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Downside risks have dominated the US Dollar against the Canadian Dollar since Wednesday's trading session. A breakout occurred through the lower boundary of an ascending channel pattern at the end of yesterday's session. The currency pair has lost about 1.26% in value during the last 24hours.

Everything being equal, it is likely that the USD/CAD exchange rate could regain some of its lost points within this session. The pair might make a retracement towards the monthly S1 at 1.3298.

On the other hand, bearish traders might drag the currency exchange rate towards a support cluster formed by the combination of the weekly and the monthly PPs at 1.3181 today.

Upside risks dominated the New Zealand Dollar versus the US Dollar on Wednesday. The currency pair appreciated about 63 base points during yesterday's trading session.

The exchange rate breached the 50.00% Fibonacci retracement level at 0.6585 during the European trading session on Thursday.

Most likely, the currency exchange rate will aim for the 61.80% Fibo level within this session.

However, technical indicators demonstrate that the NZD/USD pair might edge lower today.

The USD weakened yesterday and during today’s Asian session, as the Fed remained on hold, yet signaled its readiness to cut rates, maintaining a dovish stance. After the decision, the market seems to have priced in with certainty, that the bank will cut rates by 25 basis points (bp) in the July meeting and prices in another cut of 25 bp in the September meeting, by 85%, as per Feds Funds Futures. As anticipated, the bank removed the word “patient” from its accompanying statement, signaling its readiness to act. It should be noted, that despite the dot plot not altering the member’s expectations for the interest rate level, there seems to be a shift in towards a rate cut. Fed Chair Powell, in his press conference expressed a willingness to see more solid data before the bank actually cuts rates. Analysts tend note that the bank may have shifted dovishly beyond the market’s expectations and some even argue for a possible 50bp rate cut in July. We see the case for the bank to be closely watching any developments in the US-Sino relationships, especially in the G20 meeting, as well as any financial data, especially about inflation. We could see the USD continuing to weaken in the aftermath of the bank’s decision. EUR/USD rallied after the decision, breaking consecutively the 1.1220 (S2) and the 1.1260 (S1) resistance lines, now turned to support. We maintain a bullish outlook for the pair’s direction, as the downward trendline incepted since the 12th of June, has been broken. Please note that the pair’s RSI indicator in the 4 hour chart is above the reading of 70, implying a rather overcrowded long position for the pair, hence we could see the pair start to slowly stabilising. Should the bulls maintain control over the pair’s direction, we could see it aiming if not breaking the 1.1300 (R1) resistance line. Should the bears take over, we could see the pair breaking the 1.1260 (S1) support line and aim for the 1.1220 (S2) support level.

BoJ interest rate decision passes as a non-event

BoJ’s interest rate decision was released during today’s Asian session and more or less did not provide anything new or more dovish comments than expected. JPY appreciated somewhat upon the release against the USD in the minutes following the release, yet relented most of the gains later on. The bank maintained its current rate level as expected, at -0.10% and left the forward guidance unchanged as it stated that it would keep current extremely low rates through spring 2020. It also stated that Japan’s economy is expanding moderately as a trend although exports and output are affected by overseas slowdown. We could see JPY remaining largely unaffected by the decision as nothing actually new is provided, yet could also be compared favorably against the Fed’s interest rate decision, despite BoJ’s dovishness. USD/JPY dropped yesterday, breaking the 107.90 (R1) support line, now turned to resistance. As the pair has broken the lower boundary of its past sideways movement, we switch our sideways movement expectations for a bearish bias. It should be noted, that the pair’s RSI indicator in the 4-hour chart is just below the reading of 30, implying the pair may be oversold and a somewhat current stabilization of the pair may be in the works. Should the pair remain under the selling interest of the market, we could see the pair breaking the 107.20 (S1) support line. Should the pair’s long positions be favored, we could see the pair breaking the 107.90 (R1) resistance line.

Other economic highlights, today and early tomorrow

Today during the European session, we get from Norway, Norgesbank’s interest rate decision and from the UK BoE’s interest rate decision and the retail sales growth rates for May. In the American session we get from the US the Philly Fed Business Index for June and from the Eurozone the consumer confidence also for June. In tomorrow’s Asian session, we get Japan’s inflation rates for May. As for speakers, please note that ECB’s Coeure is scheduled to speak.

EUR/USD H4

Support: 1.1260 (S1), 1.1220 (S2), 1.1175 (S3)
Resistance: 1.1300 (R1), 1.1340 (R2), 1.1380 (R3)

USD/JPY H4

Support: 107.20 (S1), 106.60 (S2), 106.10 (S3)
Resistance: 107.90 (R1), 108.50 (R2), 109.15 (R3)

Daily Pivots: (S1) 0.6857; (P) 0.6883; (R1) 0.6911; More...

AUD/USD's recovery from 0.6831 extends higher today. While further rise cannot be ruled out, upside should be limited below 0.7022 resistance to bring fall resumption. On the downside, below 0.6831 will extend the decline from 0.7295 to retest 0.6722 low. Nevertheless, 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.

China shares at 6-1/2 week high

Equity markets embraced the shift by the Fed to an easing bias, with indices extending gains into the Asian session. US indices rose between 0.32% and 0.66% in the Asian morning while the Japan225 index jumped 0.63% and the China50 index 1.56%, rising to the highest level since May 6.

The surge in risk appetite was also felt across currency markets, with the beta-risk Australian dollar gaining 0.11% to 0.6888 versus the US dollar. The gains were helped by broad US dollar weakness which saw USD/JPY tumble 0.3% to 107.78. USD/JPY is flirting with the 61.8% Fibonacci retracement of the rally from January to April at 107.72.

USD/JPY Daily Chart

Next steps in trade talks

Positive sentiment was also boosted by comments from US trade representative Lighthizer that he will be speaking with China’s Vice Premier Liu before the end of the week, and follow up with a meeting before Trump’s tete-a-tete with Xi at the G-20 summit. The comments were made at a congressional hearing.

USD/CNH looks set to decline for a third straight day today as the pair edged down to the lowest since May 13. The 38.2% Fibonacci retracement of the April-June rally is at 6.8537 while the 55-day moving average is above the 200-day moving average for the first time since March 4.

USD/CNH Daily Chart

Bank of Japan unchanged

The Bank of Japan kept its benchmark rate, policy framework of yield control and asset purchase program unchanged at today’s meeting, as analysts had unanimously expected. The committee was not quite as unanimous with a 7-2 vote in favour of unchanged. One of the dissenters was looking for further easing immediately. The statement reiterated the forward guidance that policy rates will be kept at extremely low levels for an extended period of time, at least through to around spring 2020. The post-meeting press conference is scheduled for 12:30pm Singapore time.

Bank of England hogtied by Brexit

The Bank of England also meets today to decide interest rate policy and is widely expected to keep both rates and its asset purchase facility unchanged as both Brexit and the Tory leadership race cloud the horizon.

Ahead of the Bank of England meet we get to see UK retail sales for May, which are expected to show a 0.5% m/m decline following a flat reading in April. The European calendar is almost bare, with June consumer confidence coming late in the day.

After the Fed meeting yesterday, the US calendar also calms down, with Q1 current account data due (a slight narrowing of the deficit expected) along with the Philadelphia Fed manufacturing index, which is seen sliding to 11.0 in May from 16.6 last month.

Daily Pivots: (S1) 1.3239; (P) 1.3319; (R1) 1.3360; More...

USD/CAD's sharp decline through 1.3239 support confirms resumption of fall from 1.3564. The development also revise the case of medium term reversal. Intraday bias is back on the downside for 1.3052/68 cluster support next. For now, risk will remain on the downside as long as 1.3432 resistance holds, in case of recovery.

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.

EUR/USD

Current level - 1.1274

The climb above 1.1250 shows a reversal of the downmove from 1.1347 and the bias is positive, for a test of the mentioned peak. Initial support lies at 1.1250.

USD/JPY

Current level - 107.63

The pair has left the consolidation range on the downside and the bias is bearish, for a slide towards 106.70.

GBP/USD

Current level - 1.2692

The violation of 1.2650 signals a major reversal and a break through 1.2760 crucial high will confirm a completion of the whole downtrend since 1.3380 peak. The bias is positive above 1.2650, for 1.2760 and 1.2810.

Daily Pivots: (S1) 1.1191; (P) 1.1223; (R1) 1.1259; More......

EUR/USD's strong rise suggests that pull back from 1.1347 has completed at 1.1181 already. Intraday bias is turned back to the upside for 1.1347 resistance first. Break there will add to the case of medium term bottoming and target 1.1660 key fibonacci level next.

In the bigger picture, considering bullish convergence condition in daily and weekly MACD, a medium term bottom could be in place at 1.1107 after hitting 61.8% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.1186. Hence, for now, risk will stay on the upside as long as 1.1107 low holds. Break of 1.1347 will extend the rebound towards 38.2% retracement of 1.2555 to 1.1107 at 1.1660. However, sustained break of 1.1107 will confirm resumption of down trend from 1.2555.

The pair hit new low at 107.46 (the lowest since 3 Jan) in early European trading on Thursday, in extension of late Wednesday's post-Fed bearish acceleration. The US central bank left interest rates unchanged, as widely expected, but signaled readiness to cut interest rates in response to growing risks over trade conflict and weak inflation. After Fed's June meeting, focus shifts from the question if the central bank is going to cut rates in July's policy meeting, towards reduction percentage, as 0.25% and 0.50% cuts are both in play. Overnight's comments from US President Trump about his authority to replace Jerome Powell as Fed chairman, added to negative sentiment. Bank of Japan kept interest rates unchanged at 0.1% but pointed to rising global risks and their impact on Japanese economy, keeping opened government bond buying program. Dollar's fall was quite significant, despite markets anticipated the outcome of Fed's policy meeting and generated bearish signal on break of key supports at 107.81 (5 June low) and 107.56 (Fibo 61.8% of 104.59/112.40 rally). Daily close below these levels is needed to confirm break and open way for further weakness. There are no significant obstacles on the way towards next support at 106.43 (Fibo76.4%), violation of which would unmask key support at 104.59 (2019 low, posted after flash crash on 3 Jan). Some price adjustments on profit taking could be expected before bears resume. Broken former key support at 107.81 now offers solid resistance, with extended upticks expected to remain below falling daily Tenkan-sen (108.13) to keep bears intact.

Res: 107.81, 108.13, 108.32, 108.60
Sup: 107.57, 107.46, 107.00, 106.43

The Gold has been in a strong uptrend. After a dovish FOMC statement, we might see a save haven flight into Gold, so new highs are possible.

The Federal Reserve left its benchmark short-term interest rate unchanged, but FED Chairman Mr. Jerome Powell noted that the U.S. economic outlook is increasingly uncertain, citing trade tensions and slowing global growth. Almost half of the members of the Fed's rate-setting body see a possible rate cut this year, making the FOMC statement a bit dovish. IMO, FED needs to cut the rates due to too much U.S. debt.

1.1360-62 is the first POC zone where we might see fresh buyers. In case of a deeper retracement, 1.1343-45 zone is also valid. As W H5 and D H5 have already been broken, strong bullish momentum should target 1400 and eventually 1413, next Daily resistance.