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USD/CHF's fall from 1.0237 resumed last week and reached as low as 0.9756. Initial bias remains on the downside this week for 0.9716 support first. Break will target 0.9587 fibonacci level next. On the upside, break of 0.9838 minor resistance will turn intraday bias neutral and bring consolidations. But recovery should be limited well below 1.0014 resistance to bring fall resumption.

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.

In the long term picture, price actions from 0.7065 (2011 low) are not clearly impulsive yet. Thus, we'll treat it as developing into a corrective pattern, at least, until a firm break of 1.0342 resistance.

AUD/USD edged lower to 0.6831 last week but recovered since then. Initial bias is neutral this week first. We'd expect upside to be limited by 0.7022 resistance to bring fall resumption. On the downside, break of 0.6831 will resume the decline from 0.7295 to 0.6722 low next. However, firm break of 0.7022 will indicate near term bullish reversal and turn outlook bullish for 0.7205 resistance next.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

In the longer term picture, prior rejection by 55 month EMA maintained long term bearishness in AUD/USD. That is, down trend from 1.1079 (2011 high) is still in progress. Sustained break of 0.6826 will target 0.6008 low and then 61.8% projection of 1.1079 to 0.6826 from 0.8135 at 0.5507.

USD/CAD's fall from 1.3564 resumed last week and dropped to low as 1.3151. As a temporary low was formed, initial bias is neutral this week for some consolidations first. Upside of recovery should be limited well below 1.3432 resistance to bring fall resumption. On the downside, break of 1.3151 will target 1.3052/68 cluster support.

In the bigger picture, medium term outlook stays neutral for now even though the case of bearish reversal is building up. Decisive break of 1.3068 cluster support (38.2% retracement of 1.2061 to 1.3664 at 1.3052) will confirm completion of up trend from 1.2061 (2017 low). Further fall should be seen to 61.8% retracement at 1.2673 next. On the upside, sustained break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685, is needed to confirm resumption of up trend from 1.2061 (2017 low). Otherwise, risk will stay on the downside.

In the longer term picture, outlook remains unchanged that price actions from 1.4689 (2016 high) are forming a corrective pattern. Rejection by 1.3793 resistance would raise the chance of lengthier extension, with risk of dropping through 1.2061 low before completion.

GBP/JPY edged lower to 135.38 last week but turned sideway since then. Initial bias remains neutral this week for some consolidations first. Upside of recovery should be limited by 138.32 resistance to bring fall resumption. On the downside, break of 135.38 will extend recent fall from 148.87 to retest 131.51 low. Though, firm break of 135.38 will confirm short term bottoming and bring stronger rebound to 55 day EMA (now at 140.23).

In the bigger picture, current development suggests that GBP/JPY's medium term fall from 156.59 (2018 high) is still in progress. Break of 131.51 will target 122.36 (2016 low). Structure of such decline is corrective looking so far, arguing that it's just the second leg of consolidation from 122.36. Thus, we'd expect strong support from 122.36 to contain downside to bring reversal.

In the longer term picture, firstly, GBP/JPY's is kept well below 55 month EMA, keeping outlook bearish. But we're treating price actions from 122.36 as a corrective pattern. Hence, we'd expect range trading to continue longer. In case of an extension, strong resistance is likely to be seen at 50% retracement of 195.86 (2015 high) to 122.36 at 159.11 to limit upside. However, break of 122.26 will put 116.83 (2011 low) back into focus.

EUR/JPY dropped to 120.95 last week but recovered ahead of 120.78 support. The development suggests that consolidation from 120.78 is extending with another rise. Initial bias is mildly on the upside this week for 123.18 resistance. Upside should be limited below 123.73 resistance to bring fall resumption eventually. On the downside, firm break of 120.78 will resume the fall from 127.50 and target 118.62 low next.

In the bigger picture, down trend from 137.49 is still in progress with the cross staying inside long term falling channel. Break of 118.62 will extend the fall to 109.48 (2016 low). On the upside, break of 127.50 resistance is needed to be the first sign of medium term reversal. Otherwise, outlook will remain bearish in case of strong rebound.

In the long term picture, EUR/JPY is staying in long term sideway pattern, established since 2000. Fall from 137.49 is seen as a falling leg inside the pattern. Break of 118.62 will extend this falling leg through 109.48 (2016 low). With EUR/JPY staying below 55 month EMA, this is now the preferred case.

EUR/GBP edged higher to 0.8974 last week but retreated since then. Initial bias remains neutral this week first and some more consolidation could be seen. But further rise is expected as long as 0.8871 support holds. Break of 0.8974 will resume larger rally to 0.9101 key resistance next. However, considering bearish divergence condition in 4 hour MACD, break of 0.8871 will indicate short term topping. Deeper pull back could be seen to 55 day EMA (now at 0.8781).

In the bigger picture, medium term decline from 0.9305 (2017 high) is seen as a corrective move. No change in this view. Current development argues that it might have completed with three waves down to 0.8472, just ahead of 38.2% retracement of 0.6935 (2015 low) to 0.9306 at 0.8400, after hitting 55 month EMA (now at 0.8527). Decisive break of 0.9101 resistance will confirm this bullish case. Nevertheless, as EUR/GBP is still staying inside long term falling channel, correction from 0.9305 could still extend to 0.8400 fibonacci level before completion, if upside is rejected by 0.9101.

In the long term picture, we're holding on to the view that rise from 0.6935 (2015 low) is resuming the up trend from 0.5680 (2000 low). As long as 38.2% retracement of 0.6935 to 0.9306 at 0.8400 holds, further rise should be seen through 0.9305 to 0.9799 and above down the road.

EUR/AUD edged higher to 1.6448 last week but turned into consolidation since then. Initial bias remains neutral this week and outlook is unchanged. In case of another fall as consolidation extends, downside should be contained above 1.6052 support to bring rise resumption. On the upside, break of 1.6448 will resume the rally from 1.5683 and target 100% projection of 1.5683 to 1.6262 from 1.6052 at 1.6631 next.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Up trend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal and turn outlook bearish.

In the longer term picture, the rise from 1.1602 long term bottom (2012 low) is still in progress for 61.8% retracement of 2.1127 to 1.1602 at 1.7488. This will remain the favored case as long as 1.5346 remains intact.

EUR/CHF's down trend resumed last week and dropped sharply to as low as 1.1056. As a temporary low was formed, initial bias is neutral this week for some consolidation first. Upside could recovery should be limited below 1.1264 resistance to bring another decline. On the downside, break of 1.1056 will resume decline to 61.8% projection of 1.2004 to 1.1173 from 1.1476 at 1.0962 next.

In the bigger picture, current development firstly suggests that down trend from 1.2004 is still in progress. More importantly, it's likely a long term down trend itself, rather than a correction. Outlook will remain bearish as long as 1.1476 resistance holds. EUR/CHF could target 1.0629 support and below.

Major global central bankers sang a chorus of dovishness last week. Most importantly, both ECB and Fed signaled the possibility of rate cuts ahead. Comparatively, RBA's indication of more rate cut was not much a surprise. In the background, it appeared US and China were back on track to restart trade negotiations. Hope of more monetary easing and trade optimism lifted S&P 500 to record intraday high. On the other hand, treasury yields tumbled with US 10-year yield breaching 2% handle while German 10-year yield hit record low. Gold surged on Dollar's selloff and breached 1400 handle. WTI crude oil extended recent rebound and closed above 57 on middle east tensions.

Dollar ended the week as the worst performing currency, followed by Australian Dollar, on expectations of rate cuts by respective central banks. Yen ended as the third weakest, reacting more to rising stocks than falling yields. Swiss Franc was the strongest one, on geopolitical tension safe haven flow, followed by Kiwi. Surprisingly, Euro was the third strongest as markets pushed back rate cut expectations after Eurozone PMI data. It's not impossible for Dollar to stage similar comeback if there would be some positive developments.

PMI data saved Euro after dovish ECB Draghi

ECB President Mario Draghi said in the Sintra forum in Portugal that risks to outlook remained "tilted to the downside" and indicators pointed to "lingering softness". And he warned, "in the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required." The options on further measures were already "raised and discussed" at ECB's last meting.

"In the absence of improvement" was seen as a rather low bar for action. And markets quickly started to price in rate cut by ECB in July. Germany 10-year yield tumbled to record low at -0.326. Euro was sold off broadly and even drew Trump's criticism on ECB and Draghi. It's unsure if there was any direct relationship to the events. But within hours, Trump announced he's called Chinese President Xi Jinping to set up an "extended meeting" at G20 in Osaka on June 28-29.

However, Euro then staged a strong rebound after dovish Fed. Rally in Euro gained further momentum on Friday after PMIs showed no further deteriorations in the economy. Indeed, Euro ended the week up against all but Swiss Franc and New Zealand Dollar. EUR/USD made a clear break of 1.1347 resistance to resume recent rebound. German 10-year yield also pared back much of the decline to close at -0.282.

As of now, there's speculation that ECB could have a -10bps cut in all main policy rates in September meeting. That could bring the main refinancing rate into negative territory for the first time. If economic outlook doesn't improve ahead, ECB could have another rate cut of -10bps by year end, with possibility of new round of QE. However, as the reactions to PMIs showed, expectations could drastically turn with just a few pieces of data. The upcoming June Eurozone CPI flash on Friday could flip market expectations again.

Markets see 100% chance of Fed cut in July, but that's exaggerated

FOMC rate decisions last week were clearly dovish without a doubt. Fed funds futures are now pricing in 100% chance of a rate cut in July, with 32.3% chance of -50bps cut. That was, to us, too exaggerated given that the baseline outlook in the new economic projections was not that bad. Also, huge uncertainties of trade negotiations with China lie ahead.

First of all, on the economy, 2019 growth forecast was unchanged at 2.1%. 2020 growth forecast was revised up by 0.1% to 2.0%. Unemployment rate for 2019 was revised down by -0.1% to 3.6%, for 2020 revised down by -0.1% to 3.7%. Core PCE inflation for 2019 was revised down by -0.2% to 1.8% for 2020 revised own by -0.1% to 1.9%. These are hardly disastrous numbers.

Median projection of federal funds rate for 2019 was unchanged at 2.4%. It's revised down to 2.1% in 2020, suggesting one rate cut next year. The dot plot was admittedly more dovish. Seven members penciled in -50bps cut by the end of the year. One penciled in -25bps cut. Eight members penciled in no change in interest rate while one penciled in 25bps hike.

If the negotiations between Trump and Xi break down in the coming week, and tariffs on all the rest Chinese imports are imposed soon, then Fed has every reason to cut interest rates in July to cushion the impacts. But now, it looks like US and China are ready to enter into a new phase of trade negotiations. It's highly doubtful on whether any FOMC members would change their current stance less than a month away.

Remember that while seven members expect -50bps cut by the end of the year, the dot plot doesn't show the timing. It's unsure why traders believe that July is the month to start rate cut, rather than September. To us, chance of a July cut is far from what fed fund futures imply. The coming two weeks are crucial. Trump-Xi summit at G20 is an important event. Then, we'll have ISM indices and non-farm payroll two weeks from now. This set of data could overturn interest rate expectations, much like what Eurozone PMIs did.

Dollar index to stay pressured in near term

In any case, Dollar index's break of 96.45 support indicates resumption of fall from 98.37. More importantly, it revived the case of medium term topping at 98.37. We'd not too confidence on this bearish case yet as DXY is holding above 55 week and 55 month EMA. Though, further fall is in favor now to 38.2% retracement of 88.25 to 98.37 at 94.50. Reactions from there should reveal whether DXY is in correction to up trend, or has reversed medium term trend.

EUR/USD Weekly Outlook

EUR/USD's rebound form 1.1107 resumed last week by breaking through 1.1347 resistance to as high as 1.1377. Initial bias remains on the upside this week for 100% projection of 1.1107 to 1.1347 from 1.1181 at 1.1142 first. Break will target 161.8% projection at 1.1569 next. On the downside, below 1.1317 minor support will turn intraday bias neutral and bring consolations. But outlook will stay bullish as long as 1.1181 support holds.

In the bigger picture, considering bullish convergence condition in daily and weekly MACD, a medium term bottom should be in place at 1.1107 after hitting 61.8% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.1186. Further rise should be seen to 38.2% retracement of 1.2555 to 1.1107 at 1.1660. Reactions from there could indicate whether rebound from 1.1107 is a corrective rise or reversing medium term trend.

In the long term picture, outlook remains bearish for now. EUR/USD is held below decade long trend line that started from 1.6039 (2008 high). It was also rejected by 38.2% retracement of 1.6039 to 1.0339 at 1.2516 before. A break of 1.0039 low will remain in favor as long as 55 month EMA (now at 1.1685) holds).

Monday, Jun 24, 2019

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Tuesday, Jun 25, 2019

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Wednesday, Jun 26, 2019

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Thursday, Jun 27, 2019

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Friday, Jun 28, 2019

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