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On Monday morning, the Brent price is balancing at $113 per barrel The commodity marker remains uncertain – the supply isn’t expanding as quick as it is expected to, and the demand might drop as well.

China is cancelling lockdowns but it does not necessarily mean that the country will start increasing its oil import right away. There are doubts about the Chinese economy’s ability to quickly and steadily expand at a time when the entire world is fighting inflation and afraid of recession.

OPEC+ members are working according to their earlier approved plan to increase oil production. This factor might have calmed down financial markets but Libya remains a mess and the Iranian oil won’t come to the commodity market in a while. Taken together, all these factors create a rather controversial basis.

In the H4 chart, having completed the correctional wave at 107.30, Brent continues growing towards 113.30 and may later consolidate there. After that, the instrument may break the range to the upside and form one more ascending wave with the target at 117.60. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving near the lows outside the histogram area, which means that it may grow to reach 0 and the uptrend in the price chart may continue.

As we can see in the H1 chart, after finishing the ascending wave at 113.30 along with the correction down to 110.15, Brent has rebounded from the latter level. Possibly, the asset may break 113.30 and then continue growing towards 117.70. Later, the market may correct to return to 113.30 and then form one more ascending structure with the first target at 119.50. From the technical point of view, this idea is confirmed by the Stochastic Oscillator: after rebounding from 50, its signal line is expected to continue moving towards 80.

• EURCHF reversed from key support level 1.0090
• Likely to rise to resistance level 1.0215

EURCHF currency pair earlier reversed up from the key support level 1.0090 (the previous monthly low from April), strengthened by the lower daily Bollinger Band.

The upward reversal from the support level 1.0090 stopped the earlier minor impulse waves 3 and (v).

EURCHF can be expected to rise further toward the next resistance level 1.0215 (former strong support from May and June).

• WTI reversed from support area
• Likely to rise to resistance level 110.00

WTI recently reversed up from the support area located between the key support level 103.25 (the previous Hammer low from May), lower daily Bollinger Band and the 61.8% Fibonacci correction of the upward price impulse 1 from April

The upward reversal from the support level 103.25 started the active minor impulse wave 3.

WTI can be expected to rise further toward the next resistance level 110.00 (former top of the minor correction (b) from the middle of June).

Cable enters the US session on Monday in red after short-lived rally, inspired by renewed risk mode, pushed the price to a ten-day high in early European trading.

The price remains within the range which extends into sixth consecutive day, defining near-term price action as directionless, capped by daily Kijun-sen and supported by daily Tenkan-sen, after the action repeatedly failed to register a clear break on either side.

Strong negative momentum on daily chart and falling daily cloud weighing on the action, keeps the overall picture negative, but break of either pivot (daily Tenkan-sen / Kijun-sen) is required to generate initial direction signal.

The upside break would expose targets at 1.2386/1.2405 (Fibo 61.8% of 1.2666/1.1933 / June 16 recovery peak) and unmask more significant daily cloud base (1.2481) and Fibo 76.4% retracement (1.2493).

Loss of daily Tenkan-sen support (1.2193) would risk drop to 1.2114 /1.2045 (Fibo 61.8% / 76.4% of 1.1933/1.2406 respectively) and open way for renewed probe through psychological 1.20 support.

Res: 1.2300; 1.2332; 1.2360; 1.2406
Sup: 1.2253; 1.2193; 1.2160; 1.2114

Markets

Markets started the new week on the cautiously positive tone, building on Friday’s risk rebound. The move resumed in Asia and was extended early in European dealings, but sentiment dwindled as the session continued. Eurostoxx 50 gains an unconvincing 0.5%. US indices open about 0.5% higher. Key resistance potentially signalling moderation of the established sell-on-upticks pattern is still quite some way off. The move probably is mainly technical in nature as investors are looking for a new equilibrium after last week’s worrying setback in EMU and US PMI’s. For now, there are few data flagging a sustained improvement both with respect to the still much too fast pace of price rises as well as the cooling in global activity. Admittedly, US durable goods orders printed a solid  0.7% M/M. Shipments non-defense ex aircraft also suggest good investment contribution to Q2 growth. However, the series is notoriously volatile. US consumer confidence (tomorrow) and manufacturing ISM (Friday) will probably be more reliable for growth momentum. US PCE deflators (Thursday) and the EMU flash CPI (Friday) will update the status of inflation. Especially European interest rate markets are pondering whether the ECB has any room to take a more gradual approach on inflation even as growth decelerates. German yields are rebounding (12 bps for 5-y/10 bps for 10y/2y). US Treasuries outperform Bunds with yields rising about 3.5 bps for the 2-y and 5/6 bps for longer maturities. Later today, the US Treasury sells $42 bn in 2-y Notes and $47bn in 5-y notes. Interesting to see investor appetite for the sale in the QT era. The decline in cyclical commodities like copper and iron ore has halted. At the same time, G7 efforts to cap prices of Russian oil don’t impress broader markets. Brent oil continues drifting north ($113,55/b). European gas futures jumped up to 5.0% higher this morning, but reversed most of that gain intraday. Still, gas supply remains a dark cloud hanging over the European economy.

Global FX markets remain indecisive as all most central banks face a similar balancing act between fighting inflation and preserving growth. DXY is losing a few ticks (103.9). The yen (USD/JPY 135.3) eases slightly on higher core yields and a calmer risk sentiment. EUR/USD is gaining a few ticks as relative yields are euro positive. First resistance (1.0627/42) is still some way off. Social unrest and calls for a 7% public sector pay rise don’t help sterling. EUR/GBP settles north of 0.86(20).The forint (EUR/HUF 403.25) underperforms regional peers, touching a new all-time low against the euro. Markets are pushing the MNB to reaccelerate its anti-inflation campaign at tomorrow’s policy meeting after it reduced the pace of the base rate hikes to 50 bps last month.
 
News Headlines

Japan called on businesses and households in the Tokyo area to cut electricity use on Monday as well as for Tuesday. There is a lack of generating capacity that risks triggering a blackout in the capital city. It’s the second blackout alert this year and could restart the debate whether or not Japan should reopen nuclear plants going into the July 10 upper house elections. It’s a highly contentious topic. Japan closed most of its reactors following the Fukushima disaster in 2011 and public opposition is still strong. Tight supplies are expected to continue, with amongst others, a heatwave fueling the need for more electricity.

The French government has proposed a law to raise purchasing power of its citizens. Among the things included, is a 4% rise in pensions and other state payouts to help offset high inflation, financial newspaper Les Echos reported. The measures will cost about €8bn by April next year, Les Echos calculated and it will be put before cabinet at the start of July. Inflation soared to 5.8% in May and is expected to accelerate further to 6.5% in June. While that’s considerably lower than in many other European countries (EU average 8.1% in May) thanks to mitigating efforts including energy price caps, it is still the highest in several decades.

Daily Pivots: (S1) 1.0522; (P) 1.0546 (R1) 1.0581; More...

Intraday bias in EUR/USD stays neutral as range trading continues. Further fall is in favor with 1.0786 resistance intact. On the downside, sustained break of 1.0339/48 will resume larger down trend. Next target is long term projection level at 1.0090.

In the bigger picture, focus stays on 1.0339 long term support (2017 low). Decisive break there will resume whole down trend from 1.6039 (2008 high). Next target is 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090. However, firm break of 1.0805 support turned resistance will delay this bearish case, and bring stronger rebound first.

Daily Pivots: (S1) 1.2236; (P) 1.2278; (R1) 1.2316; More...

Intraday bias in GBP/USD remains neutral as range trading continues. Outlook stays bearish as long as 1.2666 resistance holds. On the downside, break of 1.1932 will resume larger down trend from 1.4248. However, firm break of 1.2666 will suggest medium term bottoming and bring stronger rebound back towards 1.3158 support turned resistance.

In the bigger picture, fall from 1.4248 (2018 high) could be a leg inside the pattern from 1.1409 (2020 low), or resuming the longer term down trend. Deeper decline is expected as long as 1.2666 resistance holds. Next target is 1.1409 low. However, firm break of 1.2666 will bring stronger rise back to 55 week EMA (now at 1.3140).

Daily Pivots: (S1) 134.59; (P) 134.99; (R1) 135.63; More...

Intraday bias in USD/JPY remains neutral for consolidation below 136.70. Deeper retreat could be seen, but downside should be contained above 131.48 support to bring rebound. On the upside, break of 61.8% projection of 114.40 to 131.34 from 126.35 at 136.81 will target 100% projection at 143.29.

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.

Daily Pivots: (S1) 0.9523; (P) 0.9578; (R1) 0.9634; More...

Intraday bias in USD/CHF is neutral for the moment. Fall from 1.0048 is still seen as the third leg of the consolidation pattern from 1.0063. Strong support should be seen around 0.9543 to bring rebound. On the upside, above 0.9731 minor resistance will turn bias back to the upside for retesting 1.0063 resistance. However, sustained break of 0.9543 will bring deeper fall back to 0.9459 resistance turned support.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Next target is 1.0237/0342 resistance zone. This will remain the favored case as long as 0.9471 resistance turned support holds. However, sustained break of 0.9471 will extend long term range trading with another falling leg.

Price actions in forex markets are indecisive today. Dollar is trying to rise after better than expected durable goods orders. It's also support by recovery in treasury yields. But there is no follow through buying. Canadian Dollar is still the relatively firmer one while Euro is also up slightly. Yen and Aussie are the weakest ones for today but downside is limited for both.

Technically, there is prospect of a deeper retreat in Swiss Franc for the near term. EUR/CHF has been losing some downside momentum and stronger recovery might be seen. Nevertheless, outlook will stay bearish as long as 1.0214 minor resistance holds. USD/CHF is trying to defend 0.9543 near term support, which could prompt recovery back to test on 0.9731 minor resistance too.

In Europe, at the time of writing, FTSE is up 0.51%. DAX is up 0.66%. CAC is down -0.21%. Germany 10-year yield is up 0.094 at 1.540. Earlier in Asia, Nikkei rose 1.43%. Hong Kong HSI rose 2.35%. China Shanghai SSE rose 0.88%. Singapore Strait Times rose 0.83%. Japan 10-year JGB yield rose 0.0035 to 0.238.

US durable goods orders rose 0.7% mom in May, ex-transport orders up 0.7% mom

US durable goods orders rose 0.7% mom to USD 267.2B in May, above expectation of 0.1% mom. It's up seven of the last eight months. Ex-transport orders rose 0.7% mom, above expectation of 0.4% mom. Ex-defense orders rose 0.6% mom. Transportation orders up two consecutive months, led the rise by 0.8% mom.

BoJ opinions: Necessary to persistently continue with monetary easing

In the Summary of Opinions at the June 16-17 meeting, BoJ noted, "in order to achieve the price stability target, accompanied by wage increases, in a sustainable and stable manner, the Bank needs to conduct monetary easing while examining economic and financial developments, for which uncertainties have been extremely high."

While price increases has "broadened", "it cannot be said that the price stability target has been achieved amid a virtuous cycle." Output gap remained "negative for more than two year", Japan has not reached a situation to "accelerate a rise in wages". It is "necessary to "persistently continue with monetary easing and thereby support the economy."

There was no discussion on tweaking the 0.25% cap on 10-year JGB yield.

China PBoC made biggest daily cash injection in nearly three months

China's PBoC made its biggest daily cash injection into the banking system in nearly three months today. CNY 100B worth of seven-day reverse repos were injected. The central bank said the operation was to keep "maintain stable liquidity levels at half-year end".

Separately, PBoC Governor Yi Gang said, "This year, we face some downward pressures of growth due to COVID-19 and external shocks, and the monetary policy will continue to be accommodative to support economic recovery in aggregate sense."

USD/CNH is staying in sideway trading below 6.8237 (May's top). Structure of the prices actions are clearly corrective, indicate that that rise from 6.3057 is now over. Strong support is likely to be seen around 55 day EMA (now at 6.6379) to contain any downside attempt. Break through 6.8372 is expected as a later stage.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9523; (P) 0.9578; (R1) 0.9634; More...

Intraday bias in USD/CHF is neutral for the moment. Fall from 1.0048 is still seen as the third leg of the consolidation pattern from 1.0063. Strong support should be seen around 0.9543 to bring rebound. On the upside, above 0.9731 minor resistance will turn bias back to the upside for retesting 1.0063 resistance. However, sustained break of 0.9543 will bring deeper fall back to 0.9459 resistance turned support.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Next target is 1.0237/0342 resistance zone. This will remain the favored case as long as 0.9471 resistance turned support holds. However, sustained break of 0.9471 will extend long term range trading with another falling leg.

Economic Indicators Update