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Daily Pivots: (S1) 108.28; (P) 108.43; (R1) 108.72; More...

Intraday bias in USD/JPY remains neutral and consolidation from 107.81 could extend further. In case of another rise, upside should be limited by 109.02 support turned resistance to bring fall resumption. On the downside, sustained break of 61.8% retracement of 104.69 to 112.40 at 107.63 will pave the way back to 104.62/9 key support. However, break of 109.02 support turned resistance will indicate short term bottoming and bring lengthier consolidations first..

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.

The USD held near the two-week high after mixed retail sales data released on Friday. Data showed that the core retail sales rose by 0.5% in May as expected. The headline retail sales rose by 0.5%, which was higher than the previous month’s 0.3%. Ex gas and autos, retail sales of 0.5% topped the analysts’ forecast of 0.4%. The manufacturing production data from the Fed increased by 0.2% in May, higher than the expected 0.1% while the industrial production rose by 0.4%. This week, investors will watch out for the USD as the Fed delivers its interest rates decision. Later today, investors will receive the NY Empire State manufacturing index.

The sterling was relatively unmoved after the first debate among the candidates set to replace Theresa May took place. May announced her resignation two weeks ago but will remain as prime minister until her replacement is found. In the first debate, Boris Johnson, who is widely expected to win, failed to attend. The new prime minister will need to deliver Brexit by the October deadline.

The price of crude oil was relatively unmoved in overnight trading as the world deliberated on the next course of action regarding the tanker attacks. This was after two tankers were attacked at the Strait of Hormuz, where two-thirds of all seaborne crude oil passes. The US has placed the responsibility on Iran or one of its proxies while Iran has blamed the US or one of its allies including Saudi Arabia and Israel. To avoid a military confrontation, the EU asked the two sides to have restraint as an investigation is being conducted.

EUR/USD

The EUR/USD pair rose slightly in the morning session. It is now trading at 1.1220, which is slightly higher than the Friday’s low of 1.1200. This is slightly lower than the 50% Fibonacci Retracement level. This price is along the 14-day moving average and slightly lower than the 28-day EMA. The RSI has emerged from the oversold level of 19 to the current 31. The pair will likely test the 50% Fibonacci level of 1.1230, and then resume the downward trend.

XBR/USD

The price of Brent crude oil was relatively unmoved at $61.40. On the hourly chart, the price remains above the double bottom level of 59.05 and slightly above the 28-day and 14-day moving averages. The RSI has remained relatively unchanged at the current level of 60. Today, the pair will remain relatively unchanged as traders wait for inventory data expected tomorrow.

GBP/USD

The GBP/USD pair moved slightly higher today and is currently trading at the 1.2595 level. On the hourly chart, this is much lower than last week’s high of 1.2758 and slightly below the 23.6% Fibonacci Retracement level. It is also along the 7-day EMA and slightly lower than the 14-day EMA, which appear to be crossing over. There is a likelihood that the pair will resume the downward trend to test the important support of 1.2558.

Daily Pivots: (S1) 0.9943; (P) 0.9969; (R1) 1.0013; More...

Intraday bias in USD/CHF remains neutral first, with focus on 1.0008 support turned resistance. As long as 1.0008 holds, further decline is still expected. Sustained break of 0.9836 fibonacci level should confirm medium term reversal. However, break of 1.0008 will indicate completion of fall from 1.0237 and turn bias to the upside.

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.

Daily Pivots: (S1) 1.1180; (P) 1.1234; (R1) 1.1266; More......

Intraday bias in EUR/USD remains on the downside for the moment. Rebound from 1.1107 should have completed at 1.1347 already. Deeper fall would be seen back to 1.1107 low. We'd be cautious on strong support from there 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.

The British pound has opened the new trading week under pressure against the US dollar after a heavily bearish weekly close under the 1.2600 support level. If GBPUSD sellers break the 1.2560 support level the pair could slide toward the 1.2480 region. Any intraday bounces higher are expected to find meet with strong technical selling interest from the 1.2630 to 1.2655 levels. The GBPUSD pair is heavily bearish while trading below the 1.2600 level, key support is found at the 1.2560 and 1.2480 levels.

The GBPUSD pair is only bullish while trading above the 1.2660 level, key resistance is located at the 1.2680 and 1.2710 levels.

The GBPUSD pair is heavily bearish while trading below the 1.2600 level, key support is found at the 1.2560 and 1.2480 levels.

The euro has started the new trading week on the back foot against the US dollar after the pair suffered its worst one-day drubbing since March this year. Bulls now need to move the EURUSD away from the 1.1200 level and start to close the pair above the 1.1260 level ahead of the FOMC meeting. Weakness below the key 1.1200 level may prompt another technical test of the 1.1170 to 1.1155 zone.

The EURUSD pair is only bearish while trading below the 1.1260 level, key technical support is found at the 1.1200 and 1.1170 levels.

If the EURUSD pair trades above the 1.1260 level, buyers may test the 1.1280 and 1.1310 levels.

Bitcoin bulls have returned in force after breaking through the $9,000 level and moving the number one crypto to a new 2019 trading high. The BTCUSD pair offers limited resistance above the $9,300 level, leaving the $10,000 level a likely near-term target. Only a sustained bearish move below the $8,400 support level will put the recent up move in the BTCUSD into question.

The BTCUSD pair is only bullish while trading above the $8,400 level, key resistance is located at the $9,300 and $10,00 levels.

If the BTCUSD pair trades under the $8,400 level, sellers may test towards the $8,200 and $8,000 support levels.

• Rates: Inflation expectations are drifting away
  Market based inflation expectations (5y5y forward) slid another 5 bps, with the EMU gauge at an all-time low and the US one below 2% for the first time since 2016. Core bond trading could be somewhat subdued this week ahead a dovish expected FOMC meeting on Wednesday.
• Currencies: EUR/USD pushed back in lower in the 1.1350/1.11 trading range
  EUR/USD declined both on solid US retail sales last Friday, but also on markets speculation of further ECB easing. EUR/USD traders will continue to monitor this balance this week with the Sintra ECB forum and the Fed policy decision potentially bringing more clarity on the relative policy stance between the ECB and the Fed

The Sunrise Headlines

• Friday's intraday rebound in US stock markets snapped last minute, leaving the major indices in red. The Nasdaq underperformed (-0.52%). Asian markets are trading mixed with Hong Kong (+0.7%) outperforming.
• The Hong Kong government threw in the towel and suspended the controversial extradition bill. An estimated 2m protesters took the streets again on Sunday however, demanding the bill's full withdrawal.
• Dominic Raab, a Conservative candidate, said Parliament could be suspended in order to stop the House of Commons delaying Brexit again if no deal has been struck in time (i.e. Oct. 31).
• Moody's cut Turkey's credit rating further into junk territory (B1 from Ba3), citing risks of a balance of payment crisis and a government default. The rating agency added a negative outlook. The Turkish lira slid to EUR/TRY 6.65.
• The US Chamber of Commerce calls on Trump to reverse tariffs imposed over the past years and urge the administration to reopen negotiations. According to the business group the levies can cost the US $1tn over the next 10 years.
• Saudi Arabia said OPEC+ will probably meet in the first week of July and added that the goal is to extend the production curbs and balance the market before 2020. It expects a pick up of demand in the second half this year.
• Today's economic calendar contains the US Empire Manufacturing index (June). ECB president Draghi kicks off the three-day ECB forum in Sintra (Portugal). Belgium taps the bond market

Currencies: EUR/USD Pushed back in lower in the 1.1350/1.11 trading range

EUR/USD turning back south in 1.11/1.1350 range

The dollar rebounded further on Friday as solid US data (including better than expected April/May US retail sales), made investors realize that already quite some dovishness is discounted ahead of Wednesday's Fed meeting. The rise in US yields was modest, but the dollar regained substantial further ground. At the same time, investors were pondering the chances of further ECB easing if needed. EUR/USD made a further step south closed at 1.1208 (from 1.1276). USD/JPY finished at 108.56.

This morning, most Asian equity markets are trading mixed, with Hong Kong outperforming. The dollar shows no clear trend. EUR/USD regains a few ticks (1.1215/20 area). USD/JPY is holding strong (108.60 area). The yuan (USD/CNY 6.9240) is holding near lows against the dollar. The Aussie dollar still struggles not to fall below the 0.6865 support area.

Today the focus will be on the US data. The Empire manufacturing survey is expected to ease to 11 from 17.8 after a strong rebound last month. The NAHB housing index is expected to rise from 66 to 67. Today's data probably won't change the US eco picture in a profound way anymore ahead of the Fed meeting. This evening, ECB's Draghi will give an introduction at the Sintra ECB forum. Geopolitics including the US-China trade dispute remain a wild card, but apparently there is a period of temporary calm as parties involved are considering strategy options in the run-up to the G20 meeting.

Friday's EUR/USD correction marked the end of recent upside test, putting the pair back the 1.11/1.1350 ST range. Dollar bears first want clarity on how far the Fed has moved toward starting an easing cycle. At the same time, soft ECB talk continues to weigh on the euro, too. We assume order-driven technical trade in EUR/USD ahead of Wednesday's Fed meeting. EUR/USD is testing the 1.1200 intermediate support. A break below, might at least be as much a sign of deteriorating sentiment on the euro, more than outright USD strength. EUR/GBP hovered near the 0.89 level last Friday as investors awaited the next steps in the race for the leadership of the conservative party. At the TV-debate this weekend, contenders for the Conservative party leadership even discussed the option of limiting the room of manoeuvre of Parliament blocking a no-deal Brexit. The debate suggest that uncertainty will persist, even after a new PM is put in place. Of late, the decline of sterling slowed, but the rising chance of nodeal Brexit, probably prevents a sustained rebound short-term

EUR/USD pushed back lower in the 1.11/1.1350 range as markets ponder relative positioning between Fed and ECB

Daily Pivots: (S1) 1.2551; (P) 1.2619; (R1) 1.2660; More....

Intraday bias in GBP/USD remains on the downside for 1.2559 support. Break there should confirm resumption of whole fall from 1.3381 and target 1.2391 low next. On the upside, above 1.2653 minor resistance will delay the bearish case and bring more consolidations first. But in case of another recovery, upside should be limited by by 1.2865 support turned resistance to bring fall resumption eventually.

In the bigger picture, medium term decline from 1.4376 (2018 high) is possibly ready to resume. Decisive break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don't expect a firm break there yet. Hence, focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Dollar remains generally firm in quiet Asian markets today. The greenback continues to be supported by expectation that FOMC won't deliver any "insurance" rate cut this week. Instead, Fed policy makers will look at the upcoming developments before making a decision, in particular the result of G20 summit regarding US China trade war.

Also, market pricing of as much as three insurances cuts, or 75bps, by the end of the year is questioned by Goldman Sachs as "overly hasty". We agree that the hurdle for such amount of policy easing is much higher than widely believed.

Staying in the currency markets, commodity currencies recover generally, following mild strengthen in Asian session. But upside of Aussie, Kiwi and Canadian are all rather limited. Swiss Franc is currently the weakest one as worries over geopolitical tensions faded mildly. Euro is the second weakest.

Technically, AUD/USD recovers mildly today, after breaching 0.6864 last week. Outlook is unchanged as further decline is still expected through 0.6864 decisively to 0.6722 low. Similarly, despite today's mildly recovery, further decline is expected in GBP/JPY, decisively, through 136.55 to 131.51 low. A focus today is whether EUR/USD or GBP/USD would hit recent low at 1.1107 and 1.2559 respectively first.

In Asia, Nikkei closed up 0.03%. Hong Kong HSI is up 0.48%. China Shanghai SSE is up 0.04%. Singapore Strait Times is down -0.27%. Japan 10-year JGB yield is up 0.0041 at -0.12.

BCC: Contraction in business investment to drag UK growth in 2020 and 2021

The British Chambers of Commerce revised up 2019 UK growth forecast to 1.3% (from 1.2%), driven by the "exceptionally rapid stock-building" early in the year. However, 2020 growth forecast was downgraded notably to 1.0% (from 1.3%), 2021 downgraded to 1.2% (from 1.4%). In particular, business investment is forecast to contract -1.3% in 2019 before recovering slightly by 0.4% 2020.

Adam Marshall, Director General of BCC noted: "Businesses are putting resources into contingency plans, such as stockpiling, rather than investing in ventures that would positively contribute to long-term economic growth. This is simply not sustainable",

Suren Thiru, Head of Economics at BCC said: "The deteriorating outlook for business investment is a key concern as it limits the UK's productivity potential and long-term growth prospects.... A messy and disorderly exit from the EU remains the main downside risk to the UK's economic outlook as the disruption caused would increase the likelihood of the UK's weak growth trajectory translating into a more pronounced deterioration in economic conditions."

ECB de Guindos: De-anchoring of inflation expectations needed before more monetary stimulus

Over the weekend, ECB Vice President Luis de Guindos said current monetary policy is "fully compatible with both inflation and real activity." And, "de-anchoring of inflation expectations" is needed before ECB ease monetary policy again.

He told Italian newspaper Corriere della Sera that "what we need to see is a de-anchoring of inflation expectations" for more policy stimulus. However, "this has not yet happened, despite the fact that there has been a drop in market-based inflation expectations." "If there is a further deterioration, then we will react," de Guindos added. "But for now, our monetary policy stance is fully compatible with both inflation and real activity."

On the impact of global trade tensions, de Guindos said "you can certainly smooth the impact with monetary policy, but you will not be able to address and fix this kind of problems with monetary policy".

Separately, Governing Council member Ewald Nowotny said it would be "reasonable" to have "some more flexibility" on inflation target. And, he was "in favor of keeping the 2 percent target but with a corridor of 0.5 or 1 percent, up or down. A precision landing is hardly possible."

FOMC as highlight of the week, data from Canada and Eurozone could be market moving

FOMC rate decision will be the major focus this week. For now, Fed expected to stand pat this month, and probably save the "insurance" rate cut for July. After all, the outcome of any meeting between Trump and Xi at G20 on June 28-29 is crucial to the overall outlook. Recent data suggests Fed doesn't need to jump the gun for now. Fed might tweak the statement to indicator openness for rate adjustments. But then, the new economic projections would need to confirm the need for such rate cuts. Otherwise, it's premature for Fed to reverse course. Other than Fed, BoJ and BoE will both meet this week too. Neither of them are expected to have any change in monetary policies. RBA minutes shouldn't provide any newer than Governor Philip Lowe's speeches. ECB will also release monthly bulletin.

Meanwhile, data from Canada and Eurozone could probably be most market moving. In particular, Canada CPI and retail sales could add to the case of no rate cut by BoC. Eurozone PMIs will one again reveal if the anticipated recovery in manufacturing is happening, or the spillover to services is continuing. UK CPI, New Zealand GDP and Japan CPI will also be watched too.

• Monday: Canada foreign securities transactions; US Empire State manufacturing index, NAHB housing index.
• Tuesday: RBA June minutes, Australia house price index; Germany ZEW economic sentiment; Eurozone trade balance, CPI final; Canada manufacturing sales; US housing starts and building permits.
• Wednesday: New Zealand current account; Japan trade balance; Germany PPI; Eurozone current account; UK CPI, PPI; Canada CPI; FOMC rate decision.
• Thursday New Zealand GDP; BoJ rate decision; Swiss trade balance; ECB monthly bulletin, Eurozone consumer confidence; BoE rate decision; US Philly Fed survey, jobless claims, current account, leading indicator.
• Friday: Australia PMIs; Japan CPI, PMI manufacturing; Eurozone PMIs; UK public sector net borrowing; Canada retail sales; US PMIs, existing home sales.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2551; (P) 1.2619; (R1) 1.2660; More....

Intraday bias in GBP/USD remains on the downside for 1.2559 support. Break there should confirm resumption of whole fall from 1.3381 and target 1.2391 low next. On the upside, above 1.2653 minor resistance will delay the bearish case and bring more consolidations first. But in case of another recovery, upside should be limited by by 1.2865 support turned resistance to bring fall resumption eventually.

In the bigger picture, medium term decline from 1.4376 (2018 high) is possibly ready to resume. Decisive break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don't expect a firm break there yet. Hence, focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Economic Indicators Update