see price action test 1.2935 where minor resistance could be formed. But the overall bias remains to the downside. To the downside, GBPUSD continues to target the next main support at 1.2800. The bearish bias will shift in the event that GBPUSD manages to break past 1.2900 - 1.2935. In this case, expect the near-term retracement to push GBPUSD back towards the resistance at 1.2975 region.

USDJPY intraday analysis

USDJPY (114.34): USDJPY is seen pushing higher as the bullish momentum continues to keep the price higher. Currently, USDJPY is seen testing the resistance level at 114.37. A breakout above this level is required to confirm further upside in price. The next main resistance is seen at 115.35 region. To the downside, in the event of a reversal, then USDJPY could be seen pushing back to the lower support at 112.00 which is pending a retest after previously serving as a resistance level. Ahead of the declines to 112.00, watch for the minor support at 113.36 to offer some short-term support to prices.