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While yen's free fall continues in early US session, Dollar stabilizes mildly. Economic data from US are supportive. Initial jobless claims rose 2k to 244k in the week ended June 24. That's the 121 straight week of sub-300k reading. Four week moving average dropped 2.75k to 242.25k. Continuing claims rose 6k to 1.948m in the week ended June 17. It stayed below 2m mark for 11 straight week. Q1 GDP growth was revised up to 1.4% annualized, from 1.2% annualized. GDP price index was revised down to 1.9%, from 2.2%. Overall, there is no sign in bottoming in the greenback yet and it's still vulnerable to further selloff against Euro, Sterling, Franc, Canadian and Australian. For the week so far, Sterling is the strongest, followed by Euro and then Canadian.

BoE Haldane: Need to look seriously at raising rate

In UK, BoE chief economist Andy Haldane said today that the central bank needs to "look serious at the possibility of raising interest rates to keep the lid of those cost of living increases". He noted that "for now we are happy with where the rates are", but "we need to be vigilant for what happens next". BoE's monthly report on money and credit showed that unsecured consumer credit rose by 10.3% yoy in May, five times as fast as earnings growth. The GBP 1.7b growth in May alone was faster than the average of GBP 1.5b average in the past six months. That is seen by economists as another reason for BoE to raise interest rates, to curb consumer lending. Released from UK, mortgage approvals was unchanged at 65k in May.

ECB expected to announce tapering in September or October

ECB's current EUR 60b per month asset purchase program will end by the end of the year. Markets are now expecting the central bank to announce tapering in September, by latest October. Some expect the tapering to last for a year till December 2018. Meanwhile, opinions on the timing of ECB's first rate hike various. According to a Reuters survey, 90% of currency traders expected a hike in the first quarter of 2018. But some expect that to happen in early 2019.

Sentiment indicators in Eurozone generally improved. Business climate rose to 1.15, up from 0.9, beat expectation of 0.93. Economic confidence rose to 111.1, up from 109.2, beat expectation of 109.5. Industrial confidence rose to 4.5, up from 2.8, beat expectation of 2.8. Services confidence rose to 13.4, up from 13.0, beat expectation of 13.4. Consumer confidence was finalized at -1.3. Released from Germany, CPI rose 0.2% mom, 1.6% yoy in June, up from prior -0.2% mom and 1.5% yoy, beat expectation of 0.0% mom, 1.4% yoy. Gfk consumer confidence rose to 10.6, above consensus of 10.4.

BoJ Harada: Too early to do anything

BoJ board member Yutaka Harada said today that a weaker yen will stimulate the economy and accelerate inflation. Meanwhile, if the 2% inflation target comes into sight, BoJ might reduce or even top ETF purchases. However, for the moment, it's still too early to do anything as inflation is far off the target. On the other hand, Harada believes the current stimulus is "already sufficiently bold" and he's confident that inflation will gradually approach 2%. Released from Japan, retail sales rose 2.0% yoy in May,

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 111.96; (P) 112.18; (R1) 112.55; More...

USD/JPY rises to as high as 112.91 in early US session and touching near term channel resistance. Intraday bias stays on the upside. Sustained break of the channel will argue that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. On the downside, below 111.82 minor support will turn bias neutral first. If that happens, we'll assess the near term outlook alter.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Economic Indicators Update

Spot Gold returned below daily cloud after the third continuous strong rejection at $1253 resistance zone.

Three daily candles with long upper wicks weigh on near-term structure, after rallies repeatedly failed to close above cracked 100SMA ($1249).

Near-term bias shifts lower on fresh bearish acceleration that pressures support at $1241 (lows of 27/21 June) and may extend lower for retest of key near-term support at $1236 (26 June low / 200SMA).

Newly created 10/100SMA bear-cross maintains fresh bearish pressure, with today's close below daily cloud to confirm negative stance.

Cloud is spanned between $1246/49 and now acts as resistance, guarding upside rejection levels and upper pivots at $1253/54.

Alternative scenario requires close above daily cloud and regain of $1253/54 barriers to re-open key barrier at $1258 (Fibo 38.2% of $1296//$1236 descend / 55SMA / double upside rejection).

Res: 1246; 1249; 1254; 1258
Sup: 1243; 1241; 1236; 1230

Thursday may not be dominated by appearances from prominent central bankers like the previous two were but we're continuing to see markets focus on what's been said, with the euro and sterling both pushing higher again.

An apparent acceptance by the heads of the UK and European central banks that tighter monetary policy may be appropriate in the not too distant future is once again supporting the currencies this morning, with the euro having hit fresh 13-month highs against the dollar and the pound rising above 1.30 briefly, also against the greenback.

It's clear that both Mario Draghi and Mark Carney aren't entirely behind the idea that monetary policy should be tightened any time soon but comments in recent days appear to suggest they're reluctantly accepting the growing consensus within their central banks and preparing markets for a potential move. I still believe that a further reduction in bond buying from the ECB is much more likely than a rate hike from the Bank of England this year but given how markets were positioned on the latter only a couple of weeks ago, the market response is probably appropriate.

While the euro now looks likely to add to its gains in the coming weeks - with 1.16 being the next key technical level once 1.1425-1.1450 is overcome – the new found bullishness in the pound will be tested, with 1.30 against the dollar representing a big psychological test. We did briefly breach this level in the middle of May but the move failed to generate any real momentum and fell back towards 1.26 in the following weeks. There does appear to be more momentum with the move on this occasion which could aid the push but the pair did fail at the first time of asking this morning.

The absence of central bankers today will put more focus back on the data today, with the final revision of US first quarter GDP being released, alongside jobless claims. With investors already doubting whether the Fed will raise rates again this year, it will be interesting to see how they respond should we get a downward revision in the first quarter figure.

The global currency markets were volatile and painfully unpredictable during Wednesday's trading session, with power pairs causing havoc as central bank heavyweights defied market expectations by sounding rather hawkish. Euro bulls rampaged while Sterling received a new lease of life followingspeculation that Europe and Britain's central banks areplanning to end an era of easy money. While the foreign exchange markets remained chaotic, the prospect of central banks scaling back monetary policiessupported risk sentiment. Asian shares marched higher during Thursday's trading session following Wall Street's impressive rebound as participants rediscovered their confidence over the global economy.

Sterling/Dollar clips 1.3000

Sterling staged a market-shaking rebound on Wednesday, with the upside invading Thursday's trading session after Bank of England Governor Mark Carney dished out a hawkish surprise. Bullish investors were swift in gobbling up Carney's hawkish remarks that 'some removal of stimulus is likely to become necessary' to send the GBPUSD towards 1.3000. While Sterling is likely to edge higher in the short term as investors overlook Brexit-related uncertainty and daydream over the possibility of higher rates, I still believe the upside remains limited.

It should be kept in mind that it was only last week that Carney stated that 'now was not yet the time' to raise interest rates. While raising interest rates may put a lid on inflation, it has the ability to negatively impact the fragile UK economy while also denting business confidence and pressuring consumers. Will the Bank of England raise interest rates while the UK economy is battling ongoing Brexit woes? Time will tell

EURUSD hits yearly high

I find it quite interesting how at the start of 2017 it was all about the EURUSD parity dream as political uncertainty in Europe and a Trump-fueled Dollar rally left the currency vulnerable to heavy losses. Six months later, the absence of political risk in Europe, a Dollar that lacks attitude and QE tapering speculations have sent the EURUSD to a yearly high at 1.1435. Although ECB sources attempted to quell the heated taper expectations on Wednesday, price action currently suggests that investors remain optimistic over the ECB scaling back monetary policy in the future. From a technical standpoint, the EURUSD is heavily bullish on the daily charts. The breakout above 1.1400 could encourage a further incline higher towards 1.1500.

Dollar sulks in the background

The Dollar tumbled to a new year-low on Thursday after a delayed healthcare bill vote heavily weighed on the prospects for tax cuts and infrastructure spending. With the IMF’s growth downgrade for the US economy shattering any surviving remnants of the Trump rally, the Dollar remains exposed to further downside losses. Although Fed policymakers remain optimistic over the health of the US economy the IMF and investors think otherwise and such can be reflected in the bearish price action of the Dollar Index. Who would have thought that after eight months the Dollar would relinquish its Trump rally gains and then some?

Participants may direct some of their attention towards the pending Final US GDP for Q1which could make or break the Dollar further this afternoon.From a technical standpoint, the Greenback is heavily pressured on the daily charts and the breakdown below 96.00 should encourage a decline towards 94.00.

EUR/GBP         –  0.8787

EUR/GBP – The major (A)(B)(C)-(X)-(A)(B)(C) correction from 0.9805 is unfolding and 2nd (A) has possibly ended at 0.6936.

Although the single currency edged higher to 0.8882 yesterday, lack of follow through buying and the subsequent retreat suggest consolidation below this level would be seen and initial downside risk is for pullback to support at 0.8719, however, still reckon downside would be limited and support at 0.8652 should hold, bring another rise later. Above said resistance at 0.8882 would signal the erratic rise from 0.8304 low is still in progress and may extend gain to 0.8940-50 (50% Fibonacci retracement of 0.9576-0.8304) but loss of upward momentum should prevent sharp move beyond 0.9000 psychological level and price should falter below 0.9090-00 (61.8% Fibonacci retracement) and bring retreat later.

Our latest preferred count is that the wave V of a 5-wave series from 0.5682 ended at 0.9805 earlier and major from there has possibly ended at 0.8067 as A-B-C-X-A-B-C. We are keeping our view that the entire correction from 0.9805 has possibly ended at 0.7756 and as labeled as the attached daily chart and impulsive move from 0.9084 has ended at 0.7756 as a 5-waver which marked either the (C) wave or the A leg of (C), a daily close above resistance at 0.8831 would suggest (C) leg has ended and headway towards 0.9084.

On the downside, whilst initial pullback to 0.8735-40 cannot be rule out, reckon 0.8680-90 would limit downside and bring another rise later. A daily close below support at 0.8652 would suggest top is possibly formed and risk weakness towards 0.8600-05 but reckon downside would be limited to 0.8550 and previous support at 0.8524 should hold from here, bring rebound later. 
 
Recommendation: Buy at 0.8680 for 0.8880 with stop below 0.8580

Euro's long term uptrend started in Feb 1981 at 0.5039 and is unfolding as a (A)-(B)-(C) move with (A): 0.8433 (Feb 1993), (B): 0.5682 (May 2000) and impulsive wave (C) should have ended at 0.9805 with wave III ended at 0.7254 (May 2003), triangle wave IV at 0.6536 (23 Jan 2007) and wave V as well as wave (C) has ended at 0.9805.

We are keeping an alternate count that only wave III ended at 0.9805 and the correction from there is the wave IV and may extend weakness to 0.7700, however, it is necessary to see a daily close above resistance at 0.9143 would change this to be the preferred count.

AUDJPY picked up from where it left yesterday, adding to its gains to record a three-month high of 86.44. The pair currently looks set for its fifth straight day of gains.

The RSI is well into bullish territory and maintains a steep positive slope. It is noteworthy though, that at 73 it has exceeded its overbought threshold (at 70). This might be an indication that the recent uptrend is overextended.

The area around 86.50 has been a heavily congested one in previous months and could provide resistance. Further up, the 87.00 handle might act as a psychological barrier, while a break above would shift focus to the four-month high of 87.48 from March 16.

On the downside, the 61.8% Fibonacci retracement at 85.60 (February 16 – April 19 downleg) could offer support. Should this be violated, the 85.00 mark and 50.0% Fibonacci at 84.81 might form another support area.

In the bigger picture, the recent uptrend leading the price comfortably above the 50- and 200-day moving averages (MAs) has reinforced the bullish outlook which was in danger of turning neutral. Also notice that both MAs are currently upward sloping.

Summing up, both the short- and medium-term outlooks are bullish at the moment.

The DAX index has reversed directions in the Thursday session, dropping 0.36%. Currently, the DAX is at 12,607.50. On the release front, German GfK Consumer Climate improved to 10.6, beating the estimate of 10.4. Later in the day, Germany releases Preliminary CPI, with an estimate of a flat 0.0%. In the US, today's key event is Final GDP, which is expected to gain, 1.2%. As well, unemployment claims are expected to remain at 241 thousand. On Friday, Germany releases Retail Sales and the eurozone publishes CPI Flash Estimate. The US will publish UoM Consumer Sentiment.

Mario Draghi was likely unprepared for the sharp reaction on the currency markets to his remarks at the ECB forum in Portugal. EUR/USD has rallied this week, climbing 1.9% on Draghi's hawkish comments. Draghi presented an optimistic view of the euro-area, saying that the recovery was broad and shrugged off weak inflation levels. Draghi said that the ECB's stimulus program was needed for now, but would be gradually withdrawn once inflation moved higher. Draghi's comments did not appear to be a major change from previous statements, as the ECB has said time and time again that the bank has no plans to remove stimulus until inflation levels in the eurozone are closer to the ECB's target of 2 percent. However, the markets clearly think otherwise, as Draghi's comments have raised speculation that the ECB is planning to tighten policy. After the euro jumped, the ECB beat a hasty retreat, as sources said that the markets had “misinterpreted” Draghi's remarks. This impeded the euro's rally, but only briefly. The ECB has consistently said that it would not reduce stimulus until inflation moves closer to the ECB's target of 2%, but the message the markets appear to have heard is that the long war on inflation has been won, so it's only a matter of time before the ECB wraps up its monetary stimulus. If investors remain convinced that the ECB's easy money policy is on its way out, European stock markets could lose ground.

The German economy continues to perform well, as the labor market is strong, exports are up and consumer demand is solid. Still, Germany has not been immune to low inflation levels, which have hampered economies in Europe, Japan and North America (the UK is one notable exception). German CPI, the primary gauge of consumer inflation, has not posted a gain since March, and the estimate for the June report stands at a flat 0.0%. The strong economy and the ECB's loose monetary policy, inflation remains stubbornly low. One key factor in this is falling oil prices, which have also pushed energy stocks lower, and this has weighed on the DAX as well. Some analysts have projected that the ECB will not raise interest rates before 2019, as the eurozone economy is simply not strong enough to withstand higher interest rates in the near future.

It's report card day for the US economy, with the release of Final GDP for the first quarter later on Thursday. The economy is expected to grow 1.2%, but there are worrying signs that the GDP might miss this target. Recent US economic data has been softer than expected, notably construction and manufacturing reports. US durable goods releases were weak in May. Core Durable Goods broke a streak of two straight declines, but the weak gain of 0.1% missed expectations. Durable Goods declined 1.1%, its sharpest decline since June 2016. The slowdown in orders of business equipment could weigh on second quarter growth. Last week, it was the turn of construction numbers to disappoint, as Housing Starts and Building Permits both missed expectations. Consumer spending has also been softer than expected, and if Final GDP falls short of the modest estimate of 1.2%, investor sentiment could sour and send the stock markets lower.

The euro has posted gains for a third straight day, as the pair is up 0.32% in the Thursday session. In Germany, GfK Consumer Climate improved to 10.6, beating the estimate of 10.4. Later in the day, Germany releases Preliminary CPI, with an estimate of a flat 0.0%. In the US, Final GDP is expected to gain 1.2%, while unemployment claims are forecast to remain at 241 thousand. On Friday, Germany releases Retail Sales and the eurozone publishes CPI Flash Estimate. The US will publish UoM Consumer Sentiment.

The Draghi rally continues on Thursday, as the euro has punched past the 1.14 level for the first time since June 2016. The euro has jumped 1.9% this week, buoyed by hawkish comments by ECB President Mario Draghi at the ECB forum in Portugal. Draghi presented an optimistic view of the euro-area, saying that the recovery was broad and shrugged off weak inflation levels. Draghi said that the ECB's stimulus program was needed for now, but would be gradually withdrawn once inflation moved higher. Draghi's comments did not appear to be a major change from previous statements, but the markets thought otherwise, as speculation rose that the ECB was planning to tighten policy. After the euro jumped, the ECB beat a hasty retreat, as sources said that the markets had “misinterpreted” Draghi's remarks. This impeded the euro's rally, but only briefly. The ECB has consistently said that it would not reduce stimulus until inflation moves closer to the ECB's target of 2%, but the message the markets appear to have heard is that the long war on inflation has been won, so it's only a matter of time before the ECB wraps up its monetary stimulus. Unless Draghi does more to convince the markets that they have indeed overreacted, the euro rally could continue.

Investors are casting a nervous glance at Thursday, as the US releases Final GDP for the first quarter. The economy is expected to grow 1.2%, but there are worrying signs that the economy might miss this target. Recent economic data has been softer than expected, notably construction and manufacturing reports. US durable goods releases were weak in May. Core Durable Goods broke a streak of two straight declines, but the weak gain of 0.1% missed expectations. Durable Goods declined 1.1%, its sharpest decline since June 2016. The slowdown in orders of business equipment could weigh on second quarter growth. Last week, it was the turn of construction numbers to disappoint, as Housing Starts and Building Permits both missed expectations. Consumer spending has also been softer than expected, and if Final GDP falls short of the modest estimate of 1.2%, the dollar could respond with losses.

USD/CAD – 1.3012

USD/CAD – Wave v ended at 0.9407 and a-b-c correction may extend gain to 1.4700

The greenback met renewed selling interest at 1.3348 and has dropped sharply since, adding credence to our bearish view that the decline from 1.3794 top is still in progress and bearishness remains for test of previous support at 1.2969, however, a sustained breach below there is needed to retain downside bias and suggest the rebound from 1.2461 has ended at 1.3794 (tentatively wave b top), hence further weakness to 1.2900 and later 1.2850-55 would be seen but near term oversold condition should prevent sharp fall below previous support at 1.2763, risk from there has increased for a rebound later.

We are keeping our view that the wave b from 1.0657 (a leg top) has possibly ended at 0.9633 with (a): 0.9800, wave (b): 1.0447 and wave c at 0.9633, the subsequent rise from there is now treated as wave c exceeded indicated upside target at 1.3770-80 and 1.4000 and wave (3) has possibly ended at 1.4690 and wave (4) correction has commenced for retracement back to 1.2832 support, then 1.2410-20.

On the daily chart, our latest preferred count remains that the A of (B) rally from 0.9059 low (7 Nov 2007) unfolded into an impulsive wave with i: 0.9059-1.0380, ii ended at 0.9819, iii at 1.3019 followed by triangle wave iv at 1.2026 , then wave v formed a top at 1.3066 and also ended the wave A. The wave B is unfolding as an double three a-b-c-x-a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c at 1.0784, followed by wave x at 1.1725, another set of a-b-c unfolded with 2nd a at 0.9931, 2nd b at 1.0674. the 2nd c has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3900 had been met and gain to 1.4700 would follow.

On the upside, whilst initial recovery to 1.3090 cannot be ruled out, reckon upside would be limited to previous support at 1.3165 (now resistance) and bring another decline later. Above 1.3260-65 would defer and risk a stronger rebound to 1.3300 but said resistance at 1.3348 would remain intact, bring another decline later.

Recommendation: Sell at 1.3150 for 1.2950 with stop above 1.3250.

Longer term - The selloff from 1.6194 (21 Jan 2002) to 0.9059 (07 Nov 2007) is viewed as (A) wave which is a 5-waver as labeled on the monthly chart as below, the subsequently rally is labeled as (B) with impulsive A leg of (B) ended at 1.3066, wave B of (B) is unfolding which has either ended at 0.9407 or would extend one more fall but downside should be limited to 0.9200 and 0.9000 should hold.

EURUSD

The EURUSD continued its bullish momentum yesterday topped at 1.1390 and hit 1.1419 earlier today in Asian session. The bias remains bullish in nearest term testing 1.1425. A clear break above that area could trigger further bullish pressure testing 1.1500 region before targeting 1.1615 area. Immediate support is seen around 1.1350. A clear break below that area could lead price to neutral zone in nearest term testing 1.1300 – 1.1285 region but overall I remain bullish and any downside pullback should be seen as a good opportunity to buy.

GBPUSD

The GBPUSD continued its bullish momentum yesterday topped at 1.2971. The bias remains bullish in nearest term testing 1.3050. Immediate support is seen around 1.2915. A clear break below that area could lead price to neutral zone in nearest term but as long as stay above 1.2815 price is still in a bullish phase and any downside pullback should be seen as a good opportunity to buy. On the upside, a clear break and daily close above 1.3050 would activate my bullish mode.

USDJPY

The USDJPY was indecisive yesterday. Price attempted to push lower, bottomed at 111.83 but whipsawed to the upside and closed higher at 112.32. There are no changes in my technical outlook. The bias remains bullish in nearest term testing 113.00 region. Immediate support is seen around 111.78/45 area. A clear break back below that area could lead price to neutral zone in nearest term but as long as stay above 110.65 price is still in a bullish phase. On the upside, a clear break and daily close above 113.00 would expose 114.30 region.

USDCHF

The USDCHF attempted to push higher yesterday topped at 0.9647 but closed lower at 0.9597. The bias remains bearish in nearest term testing 0.9550 – 0.9500 area. However, from a daily chart perspective as you can see on my daily chart below, 0.9550 – 0.9450 region is a major support area, which is a good place to buy. Immediate resistance is seen around 0.9647 (yesterday’s high). A clear break above that area would interrupt the bearish phase testing 0.9765 region.