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Regarding the upcoming meeting between Trump and Xi at G20, Chinese Foreign Ministry spokesman Lu Kang said "The two leaders will talk about whatever they want". And, "a deal is not only in the interests of the two peoples but meets the aspirations of the whole world."

He added "I'm not getting ahead of myself, but communication over four decades shows it is possible to achieve positive outcomes."

UK CPI rose 0.3% mom in May. Annually, CPI slowed to 2.0% yoy, down from 2.1% yoy. Core CPI slowed to 1.7%, down from 1.8%. All three figures matched expectations. Also released, RPI was unchanged at 3.0% yoy, above expectation of 2.9% yoy. PPI input slowed to 1.3% yoy, beat expectation of 0.8% yoy. PPI output slowed to 1.8% yoy, matched expectations. PPI output core slowed to 2.0% yoy, matched expectations. House price index was unchanged at 1.4% yoy in April, above expectation of 1.1% yoy.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.12179
Open: 1.11924
% chg. over the last day: -0.17
Day's range: 1.11872 – 1.12024
52 wk range: 1.1111 – 1.2009

EUR/USD keeps showing a negative trend. Yesterday the trading instrument updated the local minimums. In May, the inflation in the EU slowed down to 1.2% year-to-year. The EU is under pressure due to the comments by the head of the CBE. Mario Draghi mentioned that the regulator is willing to review additional sanctions to stimulate the economy. The quotes are consolidating around 1.11800-1.12100. The investors are waiting for the Federal Reserve to announce the new rate. It's expected that it will remain the same. However, the meeting may be used to send some signals for the further decrease of the rates next year. Keep an eye on the comments and rhetorics of the Central Bank representatives.

At 21:00 (GMT+3:00) the Federal Reserve will announce the key interest rate.

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 but above the signal line which gives a weak signal to sell EUR/USD.

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

Trading recommendations

Support levels: 1.11800, 1.11500
Resistance levels: 1.12100, 1.12400, 1.12700

If the price fixes below 1.11800, expect further descend towards 1.11500-1.11200.

Alternatively, the quotes can recover towards 1.12400-1.12700.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.25318
Open: 1.25566
% chg. over the last day: +0.26
Day's range: 1.25517 – 1.25698
52 wk range: 1.2438 – 1.3631

GBP/USD stabilized after a long descend. The GBP is consolidating around 1.24450-1.25800. The market participants are waiting for the UK inflation report. Keep tracking the Brexit issue and open positions from the key levels. The quotes can correct soon.

At 11:30 (GMT+3:00) the UK will publish a consumer price index.

The indicators do not provide precise signals, the price has crossed 50 MA.

The MACD histogram is in the positive zone which points to the power of the buyers..

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which gives a signal to sell GBP/USD.

Trading recommendations

Support levels: 1.25450, 1.25100
Resistance levels: 1.25800, 1.26100, 1.26550

If the price fixes above 1.25800, expect further correction towards 1.26100-1.26500.

Alternatively, the quotes can fall towards 1.25100-1.25000.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.34121
Open: 1.33780
% chg. over the last day: -0.29
Day's range: 1.33648 – 1.33820
52 wk range: 1.2727 – 1.3664

USD/CAD started to descend after a long rally. CAD set the new local minimums. The quotes are consolidating around 1.33650-1.33900. The trading instrument can correct further. We expect important reports from Canada. Keep an eye on the US news feed and oil quotes dynamics, open positions from the key levels.

Basis consumer price index in Canada will be published at 15:30 (GMT+3:00)

The indicators do not provide precise signals, the price has crossed 100 MA.

The MACD histogram is in the negative zone but above the signal line which gives a weak 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: 1.33650, 1.33450, 1.33200
Resistance levels: 1.33900, 1.34200, 1.34350

If the price fixes below 1.33650, expect further correction towards 1.33450-1.33200.

Alternatively, the quotes can grow towards 1.34200-1.34400.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 108.523
Open: 108.446
% chg. over the last day: +0.26
Day's range: 108.256 – 108.618
52 wk range: 104.97 – 114.56

The safe haven currencies keep moving sideways. The technical picture remains ambiguous. The quotes are testing the levels at 108.200 and 108.450. The market participants are waiting for the Federal Reserve to announce a key interest rate. Keep an eye on US Treasury bonds` yield. Open positions from the key levels.

During the Asian session, Japan published mixed reports on the trading balance.

The indicators do not provide precise signals, 50 MA is crossing 100 MA.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the oversold zone, the %K line is below the %D line which gives a weak signal to sell USD/JPY.

Trading recommendations

Support levels: 108.200, 108.000, 107.850
Resistance levels: 108.450, 108.600, 108.750

If the price fixes below 108.200, expect a descend towards 108.000-107.850.

Alternatively, the quotes can grow towards 108.600-108.750.

Today late in the American session (18:00,GMT), FOMC’s interest rate decision will be released. The bank is expected to remain on hold at +2.50% and currently Feds Funds Futures (FFF) imply a probability of 79.1% for the bank to do so, with the rest favoring a rate cut. Please bear in mind that the meeting is also to produce the bank’s new dot plot, the new economic projection and the accompanying statement. Given that the Fed Chair Powell, has recently switched his usual line about the bank being “patient” in favor of “acting appropriately”, we could see a similar switch in the accompanying statement. An additional dovish element could be the possible lowering of the bank’s projections as well as a lowering of the expectations of the Fed’s members about bank’s interest rate. It should be noted though, that a number of analysts maintain the view that the US financial data do not yet suggest a rate cut in the near future, in contrast with what the market expects. We maintain a base scenario of the bank remaining on hold and sounding a bit dovish in order to keep the door open for a possible rate cut in the future. Also, please be advised that volatility for USD pairs could be extended during Fed’s Chair Powell’s press conference later on. EUR/USD dropped yesterday, breaking the 1.1220 (R1) support line (now turned to resistance), as the common currency weakened after ECB Presidents dovish comments. Technically, we expect the pair to maintain a course south, as long as it remains under the downward trendline incepted since the 12th of June. Should the bears maintain control over the pair’s direction, we could see it breaking the 1.1175 (S1) and aim for the 1.1125 (S2) support level. Should the bulls take over, we could see the pair breaking the 1.1220 (R1) resistance line and aim for the 1.1260 (R2) resistance hurdle.

BoJ interest rate decision

Tomorrow during the late Asian session, BoJ’s interest rate decision is to be announced and the bank is widely expected to remain on hold at -0.10%. Currently JPY OIS imply a probability of 90.14% for the bank to remain on hold and if so, we could see the accompanying statement gathering the market’s attention. Given the recent statement of BoJ Governor Kuroda, that the bank has further room to support the economy, we see risks skewed to the dovish side for the bank’s accompanying statement. We could see the JPY weakening on the announcement especially if the bank decides to provide further details on what form this support could take. Also, please be advised that volatility for JPY pairs could be extended during BoJ Governor Kuroda’s press conference later on. USD/JPY maintained a range bound movement yesterday, unable to clearly break above the 108.50 (R1) resistance line. We could see the pair maintaining its current movement, yet one must note that the volatility, which could be provided by the two interest rate decisions (FOMC and BoJ), could alter the pair’s direction. Should the pair come under the selling interest of the market, we could see it breaking the 107.90 (S1) support line and aim for the 107.20 (S2) support barrier. Should the pair’s long positions be favored by the market, we could see it clearly breaking the 108.50 (R1) resistance line and aim for the 109.15 (R2) resistance hurdle.

Other economic highlights, today and early tomorrow

Today during the European session, we get Germany’s PPI rate for May, as well as UK’s inflation rates for the same month. In the American session, we get Canada’s inflation rates for May and from the US the EIA weekly crude oil inventories figure. Before BoJ’s interest rate decision in tomorrow’s Asian session, we get New Zealand’s GDP growth rate for Q1. As for speakers, please note that ECB’s President Mario Draghi, ECB’s Coeure, ECB’s Lautenschlaeger and RBA Governor Lowe, are scheduled to speak.

EUR/USD H4

Support: 1.1175 (S1), 1.1125 (S2), 1.1075 (S3)
Resistance: 1.1220 (R1), 1.1260 (R2), 1.1300 (R3)

USD/JPY H4

Support: 107.90 (S1), 107.20 (S2), 106.60 (S3)
Resistance: 108.50 (R1), 109.15 (R2), 109.75 (R3)

• All eyes on Fed – Powell may have trouble satisfying the bears
• Euro cruises lower as Draghi signals more stimulus
• Stocks roar higher as Trump-Xi agree to meet at G20
• UK & Canadian inflation data coming up

Fed meeting: Dovish, but enough to appease the market?

The main event today will be the Fed policy decision at 18:00 GMT, followed by a press conference from Chairman Powell half an hour later. A more dovish tone seems almost certain in light of the sharp decline in US inflation expectations and an overall slowing data pulse, coupled with the ongoing trade uncertainty.

The question however, is whether any signals for rate cuts will be enough to live up to the market’s already-dovish expectations, given that two rate cuts are fully priced in for July and October. In other words, much easing is factored into the greenback and equities by now, so anything short of explicit comments for aggressive cuts very soon could trigger a hawkish reaction, sending the dollar a little higher and stocks lower on the news.

Having said that, the broader picture for the dollar is increasingly becoming gloomier, hence even a positive reaction on the Fed today may remain relatively short-lived. Both the Fed and the ECB appear ready to enter an easing cycle in which the Fed will have a lot more room to cut than the ECB does, implying that the potential downside in the dollar would likely be more severe, other things equal.

Euro stumbles as Draghi opens door for more stimulus

In classic fashion, the ECB chief pushed the euro a little lower yesterday, by affirming that more stimulus will likely be needed. Yet, the market reaction was not as large as one would have expected given the gravitas of such an announcement, with the single currency even recovering some of its losses in the following hours.

This highlights that markets think the ECB’s ‘ammunition box’ is limited, as the margin to cut rates further into negative territory is small, and the appetite for restarting QE within the central bank seems even smaller. To be clear, any losses in the euro from further ECB easing are unlikely to be massive, absent a ‘shock’ reintroduction of QE.

Risk sentiment lifted by fresh hopes for trade deal

In the broader market, risk appetite improved following news that the American and Chinese presidents spoke on the phone, and that they’ll meet in person at the G20 summit next week in an attempt to break the trade deadlock. Global stocks rejoiced, with the likes of the S&P 500 (+0.97%) and Dow Jones (+1.35%) approaching their all-time highs again, also aided by ECB stimulus hopes. Likewise, commodity currencies such as the aussie, kiwi, and loonie soared – the latter pushed up by rising oil prices too.

UK & Canadian inflation on tap, more Tory leadership votes

Besides the Fed meeting, traders will also be on the lookout for May inflation figures from both the UK and Canada today.

The Canadian prints could prove crucial as forecasts point to a solid set of data, which may underscore that Fed-BoC policies are set to diverge, and thereby lift the loonie.

In the UK, the pound tends to overlook economic data, and the focus may instead be on yet another round of voting in the Conservative leadership race, which Boris Johnson is still leading by a huge margin.

Cable is trading within narrow range in early European session and awaiting release of UK inflation data which are expected to provide fresh signal.

The pair was so far unable to benefit from Tuesday’s bullish close (the first after five straight day’s in red) following bounce from new low at 1.2505 (the lowest since 3 Jan), as overall structure remains negative.

Fears of no-deal Brexit continue to pressure pound as Boris Johnson extends lead over rivals in the race for PM position.

Technical studies remain in bearish setup and add to negative outlook.

UK CPI is forecasted at 2% in May vs 2.1% previous month and markets fear that pound could fall further if today’s release falls below expectations that would also harm expectations for BOE rate hike before Brexit.

Near-term price action holds below initial barriers at 1.2559 (former low of 31 May) and 1.2580 (falling 5SMA), which guard pivotal resistance at 1.2634 (daily Tenkan-sen / 50% of 1.2462/1.2506 bear-leg), break of which would ease pressure.

On the other side, break below 1.2505 would open way towards Fibo projections at 1.2481 and 1.2433 and unmask key support at 1.2397 (2019 low posted on 3 Jan).

Res: 1.2569, 1.2580, 1.2604, 1.2634
Sup: 1.2542, 1.2532, 1.2505, 1.2481

Tensions around trade wars subsided following news reports that both the US and China leaders are set to hold an ‘extended meeting’ next week at the G20 summit in Osaka, Japan.

After President Trump confirmed the proposed talks on Twitter, the demand for risky assets returned to the markets, since it was assumed that the ongoing trade negotiations may indicate a desire from both parties to come to a consensus and some form of agreement.

In addition, the news of the upcoming meeting caused the growth of major stock indices by more than 1%, while weakening the dollar to the yuan and reinforcing the growth of US, Europe and Japan bond yields. Furthermore, SPX added over 1%, returning to the highs of the last six weeks.

The Chinese market was more than 2.5% in the green, rising to the levels of the previous day – before later adjusting to a growth of 2%.

In general, futures on the US indices maintain a positive trend at the start of today’s trading. For example, DJI is just only 1.8% away from its historical maximum. Highs on indices may now be an attainable goal, with the market consolidating after the June rally.

EURUSD

Yesterday, the euro suddenly fell below 1.1200, losing more than 0.5%. It happened after ECB chief Mario Draghi said the bank would need to ease policy again if inflation failed to head back to its target. Trump's reaction was not long in coming, as he tweeted that such actions would unfairly increase the competitiveness of European goods.

It is equally important to note that the speech of the ECB president was held on the eve of the Fed rate decision meeting. The coincidental timing of Mr Draghi’s words has further strengthened expectations that a softening of the Fed’s policy will also not take long.

Note that the dovish rhetoric of the EU and the United States has occurred almost simultaneously this year, while maintaining low volatility on forex. Nevertheless, EURUSD still maintains a bias towards depreciation.

GBPUSD

The British pound received a boost after reaching 1.2500 on Tuesday. Now, GBPUSD is trading at 1.2560, showing an increase from 26-month lows. This decline was largely due to the dollar weakening and was supported by hopes for a softer tone from the Fed. It is also worth noting the divergence between the RSI and the GBPUSD chart, which indicates the possibility of a pullback in the near future, following a period of high sales over the past few days.

The EUR/USD is waiting for the FOMC decision today. The FOMC statement will bring additional volatility in the pair.

The FOMC statement is among the primary methods the Fed uses to communicate with investors regarding monetary policy. Future monetary policy is often read between the lines and it creates additional volatility. 1.1220-1.1230 is the zone where the EUR/USD has been rejected while 1.1170-80 is the zone for a possible bounce. Breakout above or below the zones should create a breakout setup. However if the price doesn’t break the POCs then bounces/rejections will happen.

Gold prices recovered from Monday’s losses as price got a boost after Mario Draghi’s comments. The precious metal also maintained gains ahead of the conclusion of the two-day FOMC meeting today. While no rate cuts are expected, we do expect the Fed to convey to the markets the timing of its potential rate cut. Gold prices maintained strong gains, rising for three consecutive weeks so far.

XAUUSD Forms the Ascending Wedge Pattern

Gold prices have consolidated firmly above the 1320 handle. But in the process, price action has formed an ascending wedge pattern. This could potentially see price settling back to the 1320 level to establish support more firmly. The bias shifts only if gold prices can breakout convincingly above 1354 level.

Crude oil prices got a reprieve as the commodity logged gains on Tuesday. WTI crude oil prices rose over 4.0% on the day on Tuesday. In an interview, an oil minister from Equatorial Guinea said that OPEC members prefer prices to be around $60 – $70. The comments come ahead of the semi-annual OPEC meeting which could be scheduled in July. The prevailing narrative is that OPEC will continue with its production cuts.

Can WTI Crude Oil Maintain the Gains?

After oil prices surged to the upside, the breached trend line suggests there is further scope for gains. However, price action will need to close convincingly above 54.42 to confirm this bias. The next main target to the upside is at 57.50 where resistance is most likely to form. To the downside, failure to breakout above 54.42 could lead to oil prices drifting sideways, supported above the 51.70 floor.