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The euro currency posted modest gains on Monday, rising 0.08% on the day. Economic data was sparse as German GDP for the first quarter was confirmed to rise 0.4%. The gains were driven by an increase in household consumption and personal spending. The German central bank, Bundesbank, however, cautioned that growth could contract in the second quarter.

EURUSD Attempts to Rebound

On Monday, the common currency was seen posting modest gains. This came as price action coincided with the dynamic support of the trend line and the horizontal support at 1.1208. A follow through to the upside from here could see EURUSD testing the resistance level of 1.1250. We expect the currency pair to drift sideways within this range ahead of Wednesday’s Fed meeting.

Daily Pivots: (S1) 0.8912; (P) 0.8933; (R1) 0.8971; More...

EUR/GBP's rally continues today and reaches as high as 0.8974 so far. Break of trendline in 4 hour MACD suggests upside re-acceleration. Intraday bias stays on the upside for 0.9101 key resistance next. Decisive break there will carry larger bullish implications. On the downside, break of 0.8871 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

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.

GBPUSD reactivated the downtrend started from the 1.3380 peak to reach a fresh six-month low of 1.2510 on Tuesday. Technically, the pair could lose further momentum as the MACD is crossing below its red signal line. However, with the RSI rebounding on its 30 oversold mark and the Stochastics set for a bullish cross under 20, upside corrections cannot be ruled out in the very short-term.

The area between 1.25 and 1.2475 could be closely watched if the market extends on the downside. Breaking that barrier, all attention will shift to 1.2393, the lowest price recorded since April 2017, while another step lower could test the 1.2330 number, a former restrictive level. Should bearish pressure continue, increasing speculation over a more persisting downtrend, support could run towards the 1.2200 psychological mark.

On the flip side, a closing price above 1.2600 and more importantly higher than the 20-day simple moving average (SMA) currently at 1.2654, could bring some confidence to the market, with traders eyeing 1.2770 next, the 61.8% Fibonacci of the 1.2393-1.3380 upleg. Moving further up, the 50% Fibonacci of 1.2890 could next come into focus.

In the medium-term timeframe, the bearish outlook deteriorated following the drop under the previous trough of 1.2558. A rally above 1.2890 would put the market back to neutrality, though with the 50-day SMA weakening under the 200-day SMA, such a case may came later than sooner.

In brief, GBPUSD is facing a negative risk both in the short and the medium-term.

Daily Pivots: (S1) 1.6313; (P) 1.6351; (R1) 1.6408; More...

EUR/AUD rises to as high as 1.6448 so far today. 61.8% projection of 1.5683 to 1.6262 from 1.6052 at 1.6410 is already broken. Intraday bias stays on the upside for 100% projection at 1.6631 next. On the downside, break of 1.6298 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

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, with bearish divergence condition in weekly MACD, and turn outlook bearish.

• Rates: Draghi to confirm/add (?) to dovish bias in Sintra
  Core bonds grind higher this morning. Eco data won't define trading with tomorrow's Fed in mind. ECB President Draghi might keep his dovish bias or even add to it at his introductory speech in Sintra. Will he warn again of de-anchoring inflation expectations? The 5y5y EMU forward inflation swap set an all-time low of 1.1%.
• Currencies: EUR/USD stabilizes north of 1.12 ahead of Fed meeting.
  The dollar lost marginal ground despite poor USD data yesterday. Investors are reluctant to adapt positions ahead of the Fed meeting. This will still be the case today. Headlines from the ECB Sintra forum might cause intraday euro gyrations. Sterling is still haunted by the political headlines as the next vote to find a new conservative leader takes place today.

The Sunrise Headlines

• Technology shares outperformed on Wall Street yesterday (Nasdaq + 0.62%) while the DJ and S&P500 marginally gained. Except for Japan (stronger yen), Asian equities edge higher.
• The UK braces for the second round in the leadership contest today. Six candidates are left. The least popular contender and the ones with 32 or less votes will be eliminated. Results are expected this evening.
• The Reserve Bank of Australia said that further policy easing is more likely than not as inflation will probably continue to be muted “for some time”, the June minutes showed. The Aussie dollar declined to AUD/USD 0.684.
• The US will send more troops to the Mideast “for defensive purposes”, acting Defense Secretary Shanahan said, citing Iran's “hostile behaviour”. The move comes days after alleged Iranian attacks on two oil vessels in the Gulf of Oman.
• German officials said Manfred Weber's bid for presidency of the European Commission is losing momentum, adding they are preparing for a shift in focus if needed toward Weidmann's call for ECB chair.
• President Trump cut aid to El Salvador, Guatemala and Honduras as a way of forcing the countries to step up migrant reducing measures. The US administration had announced to do so already in March.
• In today's economic calendar US housing data are worth watching. Final CPI data is due in the EMU. Germany releases its June ZEW indicator. ECB's Draghi, BoE's Carney and others speak at the ECB forum in Sintra.

Currencies: EUR/USD stabilizes north of 1.12 ahead of Fed meeting.

EUR/USD stabilizes ahead of Fed decision

The dollar traded choppy yesterday, but in the end changes were limited. US data (Empire manufacturing and NAHB housing index) were poor and caused some intraday USD-weakness. EUR/USD rebounded to the 1.1240/45 area, but the gain couldn't be sustained. US short-term yields also hardly declined on the poor US data. At the same time, EMU 5Y/5Y forward inflation expectations continued drifting ever lower, raising the case for additional ECB action in a notthat- distant future. EUR/USD reversed most of the intraday gain to close at 1.1218 (from 1.1208). USD/JPY finished the day almost unchanged at 108.54. This morning, Asian equity markets mostly show modest gains with Japan underperforming. There is no high profile eco or political news. The dollar is trading slightly softer as investors are finetuning positions ahead of tomorrow's Fed decision/statement. EUR/USD is trading in the 1.1235 area. USD/JPY returned to the 108.30 area. The Aussie dollar extends its decline as the RBA minutes suggested that more easing is likely. AUD/USD is trading in the 0.6840 area.

Today, German ZEW investor confidence is expected to ease from -2.1 to -5. We see no big case for a downside surprise. US housing starts and permits are expected more or less stable at decent levels. Geopolitical tensions remain omnipresent (Iran, N-Korea…) but it isn't sure they will have a direct impact on trading today. Markets will keep a close eye at the ECB forum in Sintra. Friday's EUR/USD decline marked the end of recent upside test. Investors first want clarity on the Fed easing intentions as a lot is already priced in. At the same time, soft ECB talk weighs on the euro, too. We assume order-driven trade in EUR/USD ahead of tomorrow's Fed meeting. EUR/USD 1.1200 survived, at least for now. We still assume that sustained USD gains are not evident, even if it will be difficult for the Fed to meet markets expectations on policy easing. Sterling remained in the defensive yesterday. EUR/GBP extended its rebound beyond 0.89. Cable slipped below the 1.2560 support. Today, the second round of vote for a new conservative party leader will take centre stage. With no eco UK eco data on the agenda, political headline risk will probably prevail. Last week, there were tentative signs that that sterling could stabilize, even with the prospect of Boris Johnson becoming PM. However, this relief for sterling proved to be short-lived. The EUR/GB P 0.90/91 resistance is again on the radar.

EUR/USD holding in the middle of the 1.11/1.1350 range as markets await Fed policy decision.

Daily Pivots: (S1) 1.1191; (P) 1.1206; (R1) 1.1223; More....

No change in EUR/CHF's outlook and intraday bias remains neutral first. Recovery from 1.1119 is seen as a correction and upside should be limited by 1.1278 resistance to bring fall resumption. On the downside, break of 1.1186 minor support will turn intraday bias back to the downside for 1.1119 first. Break there will extend recent down trend 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.

The EUR/USD break below the support trend line (blue) indicates that the bears remain in control and could start a drop towards the 78.6% and 88.6% Fibonacci levels of wave 2 vs 1. A larger downtrend, however, only is confirmed once price breaks and closes (on daily chart) below the critical 1.11 support. A break above the resistance trend line (red) indicates a bullish breakout and potentially the end of the wave 2 (pink) retracement.

The EUR/USD could either be building a bear flag continuation pattern or multiple waves 1-2 of a new uptrend. This will depend on whether price can break below the support (blue) or above the resistance (red) trend lines. This wave pattern outlook is indicating that a bearish ABC (purple) seems completed and hence the development a bullish reversal has an advantage over the bearish scenario.

General Trend:

• Hang Seng rises ahead of possible press briefing by HK Chief Executive Lam
• Utilities weigh on equities in Japan
• Australian steelmaker Bluescope declines on reduced guidance
• RBA June Minutes: Lower interest rates were not the only policy option
• Australia house price declines accelerated in Q1
• PBoC continues to inject liquidity amid focus on end-June interbank liquidity conditions
• BoJ Gov Kuroda outlines issues that will be debated at this week’s policy meeting (June 19-20th)
• Markets remain focused on this week’s US Fed meeting (June 18-19th)

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened 0.0%
• (AU) RESERVE BANK OF AUSTRALIA (RBA) JUN MINUTES: FURTHER POLICY EASING MORE LIKELY THAN NOT IN PERIOD AHEAD
• (AU) AUSTRALIA Q1 HOUSING PRICE INDEX Q/Q: -3.0% V -2.6%E; Y/Y: -7.4% V -6.9%E
• BSL.AU Cuts FY19 underlying EBIT A$1.35B (prior A$1.4B); to extend buyback by up to A$250M
• COL.AU Announces updated strategy: targeting A$1.0B in cumulative cost savings by FY23; Revenue growth expected to be at least in line with market growth over long term
• (AU) Australia Treasurer Frydenberg: To introduce ~A$158B income tax package during first week of Parliament
• RSG.AU Granted approval to IPO in London, trading expected to start on June 20th
• (AU) Australia Bureau of Agricultural and Resources Economic (ABARES) cut its 2019/20 wheat exports forecast by 18% to 11.7M tons; cites drought

Japan

• Nikkei 225 opened -0.1%
• (JP) Bank of Japan (BOJ) Gov Kuroda: Overseas economic developments will be discussed at rate review starting Wednesday; Uncertainty over global economic outlook is high; risks are on downside for global economy - Comments to Parliament
• (JP) Japan Government Spokesman Nishimura: Japan is watching Iran uranium cap developments
• (JP) Japan Ministry to order Tateru [1435.JP] to suspend operations, cites alleged manipulation of data related to borrowers of commercial loans – Japanese Press
• (JP) Japan Fin Min Aso: Likely that US/China meeting will happen during G20
• (JP) Japan MoF sells ¥1.9T v ¥1.9T prior in % coupon 5-year JGB: avg yield: -0.228% v -0.170% prior, bid to cover: 4.51x v 4.94x prior
• (JP) Japan Steel Industry Association Head: Sees some slowdown in steel demand citing the US-Trade war; closely watching China steel exports amid signs of slowing demand

Korea

• Kospi opened -0.1%
• 005930.KR Head of Chip Logic: Open to M&A opportunities to grow neural processing chip
• (KR) China President Xi to visit North Korea later this week between Jun 20-21st for State visit
• (KR) South Korea nuclear envoy is headed to the US trying to revive talks about denuclearizing North Korea - Yonhap

China/Hong Kong

• Hang Seng opened +0.2%; Shanghai Composite opened +0.1%
• (CN) CHINA MAY NEW HOME PRICES M/M: 0.7% V 0.6% PRIOR; Y/Y: 10.7% V 10.7%PRIOR
• (CN) China regulator urged interbank liquidity support for smaller non-banks - financial press
• (CN) China Ministry of Finance (MoF) researcher: China may increase its muni bond sales quota for 2019
• (CN) Some measures show that bank liquidity in China has remained tight amid May government takeover announcement related to Baoshang Bank - US financial press
• (CN) China PBoC Open Market Operation (OMO): Injects CNY90B in 14-day reverse repos v CNY150B prior; Net CNY80B injected v CNY120B injected prior
• (CN) China PBoC sets yuan reference rate: 6.8942 v 6.8940 prior

North America

• (US) 320 representatives from US manufacturers, retailers and other companies and trade groups are expected to appear over seven days of hearings with officials to speak against China tariff implementation
• (US) Acting Defense Sec: Approved additional 1,000 troops to Middle East due to Iran threat (in addition to the already increased troops)
• (US) APR NET LONG-TERM TIC FLOWS: $46.9B V -$28.4B PRIOR; TOTAL NET TIC FLOWS: -$7.8B V -$8.1B PRIOR; China Total holding of US Treasuries: $1.113T v $1.12T prior (2-year low for China holdings)
• S Reportedly US DoJ will approve T-Mobile deal within next few days – CNN

Europe

• (UK) MPs Javid or Raab reportedly are expected to be defeated in Tory leadership contest tomorrow as support for Rory Stewart surges - UK's The Sun
• (UK) Chancellor of the Exchequer Hammond (Fin Min) said to be prepared to resign over PM May spending plans - press

Levels as of 1:20 ET

• Nikkei 225, -0.9%, ASX 200 +0.5%, Hang Seng +0.7%; Shanghai Composite -0.1%; Kospi +0.3%
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.1%, Dax -0.2%; FTSE100 +0.1%
• EUR 1.1235-1.1217 ; JPY 108.59-108.25 ; AUD 0.6858-0.6832 ;NZD 0.6501-0.6490
• Gold +0.2% at $1,345/oz; Crude Oil flat at $51.93/brl; Copper -0.1% at $2.648/lb

Market movers today

Focus today will be on the ECB Forum at Sintra , where ECB President Mario Draghi will give an introductory speech at 10.00 CEST and also participate in a panel with the Bank of England's Mark Carney and former Fed vice chairman Stanley Fischer at 16.00 CEST, see the full programme for the forum here . We expect Draghi to strike a dovish tone at the conference.

On the data front ,we have final Euro inflation for May and the German ZEW sentiment index for June. In the US, data on building permits and housing starts are due to be released. Housing should perform well following the sharp decline in mortgage rates and high consumer confidence.

We have just published our Nordic Outlook with updated economic forecasts and overviews for the Nordic countries. The Nordics have been resilient in general in the face of recent global weakness, with exports still supporting growth, but domestically, the Nordics are moving in different directions. We see very little domestic demand growth in Sweden and it is also slowing markedly in Finland. Norway, on the other hand, is supported by oil investments. The Danish economy is slowly decelerating with growth still above trend.

Selected market news

It was another miscellaneous and cautious trading session in Asian stock markets as they were in 'wait-and-see' mode ahead of decisions by the US Fed and other central banks. Today the Fed starts a two-day meeting. Both the USD and Treasuries remained steady, while the JPY headed up. Crude stayed lower on OPEC's inability to set the exact date for the next meeting on oil production cuts.

The AUD slid to a five-month low as the RBA's dovish minutes from the June meeting revealed that the central bank could ease further in order to boost inflation and wage growth. In June, the RBA already cut to 1.25% to keep the economy running.

New home prices in China climbed at the fastest pace in five months, increasing 0.7% m/m in May versus a 0.6% m/m rise in April, making it harder for the government to control bubbly housing markets. This rise marks the 49th month of consecutive increases. China has constantly pressed local governments to keep housing prices under control. However, the latest easing of credit conditions by the government has kept the housing market strong.

The US declared it will deploy 1,000 more troops to the Middle East for defensive purposes, emphasising concerns about a threat from Iran. The latest deployment is a new addition to the 1,500-troop build-up announced in May.

UK Finance Minister Philip Hammond is "prepared to resign" over Prime Minister Theresa May's legacy spending plans, as tension between officials at the Treasury and the prime minister's office have reached boiling point over May's spending intentions.

Daily Pivots: (S1) 1.1198; (P) 1.1222; (R1) 1.1242; More......

With 1.1268 minor resistance intact, further decline is still mildly in favor in EUR/USD. Though, we'd be cautious on strong support from 1.1107 low to bring rebound. On the upside, above 1.1268 minor resistance will turn bias back to the upside for 1.1347 again.

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 1.12347 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.