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Daily Pivots: (S1) 0.9899; (P) 0.9958; (R1) 0.9999; More...

USD/CHF's sharp fall and break of 0.9925 minor support suggests rejection by 1.0008 support turned resistance. Recovery from 0.9854 should have completed at 1.0014 and larger fall from 1.0237 is ready to resume. Intraday bias is turned back to the downside. Break of 0.9854 will confirm this bearish case and target 0.9716 support next. For now, outlook will remain bearish as long as 1.0014 resistance holds, in case of recovery.

In the bigger picture, USD/CHF's break of long term trend line support is the first indication of medium term reversal. That is, rise from 0.9186 (2018 low) could have completed at 1.0237 already). Sustained break of 38.2% retracement of 0.9186 to 1.0237 at 0.9836 will confirm and target 61.8% retracement at 0.9587. However, strong rebound from 0.9836 will revive medium term bullishness for 1.0237 and above.

• Fed was remarkably dovish, sending the dollar lower
• BoE meets today; sterling may gain a little on reaffirmation of tightening bias
• Loonie flies as BoC may be the sole 'island of neutrality'

Dollar tanks, gold soars as Fed signals incoming cuts

The Fed kept rates unchanged yesterday, but the meeting wasn't short of excitement as policymakers endorsed the market's expectations for rate cuts as much as possible. One official voted for an immediate cut, while the Committee as a whole dropped the language that they'll be “patient”, replacing it with “will act as appropriate” to support the economy. Meanwhile, the 'dot plot' with new rate projections showed 7 of the 18 members now seeing two rate cuts by December, with Chairman Powell citing a slowing global economy and trade as major risks.

The message was that the Fed is listening to market concerns, and won't hesitate to ease swiftly and boldly if the situation doesn't improve materially in the coming weeks. Markets are now pricing in 35bp of cuts at the July meeting, meaning they view a typical quarter-point (25bp) reduction as a done-deal, and also see a 40% probability for a more aggressive 50bp cut. The dollar dropped on the decision and continues to sink today, with gold being a big winner, soaring to 6-year highs.

Where does this all leave the greenback? On the bright side, a lot of pessimism is priced in already, implying that any piece of good news – either from data or trade – could have a disproportionately large positive effect as traders start second-guessing how many cuts will actually be delivered. Overall though, the days of 'king dollar' seem to be drawing to an end, as even accounting for what's priced in already, the Fed still has a lot more firepower with which to ease compared to the likes of the ECB or BoJ.

BoE may stick to tightening bias, but mind the (Brexit) gap

All eyes will turn to the UK today, as besides a Bank of England (BoE) policy meeting, investors will also have more votes in the Tory leadership race to digest. On the monetary front, recent comments from key policymakers like chief economist Haldane suggest the BoE still wants to raise rates, in contrast to market pricing that now indicates a small probability for cuts. Given this divergence, a reaffirmation of a tightening bias could help the pound climb a little today.

Yet, economics is not the driver of the pound nowadays, so more action may come from politics, where the race for who will be the next Prime Minister is in full swing. Another ballot will be held today at 12:00 GMT, and unless someone drops out of the race, a second one will follow at 17:00 GMT. Most candidates softened their Brexit stance lately, which alongside a weaker dollar, has helped to stop the bleeding in sterling.

Loonie flies as strong data underscore BoC neutrality

The Canadian dollar skyrocketed yesterday and is also on the front foot early on Thursday, after a surprisingly strong set of inflation data highlighted that the Bank of Canada (BoC) may be the sole major central bank not about to ease.

In this sense, the outlook for the loonie seems quite bright by comparison, though a lot may also depend on what trade signals come out of G20 summit next week, and out of the OPEC meeting on July 1.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.11924
Open: 1.12260
% chg. over the last day: +0.38
Day's range: 1.12257 – 1.12730
52 wk range: 1.1111 – 1.2009

Yesterday USD got weakened against the majors. The EUR/USD set the new local maximums. As expected, the Federal Reserve kept the key interest rate at 2.25-2.50% and released mixed economic forecasts. The Central Bank made it known that it's willing to review the softening of the monetary policy due to growing stress on the world economy and relatively weak inflation. The statement that the Central Bank is willing to remain calm about the further corrections of the interest rates disappeared from the FOMC communique. According to the CME FedWatch Tool 57.4% of market participants expect the range to decrease by 25 points in July, while 42.6% expect it to drop by 50 basis points. The key trading range for EUR/USD is 1.12400-1.12700. The quotes can grow further. You should open positions from the key levels.

At 15:30 (GMT+3:00) the Philadelfia Federal Reserve will release the Manufacturing Index.

The price fixed above 50 MA and 100 MA which points to the power of the buyers.

The MACD histogram is in the positive zone and above the signal line which gives a strong signal to buy EUR/USD.

The Stochastic Oscillator is in the overbought zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.12400, 1.12100, 1.11800
Resistance levels: 1.12700, 1.13000, 1.13250

If the price fixes above 1.12700, expect further growth towards 1.13000-1.13250.

Alternatively, the quotes can descend towards 1.12100-1.11900.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.25566
Open: 1.26408
% chg. over the last day: +0.78
Day's range: 1.26259 – 1.27084
52 wk range: 1.2438 – 1.3631

GBP/USD shows agressive sales. During the last two days the quotes grew by 150 points. GBP pdated the key maximums, the demand for USD grows. GBP is testing the local resistance at 1.27150 with 1.26550 actiong as a key support. The investors are focused on the meeting of the Bank of England. The regulator will leave the monetary policy parameters the same. Keep an eye on the comments by the representatives and open positions from the key levels.

The Economic News Feed for 20.06.2019:

Retail Sales Report (UK) – 11:30 (GMT+3:00);

Monetary Policy Review (UK) – 14:00 (GMT+3:00);

The price fixed above 50 MA and 100 MA which points to the power of the buyers.

The MACD histogram is in the positive zone and keeps rising which gives a strong signal to buy GBP/USD.

The Stochastic Oscillator is in the overbought zone, the %K line is crossing the %D line. There are no signals.

Trading recommendations

Support levels: 1.26550, 1.26100, 1.25800
Resistance levels: 1.27150, 1.27600

If the price fixes above 1.27150, expect further growth towards 1.27600-1.27800.

Alternatively, the quotes can descend towards 1.26300-1.26000.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.33780
Open: 1.32787
% chg. over the last day: -0.79
Day's range: 1.32277 – 1.32854
52 wk range: 1.2727 – 1.3664

USD/CAD is in a strong descending trend. During the last two days the quotes fell by 140 points. The trading instrument updated the key minimums. The demand for USD weakened after the Federal Reserve meeting. CAD is supported by the positive oil quotes trends. The quotes are testing the support at 1.32250 with 1.32600 actng as the nearest resistance. The USD/CAD can descend further. Open positions from the key levels.

The Economic News Feed for 20.06.2019 is calm.

The price is below 50 MA and 100 MA which points to the power of the sellers.

The MACD histogram is in the negative zone and below the signal line which gives a strong signal to sell USD/CAD.

The Stochastic Oscillator is in the overbought zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.32250, 1.32000, 1.31700
Resistance levels: 1.32600, 1.33000, 1.3320

If the price fixes below 1.32250, expect further descend towards 1.32000-1.321700.

Alternatively, the quotes can recover towards 1.32800-1.33000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 108.446
Open: 108.099
% chg. over the last day: -0.31
Day's range: 107.467 – 108.143
52 wk range: 104.97 – 114.56

USD/JPY quotes started to descend after long consolidation. The quotes updated the local extremums. Right now they are consolidating around the local support at 107.500 with 107.900 acting as a mirror resistance. JPY has a tendency to grow further against the USD. Keep an eye on the US Treasury bonds' yield and open positions from the key levels.

The Bank of Japan kept the monetary policy at the same levels, as expected.

The price fixed below 50 MA and 100 MA which points to the power of the sellers.

The MACD histogram is in the negative zone and below the signal line which gives a signal to sell USD/JPY.

The Stochastic Oscillator is in the overbought zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 107.550, 107.000
Resistance levels: 107.900, 108.200, 108.500

If the price fixes below 107.550, expect further descend towards 107.000.

Alternatively, the quotes can grow towards 108.100-108.300.

Daily Pivots: (S1) 107.79; (P) 108.21; (R1) 108.50; More...

USD/JPY drops to as low as 107.46 so far today. Break of 107.81 indicates resumption of fall from 112.40. Intraday bias is back on the downside. Sustained trading below 61.8% retracement of 104.69 to 112.40 at 107.63 will pave the way back to 104.62/9 key support. On the upside, break of 108.80 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

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.

Dollar drops broadly overnight after Fed indicates that it's ready to "act as appropriate" on interest rates, depending incoming data. It's clearly a sign that Fed is opening door for rate cut, even though it may not come as soon as in July. Selling picks up momentum today together with falling 10-year yield, which breaches 2.0 handle in Asian session. At this point, Australian Dollar follows as second weakest as RBA affirmed more rate cut is underway. Yen is third weakest on strong rally in Asian stocks. New Zealand Dollar is the strongest following better than expected GDP report, and then Swiss Franc and Euro.

Technically, USD/JPY's break of 107.81 support confirms resumption of fall from 112.40 for 104.69 low. It's seen as the most important indication of Dollar weakness. USD/CAD broke 1.3239 support to resume fall from 1.3564 and reaffirm case of medium term bearish reversal. USD/CHF's sharp decline indicate rejection by 1.0008 support and it's heading through 0.9854 support to resume down trend from 1.0237. 1.1347 in EUR/USD and 1.2765 resistance in GBP/USD will be two key resistance to overcome, to align Dollar's bearish outlook.

In the stock markets, DOW just closed up 0.15% overnight. S&P 500 rose 0.30% while NASDAQ rose 0.42%. In Asian, Nikkei closed up 0.60%. China Shanghai SSE closed up 2.38% to 2987.12, close to 3000 handle. Hong Kong HSI is up 1.09%. Singapore Strait Times is up 0.90%. In bond markets, Japan 10-year JGB yield is down -0.0316 to -0.166. US 10-year yield hits as low as 1.976 in Asian session, now back at 2.0001.

Fed clearly dovish, but showed no hurry to cut interest rate

Fed's announcement overnight was clearly dovish, but not dovish enough to trigger a free fall in the greenback. In short, Fed dropped its "patient" stance and pledged it "will act as appropriate" to incoming data. In the new economic median economic projections, Fed forecasts interest rates to be unchanged this year, followed by a cut in 2020, and then a hike in 2021.

Inflation appears to be main driver behind the revisions in forecasts. Core PCE inflation projections in 2019 and 2020 are both revised down. Though, it should be noted that GDP growth for 2020 was revised up, likely due to the rate cut. Unemployment rate forecasts are revised down for whole horizon.

Fed Chair Jerome Powell insisted in the post meeting press conference that " the baseline outlook remains favorable". He pointed that "Seven weeks ago we had a great jobs report and came out of the last meeting feeling that the economy and our policy was in a good place." However, "news about trade has been an important driver of sentiment in the interim."

And, "the question is whether these uncertainties will continue to weigh on the outlook and thus call for additional monetary policy accommodation". He emphasized that "ultimately the question we are going to be asking ourselves is, 'are these risks going to be continuing to weigh on the outlook?'"

Here are suggested readings on FOMC:

• FOMC Review – Divided Fed Signals Rate Cut This Year Still Likely
• Fed Ready To Pull The Trigger
• Northern Exposure: FOMC Perceive Clear And Present Risk
• FOMC Review: Fed As Dovish It Could Be Without Cutting Rates Already
• FOMC Recap: Fed Doves Play Catchup With Markets
• FOMC Signals Rate Cuts Ahead
• Fed Keeps Rates Steady, But Majority of Members See Cuts ahead
• Fed Policymakers Losing Patience
• Fed Powell press conference live stream
• Dollar down but not out, Fed not patient but not impatient
• Fed forecasts rate cut in 2020, revised down inflation projections
• Fed keeps interest rate at 2.25-2.50%, no longer patient

China media: Xi-Trump meeting just the start of new negotiation phase

The official China Daily newspaper tried to talk down expectations on the upcoming Xi-Trump meeting at G20. An editorial said both parties are "in the mood for serious dialogue". However, "the two parties' expectations are too divergent to allow" conclusion of an agreement. It added, "more likely than not, the one-on-one meeting will end up being the start of a new phase in the negotiations with the two leaders personally setting out their country's respective bottom lines."

Separately, Chinese Premier Li Keqiang reiterated the promises to open its market for foreign investors and businesses. He said today to a group of multinational executives that "China will maintain our long-standing commitment to reform and opening in order to continue to expand and open. We welcome more and more foreign investment to come to China". "We will also relax access to even more fields to create a market-oriented, law-based internationalized business environment."

BoJ warns of significant downside risks concerning overseas economies

BoJ left monetary policy unchanged today as widely expected. Under the yield curve control framework, short-term policy interest rate was kept at -0.1%. JGB purchase will continue continue to keep 10-year JGB yield at around zero percent, with some flexibility depending on developments. Monetary base is expected to increase at around JPY 80T per annum. Y. Harada and G. Kataoka dissented again in 7-2 vote.

In the accompanying statement, BoJ warned that "downside risks concerning overseas economies are likely to be significant". Risks include US macroeconomic policies, consequences of protectionist moves and their effects, emerging markets such as China, global adjustments in IT-related goods, Brexit and geopolitical risks.

Though, BoJ maintained that Japan's economy is "likely to continue on a moderate expanding trend". Domestic demand is expected to follow an uptrend. Exports are projected to show some weakness, but would stay on a "moderate increasing trend". CPI is likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising.

Also from Japan, all industry activity index rose 0.9% mom in April, above expectation of 0.70% mom.

RBA Lowe: Not unrealistic to expect more rate cut

In a speech on "The Labour Market and Spare Capacity" delivered today, RBA Governor Philip Lowe reaffirmed that the central bank is on track for further rate cuts again. He said that would be "unrealistic to expect that lowering interest rates by ¼ of a percentage point will materially shift the path we look to be on." And, "the most recent data – including the GDP and labour market data – do not suggest we are making any inroads into the economy's spare capacity."

Therefore, "it is not unrealistic to expect a further reduction in the cash rate as the Board seeks to wind back spare capacity in the economy and deliver inflation outcomes in line with the medium-term target." Though, he also emphasized that Australia should also look into other options to get closer to full employment, including fiscal policy and structural policies.

New Zealand GDP grew 0.6% in Q1, weak details keeps RBNZ on dovish side

New Zealand GDP grew 0.6% qoq in Q1, unchanged from prior quarter, and matched expectations. Looking at the sectors, growth were driven by 2.0% expansion in goods producing industries. Services growth slowed to 0.2% while primary industries contracted -0.7%. On the components, household spending was up 0.5%, investment spending was up 2.4%, exports of goods and services was up 2.8%

While the headline number was a little stronger than expected, slowdown in services, which accounted for two thirds of GDP, remained a concern. Also, investment growth was mainly driven by residential and nonresidential buildings. Contractions were seen in all other components. RBNZ might be granted some more room to wait-and-see with today's data. But bias will remain towards easing beyond next week's meeting.

Looking ahead

UK events will be the major focus for today. BoE is widely expected to keep Bank rate unchanged at 0.75%. Asset purchase target should be held at GBP 435B. Both decisions should be made by unanimous 9-0 votes. For BoE, Brexit remains overwhelmingly the major risk factor ahead, that could change economic projections and rate path drastically. UK will also release May retail sales. ECB will publish monthly economic bulletin while Eurozone will release consumer confidence. Later in the day, US will release jobless claims, Philly Fed survey, current account and leading indicator.

USD/JPY Daily Outlook

Daily Pivots: (S1) 107.79; (P) 108.21; (R1) 108.50; More...

USD/JPY drops to as low as 107.46 so far today. Break of 107.81 indicates resumption of fall from 112.40. Intraday bias is back on the downside. Sustained trading below 61.8% retracement of 104.69 to 112.40 at 107.63 will pave the way back to 104.62/9 key support. On the upside, break of 108.80 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

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

It is a green day for markets, thanks to the dovish tone adopted by the major central banks. European markets and US futures are trading sharply higher because the old trade is back on track- central bankers have decided to provide their support again.

Markets have learned this week that the major central banks are a lot more dovish now as compared to their stance a few months ago. We all know that central banks have been data dependent, but it is only now that they have started to acknowledge the weakness in the economic numbers. Last night, the Fed lowered its inflation forecast from 1.8% to 1.5% but , there wasn’t any change in the growth forecast. The reason that the event was dovish came from fact that the Fed’s outlook of the economy isn’t positive; they said the global uncertainties are increasing.

They feel it is time to shift the needle of the their monetary policy to spur the growth again or at least not letting the global economy go off the rail which is primarily due to the following two reasons:

*Lack of support from the central banks- tightening monetary policy

*Nationalism: the never ending trade war between the US and China.

Gold Blasting To The Upside

The biggest headline from last night was from the FOMC meeting, the monetary policy event was more dovish than expectations and this pushed the gold price through the roof. Market players has been expecting a few rate cuts by the Fed this year, and now, it seems like that a rate cut could possible as soon as July.

The dollar index took a nose dive last night and there are still no signs of recovery. But it is important to keep in mind that the Fed is still on the path of winding down their balance sheet by the end of September so let's not get ahead of ourselves. Therefore, the gains in the gold price may short live, but the odds for such an event taking place are low

Looking at the dot plot, it doesn’t show any change in character, meaning no change in the interest rate path for this year. However, speculators still think that there is a possibility of rate cut and it can happen as soon as next month. The debate is if the Fed is going to cut the interest rate by 50 basis point during their next meeting or if we are going to two rate cuts each containing 25 basis points.

Carney's Hands Are Tied

Now, all eyes will be on the Bank of England's monetary policy decision. The bank is in a very tight spot to defend the rising inflation, it needs to address this situation. However, Mark Carney, the governor of the Bank of England has his hands tied because of Brexit. I do not expect any change in the interest rate from the bank today but not expecting any dovish statement from the bank as well which will be at odd comparing the stands of other central banks such as the European central bank and the Federal Reserve.

The economic numbers have softened which means talks of any rate hikes should not be part of any equation. this doesn't mean that we will not hear any hawkish bias from the bank today and this could really define the floor for the sterling dollar today.

The precious metal resumed its strong gains as the upside trend remains intact. Gold prices are testing a fresh 5-year high. At the time of writing, gold is trading at 1379.90 an ounce. The gains came partly due to the dovish Fed statement and partly because of the reports of Tehran shooting down a US drone. Rising tensions between Iran and the US have kept global sentiment somewhat in check.

Will Gold Continue to Rise Higher?

As gold prices broke past the 1350 handle, the precious metal continues to trend higher With the current momentum, it is likely that gold will continue to push higher, targeting the 1400 an ounce level. The immediate support is likely to be formed at the 1350 handle which could be tested on a dip.

WTI crude oil prices held steady on Wednesday, trading near the 54.24 handle. The weekly crude oil inventory report from the American Petroleum Institute showed a drawdown of 812,000 barrels. This was smaller than the forecasts of a 1 million barrel drawdown. However, the commodity managed to keep the gains from earlier this week.

Can WTI Break the Resistance at 54.24?

The gains in crude oil prices have pushed price to the resistance area of 54.24. Price action is expected to consolidate near this level in the short term. The weekly EIA inventory report is due later today, which could be a short term catalyst. A strong close above 54.24 will signal further gains in oil prices. This would make the next resistance area of 57.50 the next key target.

The pound sterling, which initially slipped to a five-month low recovered on the day on Wednesday. The UK’s inflation report saw consumer prices rising 2.0% on the year ending May, while the core inflation rate also rose 1.7% on the year. The Bank of England will be holding its monetary policy meeting later today. No changes are expected from the central bank.

Will the GBP/USD Continue to Trend Higher?

The currency pair was initially trading within the range of 1.2716 and 1.2606. Price broke the downside of the range before settling back inside. The current gains in prices have pushed GBP/USD closer to the upper range of 1.2716. A breakout above this level is required to confirm the recent gains. This will leave GBPUSD to test the next main target at 1.2897.

Pivot (invalidation): 53.50

Our preference Long positions above 53.50 with targets at 54.85 & 55.60 in extension.

Alternative scenario Below 53.50 look for further downside with 52.90 & 52.40 as targets.

Comment The RSI is mixed to bullish.