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Daily Pivots: (S1) 0.9707; (P) 0.9742; (R1) 0.9791; More...

USD/CHF is still bounded in consolidation from 0.9695 temporary low and intraday bias remains neutral. Upside of recovery should be limited by 0.9854 support turned resistance to bring fall resumption. On the downside, below 0.9659 will target 0.9587 fibonacci level. Nevertheless, break of 0.9854 will indicate short term bottoming and target 1.0014 resistance instead.

In the bigger picture, current development confirms that up trend from 0.9186 (2018 low) has completed at 1.0237 already. With 38.2% retracement of 0.9186 to 1.0237 at 0.9836 taken out, deeper fall should be seen to 61.8% retracement at 0.9587 and below. We'd pay attention to bottoming signal below 0.9587.

Markets

Of the several themes that dominate markets, the trade topic took center-stage again today. The US Note future trended further lower after Fed’s Bullard dismissed a 50bps rate cut in July yesterday. Constructive comments from US Treasury Secretary Mnuchin (“trade deal is 90% complete”, “hopeful that a trade deal will be found”) extended the downleg but were soon undermined by Trump. The US President said there would be a substantial amount of additional tariffs if there’s no agreement reached with China. The Note future rebounded from intraday lows (yields retreated) in the wake of the levy threats. Core US durable goods data was better than expected but with little impact on trading. The US yield curve bear steepened with the wings of the curve outperforming the belly. Yields changes vary from 0 bps (2y) to 3 bps (5y) over 2.4 bps (10y) and 1.5 bps (30y). German yields followed the US trading pattern in lockstep, eventually ending virtually unchanged across the curve. Peripheral spreads narrow marginally with Italy (-4bps) outperforming.

EUR/USD trading was locked in a very narrow 1.1350/75 sideways range. Investors await more guidance from the G20 meeting later this week as an upside test north of EUR/USD 1.14 was rejected yesterday. Sentiment on risk improved as US Fin Min Mnuchin said the US and China were close to reaching a trade deal. However, the initial optimism was soon downplayed as president Trump reiterated that he could still impose additional tariffs if no deal was reached. Equities, US yields and USD/JPY (107.60 area) gained some ground on a modest trade optimism. At the same time, a presumed easing of the global trade tensions would also remove a major roadblock for the European economy and can be seen as supportive for the single currency, too. EUR/USD didn’t go anywhere and is trading in the 1.1355/60 area. US eco data were mixed (durable goods orders better than expected, but the May trade deficit widened more than expected) but had again close to no impact on USD trading.

Several BoE governors including BoE governor Carney appeared before the Treasury committee of the UK parliament. The BoE maintained its assessment of the May inflation report, indicating that limited and gradual interest rate hikes might be needed if the economy evolves as expected. At the same time, the BoE-governors acknowledged the difference between the expected BoE interest rate path and market pricing, anticipating rate cuts. The BoE also indicated that policy easing was more likely if the new PM would aim for a no deal Brexit. EUR/GBP temporarily lost modest ground at the start of the hearing, but soon returned to opening levels. The market was/is already positioned for a softer BoE and today’s hearing didn’t change markets’ assessment. EUR/GBP (0.8965 area) is holding near recent peak levels. Cable hovers in the upper half of 1.27 as the dollar regained some ground yesterday.

News Headlines

The Norwegian April unemployment rate declined sharply to 3.2%. A 3.5% unchanged reading was expected. The report reinforced the case for further tightening as indicated by the Norges bank. EUR/NOK declined from the 9.71 area to currently trade in the mid 9.67 area.

US durable goods numbers were mixed in May. The headline figure (-1.3% MoM) disappointed after an already dreadful April as nondefense aircrafts slumped again. Core measures surprised on the upside however with shipments (a proxy for the GDP investment component) rising 0.7% MoM (vs. 0.4% in April).

Daily Pivots: (S1) 106.82; (P) 107.12; (R1) 107.45; More...

USD/JPY recovers further today but stays well below 108.80 resistance. Intraday bias remains neutral and further decline is still expected. On the downside, break of 106.78 temporary low will resume the fall from 112.40 to retest 104.69 low.

In the bigger picture, decline from 118.65 (Dec 2016) is still in progress, with the pair staying inside long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we'd expect strong support above 98.97 (2016 low) to contain downside to bring rebound.

Risk appetite firms up mildly today as lifted by US Treasury Secretary Steven Mnuchin's upbeat comments regarding trade negotiation with China. There are also reports that US would delay new tariffs without deadline, to bring China back to negotiation table. However, the positive lift is capped after Trump reiterates his tariff threats to China. Overall, the markets remain cautiously optimistic on the results of the Trump-Xi meeting in Osaka later this week, but also stay on guard.

In the currency markets, New Zealand Dollar remains the strongest one for today, followed by Australian and then Canadian Dollar. Yen and Swiss Franc are the weakest ones on mild risk appetite. Dollar and Euro are mixed. As Dollar recovered since yesterday, after Fed officials dismissed aggressive rate cut in July, Gold is also in retreat, back below 1410.

Technically, USD/CAD is trying to resume recent decline by breaking 1.3151 temporary, as WTI oil is also resuming recent rise. USD/CAD should be targeting 1.3068 support next. EUR/GBP is still pressing 0.8974 resistance and break will resume recent rally for 0.9101 key resistance. While Dollar recovered, it's still holding below near term resistance against Euro, Sterling, Swiss Franc, Yen and Aussie. More downside remains mildly in favor in the greenback.

In Europe, FTSE is currently up 0.10%. DAX is up 0.37%. CAC is up 0.06%. German 10-year yield is up 0.0088 at -0.32. Earlier in Asia, Nikkei dropped -0.51%. Hong Kong HSI rose 0.13%. China Shanghai SSE dropped -0.19%. Singapore Strait Times dropped -0.09%. Japan 10-year JGB yield rose 0.0062 at -0.145.

Mnuchin hopeful to complete China trade deal year end, but Trump reiterates tariff threats

US Treasury Secretary Steven Mnuchin told CNBC that US-China trade agreement is 90% done. And he's hopeful to move forward with a plan to complete the deal by the end of the year.

He said "we were about 90% of the way there (with a deal) and I think there's a path to complete this". And, "the message we want to hear is that they want to come back to the table and continue because I think there is a good outcome for their economy and the U.S. economy to get balanced trade and to continue to build on this relationship."

Mnuchin also said "I'm hopeful that we can move forward with a plan … President Trump and President Xi have a very close working relationship. We had a productive meeting at the last G-20." He's hopeful a deal could be struck by the end of the year but said "there needs to be the right efforts in place."

Additionally, Bloomberg reported, quoting unnamed source, that US is preparing to delay imposition of new tariffs, in exchange for China's agreement to return to negotiation take. And, some advisers went further to push Trump to refrain from setting a hard deadline, to avoid a situation similar to last December's Trump-Xi summit.

However, Trump insisted that "I would do additional tariffs, very substantial additional tariffs, if that doesn't work, if we don't make a deal." He added "my Plan B with China is to take in billions and billions of dollars a month and we'll do less and less business with them."

Also, Commerce Secretary Wilbur Ross said US is "not looking for victory" on trade negotiations. And, the country just want "a sensible deal that addresses the legitimate issues that we have." Ross pointed out again that "there are some inappropriate activities underway by the Chinese" and warned "they must cease". He added, "if they do, if we make some redressing of the trade imbalance, then that's a reasonable deal for both parties."

US trade deficit widened to USD -74.5B, durable goods orders dropped -1.3%

US advance goods trade deficit widened 5.1% to USD -74.5B in May, up from USD -70.9B. That's also larger than expectation of USD -71.8B. Exports rose USD 4.1B to USD 1402.B. Meanwhile, imports rose USD 7.8B to USD 214.7B. Durable goods orders dropped -1.3% in May, worse than expectation of -0.1%. But ex-transport orders rose 0.3%, above expectation of 0.1%. Ex-defense order dropped -0.6%.

BoE Saunders: Series of rolling Brexit deadlines have greater adverse affect on growth

BoE Governor Mark Carney noted both PM candidate, former foreign minister Boris Johnson and the current incumbent Jeremy Hunt had indicated that they wanted to reach a deal with EU on Brexit. Carney reiterated that BoE it would not factor in no-deal Brexit into its economic forecasts, unless the government changes its policy. He told the parliament that "in the event that the policy of the government were to switch, the forecast of the Bank of England would switch accordingly. Also, he noted again policy response to no-deal Brexit is not automatic. Nevertheless, it's more likely for BoE to provide additional monetary accommodation in case of no-deal Brexit, then to tighten.

MPC member Michael Saunders warned that "a series of rolling deadlines would probably imply a heightened uncertainty and have a greater adverse affect on growth." And, "now that is not a reason to do the things that business fear…, but the outlook for the economy would be very different if you knew now that there was going to be a smooth Brexit compared to one where you have a rolling series of deadlines and at each point there is the risk of a no-deal Brexit."

German Gfk consumer sentiment dropped to 9.8, economic expectation halted downward spiral

Germany Gfk consumer sentiment for July dropped to 9.8, down from 10.1 and missed expectation of 10.0. On the positive side, Economic Expectation rose from 1.7 to 2.4. Gfk noted that "the downward spiral that economic expectation began at the start of 2018 halted in June, at least for the moment." Still, "the global economic cooling off, on-going discussions around Brexit, and the trade war with the USA are putting a strain on the economic indicator".

On the other hand, Income Expectations, which dropped from 57.7 to 45.5, was a major drag. Gfk noted: "the voices heralding the end of the employment boom are growing. As a result, fears concerning job losses have increased at a number of employers".

RBNZ hints on Aug rate cut, But NZD rebounds on positive references in statement

RBNZ left Official Cash Rate unchanged at 1.50% as widely expected. It also adopted an easing bias by repeatedly saying " a lower OCR may be needed". It's taken by a strong signal that another rate cut is underway in August. However, on the brighter side, RBNZ noted that "GDP growth had held up more than projected" in Q1. And "some of the factors supporting growth in the quarter would continue." Also, while risks are "tilted to the downside", resolution of trade tensions "could see uncertainty ease". New Zealand Dollar spiked lower after the release by quickly rebounded on the positive references.

Some suggested readings:

• RBNZ Review – Stand Pat and Stay Cautions
• Review Of The RBNZ's June OCR Review: Hinting Strongly
• RBNZ Holds But Keeps Door Open For A Cut In August | GBP/NZD, EUR/NZD

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 106.82; (P) 107.12; (R1) 107.45; More...

USD/JPY recovers further today but stays well below 108.80 resistance. Intraday bias remains neutral and further decline is still expected. On the downside, break of 106.78 temporary low will resume the fall from 112.40 to retest 104.69 low.

In the bigger picture, decline from 118.65 (Dec 2016) is still in progress, with the pair staying inside long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we'd expect strong support above 98.97 (2016 low) to contain downside to bring rebound.

Economic Indicators Update

US advance goods trade deficit widened 5.1% to USD -74.5B in May, up from USD -70.9B. That's also larger than expectation of USD -71.8B. Exports rose USD 4.1B to USD 1402.B. Meanwhile, imports rose USD 7.8B to USD 214.7B.

Durable goods orders dropped -1.3% in May, worse than expectation of -0.1%. But ex-transport orders rose 0.3%, above expectation of 0.1%. Ex-defense order dropped -0.6%.

The US 500 index retreated below the all-time high of 2964 in the previous couple of days, testing the red Tenkan-sen line in the daily timeframe. The 200-simple moving average (SMAs) remains flat, failing to confirm the long-term bullish picture. The MACD is extending is bullish run with weak momentum while the RSI is pointing north in the positive zone.

A closing price above the all-time high (2964) could trigger another bullish phase more likely towards the 3000 psychological mark.

Should the market correct to the downside, the 50-SMA currently at 2880 could provide nearby support, while lower, a more interesting battle could start near the lower surface of the Ichimoku cloud and the 23.6% Fibonacci retracement level of the upleg from 2332 to 2964 around 2815.

Meanwhile, in the six-month time frame the outlook is bullish as long as the price posts higher highs and higher lows. However, in the short-term view, the index looks to be slightly neutral within 2723 and 2964.

Entering into US session, New Zealand Dollar remains the strongest one for today, followed by Australian and then Canadian. On the other hand, Yen is so far the weakest, followed by Swiss Franc. Sentiments were lifted by optimistic comments from US Treasury Secretary Steven Mnuchin on trade. He reiterated that the negotiations are 90% complete and could be done by end of the year. Additionally, Bloomberg reported, quoting unnamed source, that US is preparing to delay imposition of new tariffs, in exchange for China's agreement to return to negotiation take. And, some advisers went further to push Trump to refrain from setting a hard deadline, to avoid a situation similar to last December's Trump-Xi summit.

RBNZ kept OCR unchanged and hinted on an August rate cut. The easing bias is actually well priced in and traders responded to the positive reference to the economy instead. That is, RBNZ noted that "GDP growth had held up more than projected" in Q1. And "some of the factors supporting growth in the quarter would continue." BoE Governor Mark Carney noted again policy response to no-deal Brexit is not automatic. Nevertheless, it's more likely for BoE to provide additional monetary accommodation in case of no-deal Brexit, then to tighten.

In Europe, currently:

• FTSE is up 0.13%.
• DAX is up 0.47%.
• CAC is up 0.16%.
• German 10-year yield is up 0.017 at -0.312.

Earlier in Asia:

• Nikkei dropped -0.51%.
• Hong Kong HSI rose 0.13%.
• China Shanghai SSE dropped -0.19%.
• Singapore Strait Times dropped -0.09%.
• Japan 10-year JGB yield rose 0.0062 at -0.145.

GBPUSD turns lower on loss weak and vulnerable to the downside after weakening on Tuesday. Support lies at 1.2650 as it looks for more weakness. Below that level will turn attention to the 1.2600 level. Further down, support comes in at the 1.2550 level where a break will turn focus to the 1.2500 level. Further down, support lies at the 1.2450 level. On the upside, resistance stands at the 1.2750 with a turn above here allowing for additional strength to build up towards the 1.2800 level. Further out, resistance stands at the 1.2850 level followed by the 1.2900 level. On the whole, GBPUSD retains downside pressure on further correction.

BoE Governor Mark Carney noted both PM candidate, former foreign minister Boris Johnson and the current incumbent Jeremy Hunt had indicated that they wanted to reach a deal with EU on Brexit. Carney reiterated that BoE it would not factor in no-deal Brexit into its economic forecasts, unless the government changes its policy. He told the parliament that "in the event that the policy of the government were to switch, the forecast of the Bank of England would switch accordingly. Also, he noted again policy response to no-deal Brexit is not automatic. Nevertheless, it's more likely for BoE to provide additional monetary accommodation in case of no-deal Brexit, then to tighten.

MPC member Michael Saunders warned that "a series of rolling deadlines would probably imply a heightened uncertainty and have a greater adverse affect on growth." And, "now that is not a reason to do the things that business fear..., but the outlook for the economy would be very different if you knew now that there was going to be a smooth Brexit compared to one where you have a rolling series of deadlines and at each point there is the risk of a no-deal Brexit."

US Commerce Secretary Wilbur Ross said in a Fox Business Network interview that US is "not looking for victory" on trade negotiations. And, the country just want "a sensible deal that addresses the legitimate issues that we have."

Ross pointed out again that "there are some inappropriate activities underway by the Chinese" and warned "they must cease". He added, "if they do, if we make some redressing of the trade imbalance, then that's a reasonable deal for both parties."