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European Central Bank President Draghi was certainly optimistic on inflation overnight!

Draghi's tone has given the market hope that he will taper the central bank's monetary stimulus and this in turn has sent the Euro forex pairs higher across the board.

With EUR/USD encountering resistance in the form of previous heavy chop (I don't really know how else to describe it. Take a look yourself), I have instead turned my focus to EUR/JPY and the double top level that we spoke about on the blog a couple of weeks ago.

EUR/JPY Daily:

BOOM! Yep, no resistance level is stopping that freight train from rolling straight through.

I'll let you zoom into the intraday charts on your own MT4 platform, but see how after the big bullish push, price has just traced sideways rather than pulling back? This is extremely bullish price action and if Draghi doesn't backtrack, then any short term pullbacks could be seen as juicy buy signals.

The Canadian dollar rose on Tuesday after oil prices rebounded from yesterday’s losses and the USD was lower on growth concerns. Central banks have taken the market reigns back from politicians as political risk has subsided following elections in France and the United Kingdom. The Trump administration will find it difficult to push its healthcare reform and has now pushed the vote back to after the Fourth of July. Rhetoric has been the monetary policy tool that has been used by all central banks with the Fed the only major body to go beyond words by raising rates by 25 basis points in June. The Bank of Canada (BoC) was a surprise addition with comments from Deputy Governor Carolyn Wilkins and Governor Stephen Poloz endorsing the growth of the Canadian economy and suggesting a reduction in stimulus would be forthcoming. The CAD has been trading above 1.32 since early March and is now below that level as US growth concerns rise.

European Central Bank (ECB) President Mario Draghi was confident that the current policies will bring back growth to the Euro zone. The bullish comments were part of annual central bank forum and pushed the EUR/USD to above 1.13 after the International Monetary Fund (IMF) downgraded US Growth in 2017 down to 2.1 percent. The disappointing durable goods data released on Monday continues to signal a disappointing second quarter and could put the Fed on hold despite the words from Fed speakers this week. The US central bank has said that their economic forecasts do not depend on the upcoming policies form the Administration and remain convinced that weak inflation is a temporary temporary issue.

Oil prices rose ahead of US weekly inventories on Wednesday. West Texas Intermediate surged almost 2 percent and was trading at $44. Organization of the Petroleum Exporting Countries (OPEC) delegates said that they do not intend to rush into further cuts at this time. Members of the organization will meet with Russia in July where other strategies to stabilize prices might be discussed.

The USD/CAD lost 0.489 percent on Tuesday. The currency is trading at 1.3176 after political turmoil in the US once again is putting pressure on the greenback. Consumer confidence remains high reached a 16 year high in June, but once again the paradox between the survey and actual retail sales continues. Yesterday’s durable goods orders release was a blow to manufacturing forecasts and could signal a worse than expected second quarter GDP. The IMF downgrade of US growth is also weighing the dollar down. The CAD is rising on oil prices and a soft dollar ahead of the weekly crude inventories tomorrow.

The Bank of Canada (BoC) is not expected to change its monetary policy in July despite the hawkish comments from BoC policy makers, but a rate hike later this year is definitely on the table. The timing will not be totally decided by Governor Poloz as the economy and the rate moves by the U.S. Federal Reserve will finalize the decision from the BoC with the October central bank meeting a possibility with December and January also in the running. Comments from Poloz as part of the ECB Forum in Portugal could offer a continuation of the hawkish rhetoric that was first expressed in Winnipeg in a radio interview.

Oil rose 1.905 percent in the last 24 hours. West Texas Intermediate is trading at $44.08 ahead of the API and weekly US trading inventories with drawdowns in the 2 million barrel range expected. A meeting in Russia next month with OPEC delegate will also bring more insight into what major producers could do beyond their current production cut agreement to boost prices. Rising production in the US, Canada, Brazil and even OPEC members Libya, Iran and Nigeria have kept the market well supplied despite the cuts.

Market events to watch this week:

Wednesday, June 28
10:30 am USD Crude Oil Inventories

Thursday, June 29
8:30 am USD Final GDP q/q
8:30 am USD Unemployment Claims

Friday, June 30
4:30 am GBP Current Account
8:30 am CAD GDP m/m

USD/CHF - 0.9643

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9685

Kijun-Sen level                    : 0.9685

Ichimoku cloud top                 : 0.9710

Ichimoku cloud bottom              : 0.9710

Original strategy :

Sell at 0.9680, Target: 0.9580, Stop: 0.9715

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9680, Target: 0.9580, Stop: 0.9715

Position : -

Target :  -

Stop : -

The greenback met renewed selling interest at 0.9738 and has dropped sharply on dollar’s broad-based weakness vs European currencies, suggesting the decline from 0.9771 top is still in progress and bearishness remains for further weakness towards recent low at 0.9613, however, break there is needed to provide confirmation that downtrend has resumed for further fall to 0.9575-80 and later towards 0.9550.

In view of this, we are looking to sell dollar on recovery as previous support at 0.9676 should turn into resistance and limit dollar’s upside, bring another decline. Above another previous support at 0.9692 would defer and risk a stronger rebound to 0.9715-20 but only break of resistance at 0.9738-43 would signal low is formed. 

GBP/USD - 1.2775

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2751

Kijun-Sen level                    : 1.2747

Ichimoku cloud top              : 1.2733

Ichimoku cloud bottom        : 1.2707

Original strategy :

Buy at 1.2710, Target: 1.2810, Stop: 1.2675

Position : - 

Target :  -

Stop : -

New strategy  :

Buy at 1.2710, Target: 1.2810, Stop: 1.2675

Position : -

Target :  -

Stop : -

As cable has risen again after finding renewed buying interest at 1.2706, suggesting the erratic rise from 1.2589 low is still in progress and upside bias is seen for further gain to 1.2780-85 (50% Fibonacci retracement of 1.2978-1.2589), then towards resistance at 1.2818, however, break of latter level is needed to retain bullishness and extend the aforesaid rise to 1.2830 (approx. 61.8% Fibonacci retracement). 

In view of this, would not chase this move here and would be prudent to buy cable on pullback as said support at 1.2706 should limit downside. Below 1.2680 would defer and suggest an intra-day top is formed instead, risk weakness to 1.2660 but support at 1.2640 should remain intact.

EUR/USD - 1.1294

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1244

Kijun-Sen level                  : 1.1240

Ichimoku cloud top             : 1.1196

Ichimoku cloud bottom      : 1.1180

Original strategy  :

Buy at 1.1260, Target: 1.1360, Stop: 1.1225

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1260, Target: 1.1360, Stop: 1.1225

Position : -

Target :  -

Stop : -

The single currency has rallied today and just broke above previous resistance at 1.1296, confirming recent upmove has resumed and bullishness is seen for further gain to 1.1335-40 (50% projection of 1.0839-1.1296 measuring from 1.1119), then towards 1.1360, however, near term overbought condition should prevent sharp move beyond 1.1400 (61.8% projection), risk from there is seen for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy euro on pullback as 1.1250-60 should limit downside. Below the Kijun-Sen (now at 1.1240) would defer and risk test of previous resistance at 1.1220 but break there is needed to confirm an intra-day top is formed, bring correction towards 1.1180-85 later. 

USD/JPY - 112.26

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 111.88

Kijun-Sen level                  : 111.83

Ichimoku cloud top             : 111.47

Ichimoku cloud bottom      : 111.41

Original strategy  :

Buy at 111.60, Target: 112.60, Stop: 111.25

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 111.60, Target: 112.60, Stop: 111.25

Position :  -

Target :  -

Stop : -

The greenback has surged again today on active cross-selling in yen, adding credence to our bullishness and signal the rise from 108.82 low is still in progress, hence further gain to 112.40-45 (50% projection of 108.82-111.79 measuring from 110.95) and possibly 112.75-80 (61.8% projection) would be seen, however, price should falter below 113.00-10 today, risk from there is seen for a retreat later.

In view of this, would not chase this rise here and we are looking to buy dollar on pullback but at a higher level as 111.50-60 should limit downside. Below minor support at 111.46 would defer and suggest top is possibly formed, risk weakness to 111.10-15, break there would confirm, then test of support at 110.95 would follow.

EUR/GBP - 0.8843

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term up

Original strategy  :

Buy at 0.8660, Target: 0.8860, Stop: 0.8620

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.8800, Target: 0.8900, Stop: 0.8760

Position : -

Target :  -

Stop : -

 
As the single currency has rebounded again after brief pullback, suggesting a retest of recent high at 0.8866 would be seen, however, break there is needed to confirm recent erratic upmove from 0.8304 low has resumed and extend further gain to 0.8880, then 0.8900, having said that, as broad outlook remains consolidative, reckon current c leg of larger degree wave b should be limited to 0.8950 and price should falter well below 0.9000 psychological level.

In view of this, we are looking to buy euro on pullback as 0.8800 should limit downside but one should exit on such rise. Below 0.8763 support would defer and prolong consolidation, risk weakness to 0.8730-35, however, reckon downside would be limited to 0.8719 support and bring another rebound later. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3190

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term down

 
Original strategy       :

Sold at 1.3295, Target: 1.3130, Stop: 1.3355

Position: - Short at 1.3295

Target:  - 1.3130

Stop: - 1.3355

 
New strategy             :

Hold short entered at 1.3295, Target: 1.3130, Stop: 1.3265

Position: - Short at 1.3295

Target:  - 1.3130

Stop:- 1.3265

As the greenback has dropped again today and broke below indicated support at 1.3191, adding credence to our view that the rebound from 1.3165 low has ended at 1.3348 last week, hence consolidation with downside bias remains for a retest of this support later. Looking ahead, a break below there is needed to confirm recent decline from 1.3794 top has resumed and extend fall to 1.3100-10 and later towards previous support at 1.3078.

In view of this, we are holding on to our short position entered at 1.3295. Above 1.3260-65 would risk test of resistance at 1.3308, break there would prolong consolidation and risk another bounce to 1.3348. Only a break of said resistance at 1.3348 would defer and risk a stronger rebound to previous support at 1.3387 (now resistance), however, still reckon upside would be limited to 1.3420-25 and price should falter well below resistance at 1.3471, bring another decline later.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

Gold has steadied on Tuesday, posting slight gains. In the North American session, spot gold is trading at $1247.95 per ounce. In economic news, CB consumer confidence rose to 118.9, beating the forecast of 116.1.

Investors are casting a nervous glance towards Thursday, as the US releases Final GDP for the first quarter. Preliminary GDP, which was released in May, came in at 1.2%, and this is the same estimate for the upcoming GDP report. 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.

Gold started the week with considerable losses, as risk appetite was strong. One reason for investor optimism is the positive tone emanating from the Federal Reserve. This month's rate statement was surprisingly upbeat and the optimistic sentiment about the economy has since been reiterated by Fed policymakers. The odds of a rate hike in December have risen to 62%; early last week, the odds were hovering 50%. The likelihood of a September rate hike, however remains low, at just 13%. The Fed has all but promised one more rate hike in 2017, but if the economy slows down and the Trump administration remains paralyzed by scandals, then the Fed could get cold feet and delay a rate hike until 2018. The GDP release later next week will be a key test for the economy, and the likelihood of a December hike could sag if GDP misses expectations.

The forex market was mostly driven by central bank speeches in today's European session. The euro was boosted on the optimistic remarks by the European Central Bank President Mario Draghi. The pound advanced following the release of the Financial Stability Report and the speech by Bank of England Governor Mark Carney. The dollar firmed up on the strong consumer confidence data, as markets await Janet Yellen's talk later today.

The ECB President's bullish stance on the recovery in the Eurozone and the prospects of rising inflation have helped the euro. Building on the strong momentum post the talk, euro/dollar broke above the 1.1300 handle, reaching a seven-and-a-half-month high, in late European trading session. Meanwhile, euro/pound climbed to an intra-day high of 0.8847. These positive comments may also add to speculation that the ECB is soon to start discussing its plan to normalize policy as it exits its monetary stimulus program.

Sterling got a lift against the greenback following the release of the Financial Stability Report. The BoE tightened its controls on bank credit by increasing its counter-cyclical capital buffer from 0% to 0.5% and it expects to further raise the buffer to 1% in November. While markets assume that the tighter fiscal policy may bring tighter monetary policy as well, the Governor said "Monetary policy is the last line of defence to address financial stability issues. In that regard, we don't need monetary policy to do our job." Pound/dollar rose to 1.2766, a one-week high as the European trading session was coming to a close.

The dollar index, a broader gauge of the US currency's strength, was last down 0.66% on the day. The greenback initially weakened against the yen in late European session amid the softer-than-expected home-prices data, though it quickly recovered all the losses after the release of the strong consumer confidence data. US consumer confidence in June rose to 118.9, above the expected 116.0 and May's 117.9. This pushed dollar/yen above the 112.00 handle and to a one-month high of 112.16.

Looking at commodities, gold managed to recover some of yesterday's losses, following a large sell order that hit the market. The commodity last traded at $1248.13 an ounce. This compares to yesterday's one-month low of $1235.84 an ounce.

WTI oil futures (August 2017 contract) continued to gain for the fourth consecutive day, last trading at $44.33 a barrel in late European hours.

Looking ahead, Fed Chair Janet Yellen is scheduled to give a speech at 17:00 GMT.