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'Canadian growth is slowing from a blistering end to last year and start of 2017, but is still in healthy enough territory to chew up what's left of economic slack.' —Nick Exarhos, CIBC

Canada's economic output posted the sixth straight month of expansion in April, contributed by improvements in most sectors. Statistics Canada reported on Friday that the country's GDP rose 0.2% in the fourth month of the year, following March's 0.5% gain and matching analysts' forecasts. The increase was mainly driven by services activity, with a 0.5% advance in both retail sales and wholesale trade. The report showed that 14 of 20 sectors expanded in April. On a yearly basis, the Canadian economy expanded 3.3% in the reported month, its strongest growth pace in almost three years. The largest annual increase of 5.6% was registered in the warehousing and transporting sector, supported by a rise in rail transport. Strong data suggested the Bank of Canada would be more optimistic amid the country's strong economic performance. Moreover, the economy is expected to reach full employment by the end of the year, which is one more reason to lead to a rate hike. Stephen Poloz, the BoC Governor, pointed out that two previous rate cuts did their job and the economy was now on a firmer ground despite lower oil prices.

The EUR/USD has made 3 consecutive bullish candles on daily(see the mini chart on the main chart) and the first candle from those 3 is a bullish marubozu that usually suggests a continuation. We see that the continuation has already happened but the W H3 hasn't been reached so we might see a pullback before the next leg up. We have 2 POC zones where the price could possibly reject. POC 1.3370-84 (D L4, 38.2, EMA89, ATR pivot) marks the important L4 camarilla support zone while POC2 1.1350-65 ( 61.8, ATR Low, D L5 historical buyers) marks the final support zone before we see a deeper retracement towards W L4 camarilla that might slow the uptrend continuation. If the price rejects from any POC watch for 1.1445 and 1.1500.

Cable is consolidating under fresh high at 1.3029, where last week's steep ascend peaked. Today's action is still holding within narrow range, so far contained by psychological 1.3000 support (top of thick hourly cloud), but stronger correction of 1.2588/1.3029 could be anticipated. Strongly overbought slow stochastic on daily chart suggests further easing, with notion being supported by Hanging Man candle formed on Friday. Loss of 1.3000 handle would open at 1.2944 (Friday's low) and strong support at 1.2910 (daily cloud top). Dips should ideally find support here, however, deeper pullback towards 1.2860 (Fibo 38.2% of 1.2588/1.3029) and 1.2836 (30SMA) cannot be ruled out. Bull-cross of 10/20SMA's underpins the action at 1.2808.

Res: 1.3029, 1.3047, 1.3081, 1.3120
Sup: 1.2990, 1.2977, 1.2944, 1.2910

EUR/USD

Current level - 1.1411

The intraday outlook is bearish below 1.1445 peak, for a break through 1.1385, towards 1.1290 major support. The latter is expected to provide a reliable base for another leg upwards, to 1.1550 area.

USD/JPY

Current level - 112.53

My outlook here is bearish below 113.00 resistance, for another corrective leg to 111.30 before advancing towards 114.35.

GBP/USD

Current level - 1.2994

The pair is in a consolidation pattern between 1.3050 and 1.2950 and a break through the lower bounday will target 1.2860 static support.

The Euro is holding in extended consolidation under fresh one-year high at 1.1445wher renewed upside attempts on Friday were rejected. Consolidation is so far holding within narrow range, but deeper correction of last week's strong rally is likely. Slow stochastic is turning south in deep overbought territory on daily chart and RSI is also reversing after brief probe into overbought zone. Firm break below 1.1400 handle is needed to signal pullback and expose supports at 1.1368 (Fibo 23.6% of 1.1188/1.1445/hourly cloud base) and more significant 1.1320 (Fibo 38.2%) and 1.1300 (former tops). Dip-buying scenario remains in play, as broader uptrend from 1.0340 (2017 low) is looking for further extension higher. Deeper pullback would face next supports at 1.1280 zone (converged daily Tenkan-sen/Kijun-sen) and needs to find ground above 1.1243 (20SMA/Fibo 61.8%) to keep bulls in play.

Res: 1.1426, 1.1445, 1.1500, 1.1550
Sup: 1.1368, 1.1320, 1.1300, 1.1280

Weekly

    •    Last Candlesticks pattern: Marubozu
    •    Time of formation: 14 Nov 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 15 Feb 2017
    •    Trend bias: Down

USD/JPY – 112.84

The greenback has continued trading with a firm undertone, suggesting the rebound from 108.82 low is still in progress, hence upside risk remains for marginal gain from there, however, loss of upward momentum should prevent sharp move beyond 113.00 and bring retreat later, below 111.73 support (Friday’s low) would suggest top is possibly formed, bring weakness towards 110.95 support but a daily close below the Kijun-Sen (now at 110.88) is needed to add credence to this view, bring subsequent weakness to 110.65 and later towards 110.00.

On the upside, above 113.10-20 would signals the fall from 114.39 has ended at 108.82 and upside risk remains for the rebound from there to extend further gain to 113.50 and later towards 114.00. Having said that, as broad outlook remains consolidative, upside should be limited and said resistance at 114.39 should hold. Only a break above said resistance at 114.39 would shift risk to upside and signal another leg of rise from 108.13 low is underway for headway to 114.60-65, then towards resistance at 115.51. 
 
Recommendation : Hold short enter at 112.25 for 110.25 with stop above 113.25.

On the weekly chart, last week’s rise formed another white candlestick (3rd in a row), suggesting the rebound from 108.82 is still in progress and further gain from here cannot be rule out, however, as broad outlook remains consolidative, reckon upside would be limited to 113.85 and resistance at 114.39 should hold. Only a break above resistance at 114.39 would signal another leg of rebound from 108.13 low is underway for test of resistance at 115.51 but a weekly close above there is needed to signal the fall from 118.66 top has ended at 108.13, then headway to 116.00-10 would follow but resistance at 117.53 should hold from here.

On the downside, whilst pullback to 111.90-95 cannot be ruled out, support at 110.95 should hold and bring another rebound. Below 110.95 would suggest the rebound from 108.82 has ended, bring weakness to 110.00 and possibly towards the lower Kumo (now at 109.51) but support at 108.82 should remain intact, bring further consolidation. Below 108.82 would bring retest of 108.13 but break there is needed to retain bearishness and signal the fall from 118.66 top has resumed and extend decline towards previous resistance at 107.49.

EURUSD maintains the strong bullish phase that took place in the final week of June. The pair paused its rally after reaching its highest level since early May 2016 at 1.1444 on June 29. The 50-day moving average is still heading north after a bullish crossover that took place on May 22 at 1.0816.

Following the strong upside move last week, the market reached overbought conditions, as indicated by the RSI. It is currently showing that momentum has retreated slightly below 70 but is within sight of overbought territory. The fading upside momentum suggests that a consolidation phase is likely for EURUSD in the short term. A move back below 1.1130 would indicate that the short-term bullish phase has ended.

Any upside moves would target 1.1615, the high from May 2016. A break of this major resistance level would open the way towards the August 2015 high at 1.1713.

Since the market is quite overextended, a pullback is possible. In this case, support is located around 1.1280. This level has acted as a resistance area in the past and is thus considered to be an important level to the downside. Below this, the levels at 1.1130 and 1.1015 are expected to provide support. Finally, the level at 1.0816 is important support since it converges with the 200-day MA.

After such a sharp rally in recent days, EURUSD is likely to take a breather, providing more risk to the downside than to the upside in the near term. But looking at the bigger picture, the uptrend that started from the January 3 low at 1.0340 to the June 29 high of 1.1444 is still intact. Trend indicators are giving a bullish market structure, as prices are above the daily Ichimoku cloud and there was a bullish crossover of the 50-day MA with the 200-day MA. Meanwhile, the 50-day MA is still rising.

Gold is holding a negative bias in the short-term as prices approach the June 26 low of 1235.74. The market has been making lower highs and lower lows since falling from the June 6 peak of 1295.97.

The 20-period moving average has crossed below the 50-period MA, giving a bearish signal. The short-term moving average is pointing down, highlighting the bearish view. Meanwhile, the RSI is below 50 in bearish territory, indicating there is a negative bias in the market. The oscillator has not crossed below 30, so gold is not oversold yet, leaving room for further downside.

The immediate target is the June 26 low of 1235.74. Breaking below this level would extend the downside move towards 1226.42 as the next support level. This was an area of congestion in the past. The next main support is located at the May 9 low of 1214.17

Overall, downside pressure is expected to remain strong in the near term as long as the market is trading below the 50-perdiod MA. Only a move above 1248.14 would weaken the bearish bias. This level is an important resistance area as it provided both resistance and support in the past. This is also where the 50-period MA converges. The next main resistance level comes in at 1258.73, a previous high (June 23) and also a support level in the past.

A move above the June 14 high of 1280.82 would cancel the short-term bearish view and this would open the way to re-test the June 6 high of 1295.97. From here, there is scope to resume the uptrend that took place from 1214.17 to 1295.97.

Today's Asian session saw the dollar broadly advancing relative to other majors, though its gains were limited in nature. China's Caixin manufacturing PMI positively surprised, pushing the yuan higher, while a negative backdrop could potentially form for the yen after Prime Minister Shinzo Abe's Liberal Democratic Party lost an election in Tokyo.

As Asian traders were completing their day, the dollar index was up two-tenths of a percent at 95.79. The index, which gauges the greenback against a basket of major currencies, hit a nine-month low of 95.47 during Friday's trading. The US currency suffered sizable losses last week against the euro, pound and the loonie after relatively hawkish comments by the European Central Bank, Bank of England and Bank of Canada heads.

Dollar/yen was last up four-tenths of a percent on the day at 112.81. Euro/dollar and pound/dollar were both down two-tenths of a percent with euro/dollar marginally below the 1.14 handle and pound/dollar at the 1.30 mark. Dollar/loonie was up more than two-tenths of a percent, eyeing the 1.30 handle.

The yen could be under pressure today after Prime Minister Shinzo Abe's party suffered a defeat in an election yesterday in Tokyo, the nation's capital. Tokyo elections have on occasion served as bellwethers for the outcome in the upcoming general elections. Adding to that the fact that the Bank of Japan is one of the few major central banks which has not yet signaled scaling back on its ultra-loose monetary policy, and a weaker yen further ahead has a greater probability of materializing.

In positive news out of Japan, its Tankan large manufactures and non-manufacturers indices both showed an improvement during the second quarter of the year. The yen posted some minor gains relative to the greenback as the data became public.

The June Caixin manufacturing PMI out of China added to last week's upbeat official PMI figures. Specifically, it came in at 50.4, beating forecasts for a reading of 49.5, while it was above May's 49.6. The Chinese currency benefitted upon the release of the figures. Dollar/yuan last traded slightly up on the day at 6.78. The pair contracted (yuan has been strengthening during the past) in the previous four days.

China and Hong Kong are today launching a 'Bond Connect' scheme is an effort to develop mutual capital markets access.

The commodity-linked Australian and New Zealand dollars were both trading down two-tenths of percent versus their US counterpart with the close of Asian markets at $0.7674 and $0.7314 respectively. The aussie failed to receive a boost after the positive figure for Chinese manufacturing PMI. Australia and China trade heavily with each other.

In other Australian news, the country's central bank will be holding its monthly policy meeting tomorrow during which it is expected to maintain its key benchmark rate at the record low of 1.5%.

Turning to commodities, gold hit a one-and-a-half-month low of $1234.72 an ounce in today's trading. It was last down two-tenths of a percent, just shy of the $1235 level. WTI and Brent crude last traded at $46.29 and $48.99 a barrel respectively, both up five-tenths of a percent.

As regards the rest of the day, manufacturing PMI figures out of the US, eurozone and the UK will be gathering the forex market participants' attention. Bank of England Governor Mark Carney is also scheduled to speak at 12:00 GMT.

Summary

Asian markets were generally higher, but with little to push the markets, they drifted a bit directionless into mid-day break. USD/JPY started the day with a gap open at 112.06 after PM Abe’s LDP party suffered a blow in the Tokyo Governor elections. Chatter is there will be a re-shuffle of his cabinet by August and he may have to push back planned sales tax hike from Oct of 2019. The Q2 Tankan survey did little to shift the yen, as data came in a bit better than expected and improved from Q1. Japan’s final manufacturing PMI also confirmed expansion.

The China/Hong Kong bond connected opened today. China Caixin manufacturing reached a 3-month higher which helped to bring the Shanghai Composite back into positive territory. PBOC again skipped open market operations for the 7th consecutive day. Financial press speculated on the $7.2B in dividends that offshore Chinese companies will payout in July and its impact on the yuan. Former PBOC member Yu Yongding commented thathigh domestic savings rates, overwhelming concentration of debt among state-owned enterprises, large FX reserves and the largely closed capital account as factors preventing crisis scenarios.

Economic data in Australia showed a dip in May building approvals, even lower than expectations. PMI manufacturing rose to 55 remaining in expansion territory. AUD/USD remained in a tight range; with the next big catalyst on July 4th when the RBA will hold is interest rate decision. They are expected to keep rates on hold at 1.5%.

Politics

(JP) Incumbent Tokyo Gov Yuriko Koike won landslide victory in election with her Tokyo Residents First Party securing 49 out of the 127 seats, and will hold a majority 79 along with its allies including the Komeito party

(JP) Japan PM Abe may reshuffle cabinet as early as August - Japan press

Key economic data

(JP) JAPAN Q2 TANKAN LARGE MANUFACTURING INDEX: 17 V 15E; MANUFACTURERS OUTLOOK: 15 V 14E; ALL-INDUSTRY CAPEX: 8.0% V 7.2%E

(CN) CHINA JUN CAIXIN PMI MANUFACTURING: 50.4 V 49.8E (3-month high)

(AU) AUSTRALIA JUN AIG MANUFACTURING INDEX: 55.0 V 54.8 PRIOR (9TH CONSECUTIVE MONTH OF EXPANSION

(AU) AUSTRALIA JUN CORELOGIC HOUSE PRICES M/M: 1.8% V -1.1% PRIOR

(AU) AUSTRALIA MAY BUILDING APPROVALS M/M: -5.6% V -1.3%E; Y/Y: -19.7% (9TH CONSECUTIVE DECLINE) V -14.1%E

(JP) JAPAN JUN FINAL PMI MANUFACTURING: 52.4 V 52.0 PRELIM

(KR) SOUTH KOREA JUN PMI MANUFACTURING: 50.1 V 49.2 PRIOR

(AU) AUSTRALIA JUN MELBOURNE INSTITUTE INFLATION M/M: 0.1% V 0.0% PRIOR; Y/Y: 2.3% V 2.8% PRIOR

Speakers and Press

China

(CN) Former PBOC member Yu Yongding: Deleveraging poses more of a risk of deflation to China than financial crisis

(CN) PBOC Vice Gov Pan Gongsheng: Bond link shows China's will to enhance Hong Kong as a financial hub; foreign issuers have strong interest in yuan bonds in China

Japan

(JP) Japan Fin Min Aso may be in violation of minister code for purchasing golf membership - Japan press

(JP) Japan Chief Cabinet Sec Suga: Abe administration to continue prioritizing the economy

(JP) Nikkei explores BOJ outlook report expected on July 20th: inflation forecasts could be revised down to around 1% for FY17 from 1.4% in the April report, while FY18 could be lowered to ~1.5% from 1.7%

Asian Equity Indices/Futures (00:30ET)

Nikkei +0.2%, Hang Seng +0.1%, Shanghai Composite +0.0%, ASX200 -0.3%, Kospi -0.3%

Equity Futures: S&P500 +0.2%; Nasdaq +0.3%, Dax +0.2%, FTSE100 +0.1%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.1426-1.1403; JPY 112.57-111.97; AUD 0.7695-0.7667; NZD 0.7345-0.7315

Aug Gold -0.3% at 1,238/oz; Aug Crude Oil +0.3% at $46.19/brl; Sept Copper -0.1% at $2.70/lb

(CN) PBOC skips open market operations (7th straight skip)

(CN) PBOC SETS YUAN MID POINT AT 6.7772 V 6.7744 PRIOR

(KR) Bank of Korea (BOK) sells KRW0.70T in 6-month monetary stabilization bonds; avg yield 1.33% v 1.30% prior

USD/CNY Analysts suggest the $7.8B in dividend payments due by China's offshore listed companies in July will put downward pressure on the yuan

Asia equities notable movers

Australia

Fairfax Media, FXJ.AU Confirms it has ended private equity talks and plans to proceed with domain separation; Guides FY17 EBITDA A$262-266M; -10.3%

Japan

Daiichi Sankyo, 4568.JP Top-line results from Phase 3 Global Clinical Development Program evaluating Mirogabalin in pain syndromes met primary endpoint; -2.3%

Hong Kong/China

Casino names all lower after June Macau gaming rev was lower than expected, attributed to China President Xi’s visit to Hong Kong the last week of the month

China Jicheng Holdings,1027.HK Names in David Webb's "50 HK stocks not to own"; -23%

Hangzhou Tigermed Consulting,300347.CN Guides H1 Net CNY109-125M, +40-60% y/y; +10%