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Daily Pivots: (S1) 122.62; (P) 122.89; (R1) 123.19; More....

No change in EUR/JPY's outlook. While further rise could be seen, upside is still expected to be limited by 123.73 resistance to bring fall resumption. On the downside, below 122.10 minor support will turn bias to the downside for retesting 120.78 first. Break of 120.78 will resume the fall from 127.50 and target 118.62 low next. However, sustained break of 123.73 will indicate short term reversal and turn outlook bullish for 127.50 resistance again.

In the bigger picture, down trend from 137.49 is still in progress with the cross staying inside long term falling channel. Break of 118.62 will extend the fall to 109.48 (2016 low). On the upside, break of 127.50 resistance is needed to be the first sign of medium term reversal. Otherwise, outlook will remain bearish in case of strong rebound.

The EUR/USD needs a break above the local resistance level at around 1.1330 before a bullish breakout and continuation towards 1.1410 and even 1.15 becomes more likely. A bearish retracement could retest the support zone around 1.1250-1.1275, which could still act as a potential bouncing spot for more upside. The uptrend is invalidated if price manages to break below 1.1250.

The EUR/USD bullish break above 1.1330 could indicate a push higher towards the Fibonacci targets of wave 5 vs 1+3. The bullish move could complete a wave 5 (blue/purple) of either a wave 1 (pink) and a new uptrend (see chart below) or of a wave C and restart the old downtrend (alternative wave outlook not shown here). In any case a bullish move seems likely as long as price stays above the 1.1250 support zone.

Market movers today

In Sweden, Prospera's inflation expectations survey is due out. We expect inflation expectations have fallen further, as actual inflation has come down, too. The Riksbank's Floden is also speaking this morning.

In the euro area, we have a lot of ECB speeches this morning, most notably ECB President Draghi at 10:15 CEST. If he or others want to correct last week's market reaction to the June ECB meeting there will be ample opportunities today.

In the US, we expect CPI core rose +0.2% m/m in May, implying an unchanged core inflation rate of 2.1% y/y, in line with expectations. Subdued underlying inflation pressure is one reason why we expect the Fed to ease monetary policy slightly in H2 19.

In the UK, the House of Commons will vote on a proposal to give MPs control of parliamentary business on 25 June as a way to block the new prime minister, to simply let the UK crash out of the EU without a deal. It would require some Conservative rebels to vote with the opposition and it may fail this time, but shows the MPs will not let the prime minister take full control of the Brexit process, see full story .

This morning, we published our monthly euro area macro monitor, where we argue risks are increasing but our baseline persists.

Selected market news

In an otherwise somewhat uneventful session, it was bit of deja vu for markets yesterday as a few Trump tweets and a Washington Post interview fuelled concerns over political pressure on the Fed and trade woes anew. The US President first tweeted that the US is put at a 'big disadvantage' as US rates are kept too high while others are devaluing their currencies, explicitly mentioning the EUR and CNY. Separately, Trump said that he is currently 'holding up' the deal between the US and China on trade, accusing China of reneging on previously agreed terms. The battle lines are now clearly drawn ahead of the G-20 meeting in Osaka on 28-29 June, but recent messages from central banks suggest Trump may get his way quite soon when it comes to policy rates and the USD.

Currency war - again? Europe does not have much ammunition to take part in that (cf ECB last week), but a good indicator of whether the Chinese authorities are directly using their currency in a trade deal context is USD/CNY. The cross rose above 6.93 early this week, closing in on the crucial 7.00 level, but has held firm around the 6.91 level after being guided lower by the People's Bank of China fixing on Tuesday morning. Separately, Chinese CPI growth rose to a 15M high at 2.7% y/y in May. Equities were mixed in the US session but predominantly lower in Asia, with the Hang Seng Index down 1.6% at the time of writing. Brent crude oil was stable just above the USD61/bbl level. US PPI data was broadly in line with expectations and the US 10Y Treasury yield declined just a tad to 2.13%. The USD remained on a weak footing; EUR/USD was steady around the 1.13 mark.

Daily Pivots: (S1) 0.8882; (P) 0.8909; (R1) 0.8926; More...

A long as .0.8829 minor support holds, further rise is expected in EUR/GBP. Current rise from 0.8472 should target 0.9101 key resistance next. On the downside, break of 0.8829 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 0.8526). 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.

Six day rally comes to an end

All good runs must come to an end and while this one is hardly one for the history books, it was undoubtedly welcome given the worry that was spreading early last week.

US equity markets gave up early gains to just about end in negative territory on Tuesday, weighing on Asian stocks overnight and European futures as we head into the open. It brought a decent run to an end, one that started suddenly as investors became more convinced that the Fed would cut interest rates sufficiently and ease slowdown fears.

It seems we're dealing with a very emotional investor at the moment, the way we're so suddenly swinging between such optimism and pessimism on the basis of such minor actions. A lot seems to hang on how many rate cuts we'll see from the Fed and to be honest, I think market expectations are too high so we may be setting ourselves up for disappointment.

The rebound may be providing some near-term comfort as we continue to reassure ourselves that everything is ok and the Fed will come to the rescue but I'm not sure that's healthy, accurate or warrants the kind of bounce we've seen over the last week. Then again, a successful Trump/Xi meeting later this month may negate the need for such a significant u-turn from the central bank.

UK data encouraging but leadership race remains a drag on GBP

On this side of the pond, it's all gone a little quiet. Well, compared to the Brexit noise we've become accustomed to. The Conservative leadership race has put Brexit on hold for now, which is handy as the new end of October deadline creeps ever closer.

The number of candidates remains at 10 but with a number of the front-runners Brexiteers, it's no surprise that the pound remains out of favour. Boris Johnson is probably seen as the greatest risk for the currency and while we keep getting told that the favourite never wins, it's not providing much comfort at the moment.

We have no UK data out today but what we have had so far this week has been mixed which is pretty consistent really. April was a bad month for the economy but was primarily driven by one-off factors which suggests we'll return to modest growth soon enough. The labour market data was far more encouraging and may well give policy makers at the BoE a decision to make later this year is Brexit can be resolved in an orderly and undisruptive manner.

Daily Pivots: (S1) 1.6236; (P) 1.6262; (R1) 1.6298; More...

Intraday bias in EUR/AUD remains on the upside for momentum. Current rally from 1.5683 is targeting 61.8% projection of 1.5683 to 1.6262 from 1.6052 at 1.6410 first. Break will target 100% projection at 1.6631 next. On the downside, below 1.6255 minor support will turn intraday bias neutral first. But retreat should be contained well above 1.6052 support to bring rise resumption.

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.

Daily Pivots: (S1) 1.1204; (P) 1.1224; (R1) 1.1260; More....

EUR/CHF's recovery from 1.1119 extends further but outlook is unchanged. Upside should be limited below 1.1278 resistance to bring fall resumption. On the downside, below 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.

Daily Pivots: (S1) 1.1305; (P) 1.1321; (R1) 1.1342; More.....

EUR/USD is staying in consolidation from 1.1347 temporary top and intraday bias remains neutral first. 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.

Daily Pivots: (S1) 1.2684; (P) 1.2709; (R1) 1.2747; More....

Intraday bias in GBP/USD remains neutral at this point. On the upside, break of 1.2763 will extend the corrective rise fro 1.2559. But in that case, upside should be limited by by 1.2865 support turned resistance to bring fall resumption eventually. On the downside, break of 1.2559 low will extend the decline from 1.3381 for 1.2391 low first.

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.

Daily Pivots: (S1) 0.9897; (P) 0.9917; (R1) 0.9945; More...

Intraday bias in USD/CHF remains neutral as consolidation from 0.9854 is extending. In case of another recovery, upside should be limited by 1.0008 support turned resistance and bring fall resumption. On the downside, break of 0.9854 will extend the decline from 1.0237 to 0.9716 cluster support (50% retracement of 0.9186 to 1.0237 at 0.9712).

In the bigger picture, USD/CHF's break of long term trend line support is the first indication of medium term reversal. Focus is now back on 0.9879 support. Sustained break should confirm that medium term up trend from 0.9186 has completed at 1.0237 already. Further fall should be seen to 0.9716 cluster support (50% retracement of 0.9186 to 1.0237 at 0.9712) next. Break will target 61.8% retracement at 0.9587.