Sample Category Title

Pivot (invalidation): 1.1310

Our preference Short positions below 1.1310 with targets at 1.1280 & 1.1270 in extension.

Alternative scenario Above 1.1310 look for further upside with 1.1325 & 1.1340 as targets.

Comment Even though a continuation of the technical rebound cannot be ruled out, its extent should be limited.

• Rates: Core bonds remain resilient
  US President Trump criticized Germany over support for Nord Stream 2. His comments sank oil prices. Investors aren’t willing to bet against a dovish Fed next week. The US yield curve remains in bull steepening mode. Risk sentiment shows more signs of fatigue. The eco calendar only contains second tier eco data.
• Currencies: USD decline halts, but sustained gain difficult ahead of the Fed meeting.
  EUR/USD again failed to clear the 1.1340/50 resistance yesterday even as US CPI was soft and US yields declined. The eco calendar is thin today. USD trading might be technical in nature. Sustained USD gains are not evident ahead of next week’s Fed meeting as markets expect Powell and Co to take a dovish turn.

The Sunrise Headlines

• US stock markets marginally dropped yesterday as growth worries linger. The Nasdaq (-0.38%) underperformed. Asian equities slip during a risk-off trade session. Japan (-1%) underperforms its peers.
• In Australia’s May job report net job growth (42.3k) and the participation rate (66.0%) topped estimates. An unexpected stabilization of the unemployment rate (5.2%) however casted a shadow over the report. AUD/USD (0.69) lost ground.
• The UK holds a first leadership ballot today, which will at least eliminate one of the 10 candidates to follow up on Theresa May. An outcome is expected by noon. The others face more ballots next week (June 18,19 and 20).
• Brent crude oil prices briefly dipped below $60/b. yesterday after US oil stocks showed an unexpected 2.2m barrel increase, raising fears for a supply glut. Oil prices have dropped more than 20% from its correction top in May.
• The Nord Stream 2 gas pipeline between Germany and Russia triggered frustrations with Trump. The US president is considering sanctions to block the project that would increase gas flows from Russia to Europe.
• Rating agency Fitch said Italy’s fiscal outlook would weaken if the new dispute with the EC escalates, adding that the re-emergence of the mini-BOTs “risks an adverse market reaction”. A sovereign update is due in August.
• Today’s economic calendar contains the weekly US jobless claims. Industrial production figures are due in Europe. EMU finance ministers meet to discuss member states’ budgets and Italy. The latter and the US are to sell bonds

Currencies: USD Decline Halts, But Sustained Gain Difficult Ahead Of The Fed Meeting

USD stabilizes, but sustained gains remain difficult

Dollar shorts were forced to take a step backward yesterday. A modest risk-off pushed US yields lower and narrowed the US-German spread further. US CPI was also softer than expected, reinforcing market hopes on a Fed rate cut. However, two attempts of EUR/USD to break above the 1. 1340/50 resistance failed, triggering a technical setback. Later, a sharp decline of the oil price and president Trump considering sanctions related to the Nord stream 2 gas pipeline were a dollar positive/euro negative too. EUR/USD closed the day at 1.1287. The impact on USD/JPY was modest. The pair closed little changed at 108.50

This morning, sentiment on risk remains fragile. The dollar is slightly losing ground. EUR/USD returns close to the 1.13 level. USD/JPY trades in the 108.30 area. The Australian dollar is declining further. Australian job growth was strong, but a small miss in the unemployment rate (5.2%) kept the hope alive for further RBA easing. Australian yields continue to set record low levels. AUD/USD is drifting to the low 0.69s.

Today’s eco data (EMU production, US import prices and jobless claims) are probably only of intraday significance for FX trading. The euro area finance ministers meet to discuss disciplinary action on Italy (budget). Yesterday, the dollar was in slightly better shape. Even so, we see little upside for the dollar ahead of week’s Fed meeting. Comments from US politicians on the Fed (Wilbur Ross) and on a too strong dollar might cap USD gains too.

At the end of last week, US yields touched new cycle lows, pushing EUR/USD temporarily above the 1.1324 resistance. US yields bottomed this week as substantial Fed easing was discounted, removing some pressure from the dollar. Still, the USD rebound was unimpressive. Longer term, the dollar might have entered a sell-on-upticks pattern. The 1.1200/1.1250 looks solid EUR/USD support. Further sustained gains beyond 1.1324/48 still open the way to the 1.1448 target area.

On Tuesday sterling rebounded on solid UK labour data. Yesterday, sterling initially gained further after Boris Johnson said he didn’t aim for a no deal Brexit. However, this ‘political’ rebound had no strong legs. EUR/GBP closed near 0.89. We expect more technical trading as the contest for the leadership of the conservative party continues. Still we have the impression that extreme negative news will be needed to push EUR/GBP beyond 0.90/0.91 tough resistance.

EUR/USD: Dollar decline halted, for now, but sustained gains probably remain difficult

General Trend:

• Hang Seng extends underperformance as protests continue, decliners include insurers and property developers
• Standard Chartered and HSBC also continue to drop
• Markets in Hong Kong later pare losses, government again delays meeting on extradition bill
• Hong Kong money market rates continue to rise; some have cited increased cash demand by banks amid protest-related branch closures and focus on quarter end
• HKD less volatile vs prior session
• China launched new high-technology stock board, Shanghai IT index outperformed in early trading
• Chip-related companies in South Korea and Japan decline, tracks US weakness
• Declines in shares of MUFJ and lower bond yields weigh on financials in Japan
• Australia’s Wesfarmers declines over 4% on cautious outlook
• Australia May unemployment rate higher than expected, more people entered the workforce
• Aussie and AU yields declined following the data as markets expect more easing from the RBA
• PBoC uses 28-day reverse repo for second straight session
• PBoC Gov did not comment on monetary policy
• Some economists believe China could announce policy easing measures in the coming weeks (China Daily)
• Japan sells 30 yr JGBs at lowest bid to cover since late 2017, yield declines
• Japan’s Q2 BSI indices declined q/q [BoJ Q2 Tankan survey expected to be released on July 1st]
• Japan Economy Min Motegi and USTR Lighthizer are expected to meet later today
• China’s key May data (including industrial production) due for release on Friday

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• (AU) AUSTRALIA MAY EMPLOYMENT CHANGE: +42.3K V +16.0KE; UNEMPLOYMENT RATE: 5.2% V 5.1%E
• WES.AU KMart Trading update: 2019 YTD Kmart SSS -0.2% y/y; Total Sales +1.3% y/y; YTD Target SSS -0.7% y/y; Total sales -1.3% y/y
• CAR.AU Examining the sale of 50.1% stake in Stratton Finance; Guides FY19 (excluding Startton) Adj Net A$130-132M; adj EBITDA 209-211M Rev 418-240M
• (AU) AUSTRALIA JUN CONSUMER INFLATION EXPECTATION: 3.3% V 3.3% PRIOR
• COL.AU CEO expected to announce a "strategic reset" next week ; said to be planning to layoff 450 employees at head office – SMH

Japan

• Nikkei 225 opened -0.4%
• 8306.JP May have impairment of ¥300B on its controlling stake in Indonesia JV, which could put Q1 into a loss, the first since it formed in 2005 - Nikkei
• (JP) JAPAN Q2 BSI LARGE ALL INDUSTRY Q/Q: -3.7 V -1.7 PRIOR; LARGE MANUFACTURING Q/Q: -10.4 V -7.3 PRIOR
• (JP) Japan Cabinet Sec Suga: PM Abe expects a frank opinion exchagne with Iran's Rouhani
• (JP) Japan MoF sells ¥699.7B v ¥700B indicated in 0.50% (prior 0.70%) coupon 30-year JGBs, avg yield: 0.3190% v 0.621% prior, bid to cover 3.47x v 4.56x prior (lowest BTC since Nov 2017)
• (JP) Japan Apr Tertiary Industry Index M/M: 0.8% v 0.4%e (highest since Oct 2018, first rise since Jan)

Korea

• Kospi opened -0.2%
• (KR) South Korea President Moon is hoping to meet with North Korea Leader Kim before US President Trump travels to South Korea later this month – Yonhap
• (KR) US State Dept: Ready to continue working level denuclearization talks with North Korea - Yonhap

China/Hong Kong

• Hang Seng opened -0.3%; Shanghai Composite opened -0.1%
• (CN) China CBIRC Vice Chairman Zhaoxing: Certain country is trying to curb China's growth
• (CN) China FX Regulator SAFE Chief Pan Gongsheng: FX market has been generally stable, fully confident to maintain FX market stability
• (HK) Hong Kong Legislator will not hold meeting today on China extradition bill (second delay)
• (CN) China Vice Premier Liu He: Room to expand financial support for quality GDP growth; China to step up counter cyclical measures - speaking at forum in Shanghai
• (CN) China CSRC Chief: China will ease entry barriers for overseas custodian services; China has approved ownership controls by 3 foreign brokers
• (CN) China CBIRC cheif Guo Shuqing: Will continue to support Shanghai building a financial center; financial system is operating in a stable manner; China's economy is overly reliant on bank loans - Lujiazui forum
• (CN) China PBOC Gov Yi Gang: PBOC to support cross border capital management in Shanghai free trade zone; will support Shanghai ownership limit removal as a trial - speaking at Lujiazui forum
• (CN) China PBoC Open Market Operation (OMO): Injects CNY100B in 28-day reverse repos v CNY35B combined in 7-day and 28-day prior; Net CNY90B injected v CNY25B drain prior
• (CN) China PBoC sets yuan reference rate: 6.8934 v 6.8932 prior
• (CN) CHINA MAY AGGREGATE FINANCING (CNY): 1.400T V 1.450TE
• (CN) CHINA MAY NEW YUAN LOANS (CNY): 1.180T V 1.300TE
• (CN) CHINA MAY M2 MONEY SUPPLY 8.5% Y/Y V 8.6%E
• (US) Pres Trump: reiterates expects to meet with Pres Xi at G-20 summit
• (CN) According to economists, moderate China inflation and the global dovish monetary environment may provide more room for the China authorities to adjust money and credit supplies as a tool to counter downside risks if trade tension escalates - China Daily
• HUAWEI.CN White House official: Expect to meet 2-yr deadline for Huawei ban for contractors in defense law

North America

• (US) DOE CRUDE: +2.2M V -0.5ME; GASOLINE: +0.8M V +0.5ME; DISTILLATE: -1.0M V +1ME
• (CL) Chile CODELCO: Regret workers' decision at Chuquicamata; strike to begin Friday
• (MX) Mexico Central Bank (Banxico) Deputy Gov Heath: Current rate of 8.25% is needed, cannot start easing cycle with so much risk

Europe

• (UK) Parliament rejects Labour-backed bid to block no-deal Brexit in 309-298 vote
• (UK) MAY RICS HOUSE PRICE BALANCE: -10% V -21%E (highest level since Oct 2018)
• (PL) White House confirms to deploy 1,000 additional US troops to Poland

Levels as of 1:20 ET

• Nikkei 225, -0.1%, ASX 200 flat, Hang Seng -0.9%; Shanghai Composite -0.1%; Kospi -0.7%
• Equity Futures: S&P500 -0.2%; Nasdaq100 -0.3%, Dax -0.3%; FTSE100 -0.3%
• EUR 1.1299-1.1286 ; JPY 108.53-108.16 ; AUD 0.6938-0.6910 ;NZD 0.6588-0.6568
• Gold +0.2% at $1,339/oz; Crude Oil -0.1% at $51.23/brl; Copper -0.3 % at $2.643/lb

The GBP/USD seems to have finished a bullish swing which probably has completed the entire wave 4 (green) correction. A bullish breakout is aiming for the Fibonacci targets of wave 5 vs 1+3 at around 1.25 and then 1.24.

The GBP/USD bullish price action failed to break above the previous top, which confirms the expected wave 1-2 (orange) pattern that we mentioned in ecsLIVE for the past few days. There are several other bearish reversal patterns present, including a double top, head and shoulders pattern (dark red boxes), a rising wedge reversal pattern, and a larger bear flag pattern. Price is now building a bear flag and a break below the support trend line (blue) would confirm the bearish breakout. This break could either be a wave 3 (orange) as indicated in the image or a wave C if the wave 4 correction becomes expanded.

USDJPY has been on the sidelines for the most part of the week as the 109.00 level seems to be a real obstacle for the bulls. Over the last seven weeks the pair has been developing in a descending channel, erasing the bullish retracement from the 104.64 support.

Technically, the price could lose some ground in the short-term as the RSI is moving downwards in the negative area, while the stochastic is creating a bearish cross within the %K and %D lines.

A continuation of the rebound from the five-month low, could meet strong resistance between 108.80 and 109.00, where the 20-day simple moving average (SMA) is located. Exiting the channel, the 38.2% Fibonacci of the upleg from 104.64 to 112.40 near 109.45 could halt further advances.

Alternatively, a decline under five-month low (107.80) should keep the pair in a bearish mode, challenging the immediate support of the 61.8% Fibonacci region of 107.60. A strong rally below this line could open the way towards the 105.65 hurdle, identified by the low on January 2018.

In the short-term picture, USDJPY is gently pointing down after the bounce off the four-month high of 112.40. Only an upside run above the aforementioned obstacle could turn the bias back to bullish. Otherwise traders will most likely look for negative movements.

The Australian dollar declined after the country released employment data. In May, the unemployment rate remained unchanged from the previous month at 5.2%. This was higher than the expected 5.1%. During the month, the employment change rose by 42.3K, which was better than the expected 16K while the participation rate rose to 66%. These numbers come a week after the RBA lowered interest rates for the first time in many years.

The Swiss franc was relatively unmoved in the Asian session ahead of an important decision by the Swiss National Bank. The bank is expected to leave interest rates unchanged at minus 0.75%. Some investors expect the bank to point to a further interest rates cut by the end of the year. In recent days, the Swiss economy has softened a bit because of weak external demand. The Swiss franc too has strengthened, which goes against the desire of the central bank.

The price of crude oil declined after data from EIA confirmed that there was an oversupply issue in the United States. In the past week, crude inventories rose by 2.2 million barrels, which was higher than the expected drawdown of more than 481k barrels. In the previous week, the inventories had risen by 6.77 million barrels. Earlier on, data from API showed that inventories rose by more than 2 million barrels.

EUR/USD

The EUR/USD pair declined even after weak inflation numbers from the United States. The pair declined from a high of 1.1343 to a low of 1.1280. It is now trading slightly higher at the 1.1290 level. On the hourly chart below, the RSI has emerged from the oversold level of below 30. The price is slightly lower than the 25-day and 14-day moving averages. It is also between the 100% and 61.8% Fibonacci Retracement level. The pair will likely remain along this channel as traders receive the German CPI and US initial jobless claims data.

USD/CHF

The USD/CHF pair was relatively unmoved ahead of the important decision by the Swiss National Bank (SNB). The pair is trading at the 0.9947 level, which is along the 38.2% Fibonacci Retracement level and along the middle line of the Bollinger Bands. The demarker indicator has moved sharply lower while the stochastic indicator has moved lower. The pair will likely move sharply in either direction after the SNB decision.

XBR/USD

The XBR/USD pair declined sharply after the inventory data was released. The pair reached a low of 59, which is along an important support level. At this point, the pair has completed forming the double bottom pattern, which is an indication that it might start having a strong upward trend. The RSI remains along the oversold level. There is a likelihood that the pair will move higher after forming the double bottom.

Ethereum has returned towards the $260.00 resistance level as the second largest cryptocurrency tracks the broader market higher on Thursday. Ethereum is still in the danger zone while trading below the $280.00 as the bearish head and shoulders pattern still remaining valid. Overall, the ETHUSD pair is still tracking BTCUSD fairly closely this week and has yet to break the strong correlation.

If the ETHUSD pair trades above the $260.00 level, key resistance is found at the $280.00 and $320.00 levels.

If the ETHUSD pair fails from the $260.00 level, key support is found at the $230.00 and $205.00 levels.

The euro has fallen back towards the lower end of its weekly trading range against the US dollar after bulls failed to move price above its former weekly trading high. The EURUSD pair is under technical pressure while trading back under the 1.1310 level and risks further losses towards the 1.1265 level. Overall, the US dollar index is starting to retrace last weeks losses, forcing majors lower against the greenback.

The EURUSD pair is only bearish while trading below the 1.1310 level, key technical support is found at the 1.1280 and 1.1260 levels.

If the EURUSD pair trades above the 1.1310 level, buyers may test the 1.1330 and 1.1347 levels.

The British pound has reversed sharply from the 1.2750 level against the US dollar after UK Parliament was unable to block a hard-Brexit on Wednesday. The bullish pattern on the four-hour time frame still remains valid, with the 1.2655 level the foremost support zone. Bulls need to move price back above the 1.2710 level to install the intraday bullish sentiment towards the GBPUSD pair.

The GBPUSD pair is only bullish while trading above the 1.2710 level, key resistance is located at the 1.2755 and 1.2820 levels.

The GBPUSD pair is only bearish while trading below the 1.2710 level, key intraday support remains at the 1.2655 and 1.2610 levels.

Daily Pivots: (S1) 1.1264; (P) 1.1306; (R1) 1.1329; More......

EUR/USD is staying in tight range below 1.1347 temporary top and intraday bias remains neutral first. With 1.1251 minor support intact, further rise is mildly in favor. On the upside, above 1.1347 will target 1.1448 key resistance next. Decisive break there will carry larger bullish implications. On the downside, break of 1.1251 minor support will suggest that recovery from 1.1107 has completed. Intraday bias will be turned back to the downside for retesting 1.1107 low.

In the bigger picture, current development argues that a medium term bottom could be in place at 1.1107, on bullish convergence condition in daily MACD. Decisive break of 1.1448 resistance would confirm this case. And stronger rebound would be seen to 38.2% retracement of 1.2555 to 1.1107 at 1.1660. At this point, it's early to judge whether rise from 1.1107 is a corrective move or the start of an medium term up trend. We'd look at the structure of the rebound to decide later. But in any case, for now, risk will remain on the upside as long as 1.1107 low holds.