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The USDJPY is consolidating under new highest level since Sep 1998 (137.75) in early Tuesday’s trading, following Monday’s bullish signal on 2.6% advance (the biggest one-day advance since June 17) and close above previous top at 137.00.

The dollar remains supported on expectations that Fed will remain aggressive in its monetary policy, short/medium inflation outlook remains pessimistic, with migration from risky assets to the safety on growing uncertainty over economic and geopolitical situation, additionally underpins the greenback.

Overbought conditions of firmly bullish daily studies, suggest that bulls may take a breather for consolidation before resuming towards Fibo projections at 138.21 and 138.57, violation of which would open way for attack at psychological 140 barrier.

Broken 137.00 level reverted to support whish so far holds, with dips expected to find ground above rising 10DMA (136.16) to bulls intact.

Res: 137.75; 138.21; 138.57; 139.14.
Sup: 137.00; 136.52; 136.16; 135.60.

Asian shares were a sea of red on Tuesday as recession fears and China’s renewed Covid-19 outbreak smothered appetite for risk. Overnight, Wall Street’s main indices took a beating as investors sprinted to safety ahead of the US inflation data and earnings season. In Europe, stocks are expected to open lower due to Europe’s energy shortage and growing caution ahead of key economic data and bank earnings.

In the currency markets, the mighty dollar flexed its safe-haven muscles with the dollar index (DXY) hitting its highest levels since 2002. Meanwhile, the EURUSD parity dream came closer to reality this morning as prices touched 1.0004 for the first time since December 2002. Looking at commodities, gold remains depressed and unloved while oil prices were hit by demand concerns.

The negative vibe and sense of uncertainty across financial markets could fuel further dollar upside while dragging equities lower. Given how markets remain highly sensitive and reactive to anything regarding inflation, tomorrow’s pending US CPI report could spark fireworks. On the data front, Australian consumer sentiment tumbled for the eighth consecutive month in July. Business confidence also disappointed, dragged by global uncertainty, looming hikes, and soaring inflation. Germany’s ZEW economic confidence survey will be published later this morning. A disappointing report could compound the euro’s woes, weakening the single currency further.

It's all about the US inflation report

Wednesday sees the release of the US inflation report with investors watching anxiously to see if prices are rising again or perhaps that we are finally peaking. According to a poll by Bloomberg, inflation is expected to rise 8.8% year-on-year in June compared with 8.6% in May. If expectations meet reality, this would mark the fastest increase in consumer prices since the 8.9% figure back in December 1981! Such a development will most likely reinforce market bets of more aggressive Fed rate hikes, ultimately injecting dollar bulls with fresh momentum.

Other than the US inflation data, it may be wise to keep an eye on the weekly jobless claims report on Thursday. At the end of the week, there will also be a barrage of key releases ranging from the latest retail sales, industrial production, and consumer sentiment which will provide insight into the health of the US economy.

Oil hit by demand concerns

Oil found itself under renewed selling pressure on Tuesday as fresh Covid-19 curbs in China and fears of a global economic slowdown weighed heavily on the demand outlook.

The global commodity is down over 1.5% this morning with an appreciating dollar adding to the pressure and fueling the downside momentum. While fears of a global recession could keep bulls at bay, oil prices remain pulled and tugged by conflicting forces. On one side of the bearish equation, there are recession fears and Covid-19 restrictions in China. However, bulls could draw support from ongoing geopolitical risks and tightening market conditions. President Joe Biden is scheduled to visit Saudi Arabia this week during a tour to the Middle East.

Looking at the technicals, WTI has the potential to target the psychological $100 level if bears can charge through the $102 level. Brent seems to have created fresh resistance around $107.50 with a breakdown below $105 signaling a selloff towards $102.

Commodity spotlight – Gold

Gold is struggling to nurse deep wounds inflicted by last week’s brutal selloff.

The precious metal has been smothered by an appreciating dollar and expectations over the Fed maintaining an aggressive stance towards higher interest rates. Prices are trading around $1730 as of writing, with the next key level of interest found at $1700. The precious metal looks depressed and could be instore for more pain if the pending US CPI report meets or exceeds market expectations. If prices are able to breach $1700, the next key level of interest can be found at $1680.

Daily Pivots: (S1) 162.79; (P) 163.63; (R1) 164.22; More...

Intraday bias in GBP/JPY stays neutral and further fall is in favor with 165.26 minor resistance intact. On the downside, below 160.37 support will target 155.57 key support level next. On the upside, above 165.26 minor resistance will turn bias back to the upside and bring retest of 168.67 high instead.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 155.57 support holds, even in case of deep pull back.

Daily Pivots: (S1) 137.52; (P) 138.35; (R1) 138.80; More....

Intraday bias in EUR/JPY stays neutral and further fall is in favor with 139.78 minor resistance intact. On the downside, below 136.86 will target 132.63 support. Decisive break will turn outlook bearish for 124.37 support. On the upside, above 139.78 minor resistance will turn bias to the upside for stronger recovery.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 134.11 resistance turned support holds, even in case of deep pull back. Firm break of 139.78 will target 149.76 (2015 high. However, sustained break of 134.11 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Daily Pivots: (S1) 0.8428; (P) 0.8459; (R1) 0.8475; More...

Further decline is expected in EUR/GBP with 0.8531 minor resistance intact. Rebound from 0.8201 should have completed at 0.8720, after rejection by 0.8697 medium term fibonacci level. Further fall would be seen to retest 0.8201/48 support zone next. On the upside, above 0.8531 minor resistance will turn intraday bias back to the upside for 0.8720 resistance instead.

In the bigger picture, rejection by 38.2% retracement of 0.9499 to 0.8201 at 0.8697 argues that rebound from 0.8201 is merely a corrective move. That is, down trend from 0.9499 (2020 high) is now over. Sustained break of 0.8201 will resume such decline and target 61.8% retracement of 0.6935 to 0.9499 at 0.7917. This will now remain the favored case as long as 0.8720 resistance holds.

Daily Pivots: (S1) 1.4841; (P) 1.4911; (R1) 1.4977; More...

Intraday bias in EUR/AUD is turned neutral with current recovery. But further decline is in favor with 1.5043 minor resistance intact. Break of 1.4759 support should confirm that corrective rise from 1.4318 has completed at 1.5396 after rejection by 1.5354 support turned resistance. Deeper fall should then be seen back to retest 1.4318 low. On the upside, however, break of 1.5043 will bring stronger rebound back towards 1.5396.

In the bigger picture, rejection by 1.5354 support turned resistance, as well as 55 week EMA (now at 1.5398), maintain medium term bearishness. That is, larger down trend from 1.9799 is not completed yet. Break of 1.4318 low will target 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). This will remain the favored case now as long as 1.5396 resistance holds.

Daily Pivots: (S1) 0.9834; (P) 0.9893; (R1) 0.9931; More....

EUR/CHF's down trend resumed after brief consolidations. Intraday bias is back on the downside. Next target is 0.9650 long term projection level. On the upside, above 0.9953 minor resistance will turn intraday bias neutral again, and bring consolidations, before staging another fall.

In the bigger picture, rejection by 55 week EMA affirmed medium term bearishness. Long term down trend from 1.2004 (2018 high) is expected to target 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. On the upside, break of 1.0513 resistance is needed to indicate medium term bottoming. Otherwise, outlook will stay bearish in case of strong rebound.

Daily Pivots: (S1) 1.2947; (P) 1.2999; (R1) 1.3057; More...

Range trading continues in USD/CAD and intraday bias remains neutral. Further rise is mildly in favor with 1.2818 support intact. On the upside, break of 1.3082 and sustained trading above 1.3022 fibonacci level will carry larger bullish implications, and bring up trend resumption. Next target is 100% projection of 1.2005 to 1.2947 from 1.2401 at 1.3343. On the downside, break of 1.2818 minor support will bring deeper fall back to 1.2516 support instead.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness.

Daily Pivots: (S1) 0.6682; (P) 0.6769; (R1) 0.6822; More...

Intraday bias in AUD/USD remains on the downside. Current down trend from 0.8006 should now target next fibonacci level at 0.6461. On the upside, break of 0.6873 minor resistance will turn bias neutral and bring consolidations first. But outlook will remains bearish as long as 0.7282 resistance holds, in case of rebound.

In the bigger picture, price actions from 0.8006 could still be a corrective pattern to rise from 0.5506 (2020 low). But current downside acceleration is raising the chance that it's a bearish impulsive move. In either case, outlook will remain bearish as long as 0.7282 resistance holds. Next target is 61.8% retracement of 0.5506 to 0.8006 at 0.6461.

Daily Pivots: (S1) 136.34; (P) 137.05; (R1) 138.12; More...

Intraday bias in USD/JPY remains on the upside and outlook is unchanged. Current up trend should target 100% projection of 114.40 to 131.34 from 126.35 at 143.29. For now, outlook will remain bullish as long as 134.73 support holds, in case of retreat.

In the bigger picture, current rally is seen as part of the long term up trend from 75.56 (2011 low). Next target is 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, which is close to 147.68 (1998 high). This will remain the favored case as long as 126.35 support holds.