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Key Points:

• A reversal could be seen earlier than anticipated.
• Selling pressure likely to stem from bearish technical bias.
• Losses could extend to a 12-month low at 0.9531.

The Swissy looks about ready to make an about face as its rally appears to have run short on momentum. This is largely indicated by the technical bias which remains firmly bearish – even if the pair has managed to claw its way back the 50.0% Fibonacci level. As a result of this, the USDCHF could begin to track towards the 0.9531 handle in the coming days which would be a 12-month low.

First things first, it’s worth taking a closer look at exactly why we expect to see the pair reverse shortly –especially given that we had originally forecast a rally up to at least the 0.97 handle. Primarily, the formation of a shooting star (sometimes called a pin candle) during the prior session can be attributed to sparking concerns of an early reversal. Ordinarily, such a candle wouldn’t be nearly enough to pose a real threat to the uptrend. However, due to numerous other technical indicators also remaining bearish in spite of the rally, fears that bulls are losing control are notably heightened.

In particular, it has been noted that the parabolic SAR and EMA’s have yet to shake their strongly bearish bias. This should make it fairly easy for the bears to put pressure on the pair once the decline has resumed and this view is only reinforced by the ADX reading which has been above that key 20.0 reading since May – the beginning of the most recent long-term rout for the USDCHF. Overall, the technical outlook is fairly grim and the movement of the stochastics out of oversold territory certainly won’t be helping matters either.

If we do see this pair begin to slump yet again, we expect it to reach as low as 0.9531 rather quickly. Losses past this point are currently looking unlikely as the 0.9531 mark does represent at 12-month low and the Swissy will almost certainly be flirting with becoming oversold upon reaching this price. Nevertheless, it will be worth taking a look at the pair closer to the time as it could continue to track lower if the MACD and signal line crossover – a feat that isn’t actually looking too unlikely.

Ultimately, monitor the USDCHF as we move forward as the pair could have some solid moves instore for us yet. As discussed, the technical bias is suggesting that the bears are likely to be staging a comeback this week which could result in some notable losses. Nonetheless, also keep an eye on the fundamental side of things as any particularly robust US employment data could upset the applecart as this week comes to an end.

GOLD - The commodity has halted its weakness and triggered a recovery higher as it lookd for more correction. On the downside, support comes in at the 1,215.00 level where a break will turn attention to the 1,210.00 level. Further down, a cut through here will open the door for a move lower towards the 1,200.00 level. Below here if seen could trigger further downside pressure targeting the 1,190.00 level. Conversely, resistance resides at the 1,230.00 level where a break will aim at the 1,240.00 level. A turn above there will expose the 1,250.00 level. Further out, resistance stands at the 1,260.00 level. All in all, GOLD looks to recover further on correction

STOCKS

Dow (21478.17, -0.01%) has not been able to move above 21570 in the last few sessions but at the same time the bears at resistance near 21500/600 do not seem to be strong enough to push the index sharply to lower levels. While it sustains above 21400, upside possibility remains high.

Dax (12453.68, +0.13%) seems to be bouncing from levels near 12300. The interim support turned resistance at 12500 is important for now and while the index trades below 12500, we could possibly see another leg of rejection after the ongoing “pause phase” which could last for another 2-3 sessions.

Shanghai (3208.66, +0.05%) bounced sharply to close above 3200, breaking the ongoing sideways movement within 3200-3170 levels. A rise towards 3220 is possible before a slight dip is seen. Overall medium term looks bullish towards 3250.

Nikkei (20027.42, -0.27%) is testing immediate support near 19980 and if that holds, we could see a rise back towards 20250 in the next couple of sessions.

Nifty (9637.60, +0.25%) was stable yesterday, trading above 9600. While it sustains at current or higher levels, our initial target of 9700 could be tested soon. A few sessions of sideways consolidation is possible before resumption of an upward rally. For now, near term looks bullish.

COMMODITIES

Gold (1223) is trading within the range of 1190-1230 and Silver (16.00) is within 15.80-16.50. We will remain bearish on Bullion while gold and silver are trading below 1250 and 16.50 levels respectively. We are now awaiting U.S. non-farm payrolls for June, due on tomorrow at 6:00 pm IST, for more insight into Fed policy and the future path of U.S Dollar.

No directional movement had been seen in Copper (2.66) also as it is trading within the range of 2.66-2.78.If 2.66 holds then we might see 2.82 within few days of time otherwise it might come back towards 2.55 levels. We will remain bullish on copper while it is trading above 2.55 levels.

Brent (47.97) and WTI (45.30) fell just a day before of the release of U.S weekly crude oil inventory data (8:30 pm IST,expected -2.4M B), as traders wanted to book profits after a streak of 8 up days in a row. As we have said that this short term rally hasn’t affected the midterm bearishness while Brent and WTI are trading below 54 and 51 levels. In very short term time frame, 48 (Brent) and 45.80 (WTI) could be the pivots, where the price action may determine the near to medium term path. A surplus or a less than expected shortage in weekly inventory could bring further bearish possibilities towards 44 (Brent) and 42.10 (WTI) into consideration

FOREX

No set date for US Fed balance sheet reduction and concerns over persistent soft inflation limits Dollar strength.

Dollar Index (96.28) has retreated a bit from our resistance of 96.50-60 and Euro (1.1338) still trades above the support of 1.1290, keeping bidirectional possibilities still open despite our preference for further Dollar strength in the coming days. As discussed in the last two days, till now, most of the majors are in a normal correction and further break of major supports are required before the downtrend can be confirmed. Therefore we wait for clarity.

Dollar Yen (113.04) is stuck in a range of 112.75-113.50 for the last 3 sessions but the bias remains bullish for 114.30-115.00 till the support of 112.60 holds.

It is a critical moment for Pound (1.2933) as it must rise right now if it has to keep the immediate upside momentum intact. Failure to rise today may rob it of the upside momentum and the support of 1.2880 may be challenged.

Aussie (0.7598) breached the support of 0.7580 briefly before recovering but now the lower support of 0.7530-15 come into focus which may be tested by the next week.

Dollar Rupee (64.78) spent the day in the range of 64.60-90 for the day and this range may continue for the rest of the week.

INTEREST RATES

The US yields may remain stable today but could start falling from current levels in the coming sessions. The 30YR (2.85%) could come off towards 2.83% while the 10YR (2.33%) and the 5Yr(1.93%) could move down to 2.30% and 1.90% respectively .

The Japanese yields are all rallying upwards and look bullish for the medium term. the 5YR, 10YR and 30Yr are a trading at -0.05%, 0.09% and 0.88%. the 30YR may head towards long term resistance near 1.12 while there could be less scope on the upside for the 10Yr and the 5Yr.

The UK yields have also risen sharply in the last few sessions but could now pause for some sessions or maybe dip slightly before resuming the near term uptrend. Medium term looks bullish.

The German yields are also trying to rise and could eventually move up with interim dips. But also note long term resistances are hovering above current levels and could push the yields lower in the longer run.

Daily Pivots: (S1) 0.8755; (P) 0.8782; (R1) 0.8802; More...

Intraday bias in EUR/GBP remains neutral for consolidation below 0.8879. 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.

Daily Pivots: (S1) 1.4879; (P) 1.4922; (R1) 1.4969; More...

Intraday bias in EUR/AUD remains neutral at this point. Further rise is in favor with 1.4796 minor support intact. We're holding on to the bullish view that pull back from 1.5226 has completed at 1.4625, ahead of 38.2% retracement of 1.3624 to 1.5226 at 1.4614. Above 1.4997 will turn bias back to the upside for 1.5226 first. However, firm break of 1.4796 will dampen this view and turn bias back to the downside for 1.4625 support.

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 1.4669 support will dampen this bullish view. We'll assess the outlook later after looking at the structure and depth of the pull back.

Daily Pivots: (S1) 1.0929; (P) 1.0946; (R1) 1.0960; More...

A temporary top is formed at 1.0964 again and intraday bias in EUR/CHF is turned neutral for consolidation. Downside of retreat should be contained by 1.0893 support to bring another rally. Above 1.0964 will target 1.0986/0999 resistance zone. Break there will extend whole rally from 1.0629 to 61.8% projection of 1.0652 to 1.0986 from 1.0830 at 1.1036.

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 will 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) 1.1319; (P) 1.1344 (R1) 1.1375; More.....

Intraday bias in EUR/USD remains neutral as consolidation from 1.1444 is still in progress. We'd expect downside to be contained by 1.1291 resistance turned support to bring rally resumption. Break of 1.1444 will extend the rise from 1.0339 low to 1.1615 resistance next. Meanwhile, break of 1.1291 will turn focus back to 1.1118 support.

In the bigger picture, the firm break of 1.1298 resistance further affirm medium term reversal. That is an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Further rise would be seen to 55 month EMA (now at 1.1776). Sustained break there will pave the way to 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 next. This will now remain the favored case as long as 1.1118 support holds.

Daily Pivots: (S1) 1.2900; (P) 1.2924; (R1) 1.2955; More...

Intraday bias in GBP/USD remains neutral as consolidation from 1.3029 is in progress. While deeper retreat cannot be ruled out, downside should be contained above 1.2849 support to bring rise resumption. Break of 1.3029 should then send GBP/USD through 1.3047 to 61.8% projection of 1.2108 to 1.3047 from 1.2588 at 1.3168 next.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern that is still in progress. While further upside is now in favor, overall outlook remains bearish as long as 1.3444 key resistance holds. Larger down trend from 1.7190 is expected to resume later after the correction completes. And break of 1.2588 will indicate that such down trend is resuming.

Daily Pivots: (S1) 0.9617; (P) 0.9652; (R1) 0.9675; More......

No change in USD/CHF's outlook as price actions from 0.9551 are seen as a corrective move. Intraday bias stays neutral at this point. Outlook remains bearish as long as 0.9777 resistance holds. Below 0.9620 minor support will turn bias back to the downside first. Further break of 0.9551 will extend the decline from 1.0342 to 0.94443 key support level. At this point, we'd expect strong support from there to bring rebound. Meanwhile, break of 0.9777 will now indicate short term reversal, on bullish convergence condition in 4 hour MACD.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.

Daily Pivots: (S1) 112.85; (P) 113.14; (R1) 113.57; More...

A temporary top is in place at 113.68 as USD/JPY lost upside momentum. Intraday bias is turned neutral for consolidation. Downside of retreat should be contained by 111.72 support to bring another rally. Above 113.68 will target 114.36 resistance next. Decisive break there will confirm our bullish view that corrective pull back from 118.65 has completed at 108.12. In that case, further rally would be seen to retest 118.65.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85.