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The XAU/USD wave pattern is suggesting a bearish bounce at the resistance levels for one more push lower. The bearish swing could expand and complete the wave E (pink) of a larger triangle pattern. However, if price manages to break above the top of wave D (pink), then the larger bearish correction is invalidated and an immediate uptrend continuation seems imminent.

The XAU/USD strong impulsive price swing is probably a wave 3 (green) pattern, which seems to be part of larger bullish ABC (blue) zigzag. A pullback is expected to bounce at the Fibonacci retracement levels of wave 4 vs 3 and move up for one more higher high to complete wave 5. However, a break below the 50% Fibonacci retracement level would make this wave outlook less likely.

General Trend:

• US markets rose on Tuesday amid comments from Fed officials (Powell, Clarida, Evans)
• Gainers in Japan include auto-makers, large tech firms and financials; Trade-sensitive Marine/Transportation companies also rising
• Property and financial shares rise in Shanghai
• Chinese property developers rise on speculation Nanjing eased property curbs
• Chinese rare earth firms gain, China said to have held meeting on rare earth industry
• Shanghai Health Care index drops over 2%, China plans to audit various drug companies
• China Caixin Services PMI hit 3-month low, the gauges for new business and employment declined
• Little initial market reaction seen to Aussie GDP data
• South Korea confirms April current account deficit on dividend related flows
• JGB Futures trade at highest level since July 2016 despite gains in the Nikkei
• NZD rises on session, RBNZ official reiterated main view is for rates to remain around current levels
• Philippines Central Bank Chief plays down higher than expected May CPI data
• Taiwan Semi continues to target improving H2 conditions
• Samsung said to revise production at mobile phone plant in China
• Australian IoT and cloud company Buddy Technologies [BUD.AU] said its smart lighting solutions are not currently subject to the higher US tariffs on China, notes its prior efforts to reclassify products under non-tariffed import codes.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.3%
• (AU) AUSTRALIA Q1 GDP Q/Q: 0.4% V 0.5%E; Y/Y: 1.8% V 1.8%E (slowest annual pace since 2009)
• (AU) Australia May AiG Performance of Services Index: 52.5 v 46.5 prior (highest since Nov 2018, first expansion since Dec)
• (NZ) RBNZ Assistant Gov Hawkesby: RBNZ central view is interest rates to remain broadly around current levels for foreseeable future; have room to provide stimulus if needed
• VOC.AU EQT withdraws A$5.25/shr takeover offer
• (AU) Reserve Bank of Australia (RBA) Gov Lowe: It is not unreasonable to expect a lower cash rate but limits to what cuts can achieve; Economic forecasts had assumed rates at 1.00% by year end, the board has not yet made a decision, reiterates stance that such depends on labour market - speaking at RBA Board Dinner (after the close yesterday)
• DCN.AU Starts strategic review; cuts Q1 Mt Morgan production 36-38K oz (prior 50-55K) at AISC A$1,500-A$1,600/oz (prior 1,050-1,150)
• (AU) Australia sells A$900M v A$900M indicated in 2.50% May 2030 bonds, avg yield 1.5477% v 1.8222% prior, bid to cover 2.67x v 3.17x prior

Japan

• Nikkei 225 opened +1.3%
• (JP) Japan PM Abe: Fundamentals that support domestic demand are firm
• TM Issues letter to US dealers that estimates potential tariffs on imports could cost suppliers $0.2-1.1B - press
• 5301.JP Cuts graphite electrode prices by more than 10% - Nikkei
• 4010.JP Acquired US based Advanced Polymer Technologies for $13.9M (~¥1.5B) - Nikkei

Korea

• Kospi opened +0.8%
• (KR) South Korea Apr Current Account: -$0.66B v $4.8B prior (1st deficit since April 2012); Goods Balance: $5.7B v $8.5B prior; April dividend payments overseas rose to $6.8B (second highest level on record)
• (KR) Bank of Korea (BOK): Current account likely to return to surplus in May
• 005930.KR Adjusting production volumes at mobile phone factory in Huizhou china due to increasing competition, including cutting jobs

China/Hong Kong

• Hang Seng opened +1.3%; Shanghai Composite opened +0.7%
• (CN) CHINA MAY CAIXIN PMI SERVICES: 52.7 V 54.0E (3-month low)
• (CN) China PBoC Open Market Operation (OMO): Injects CNY60B in 7-day reverse repos v CNY60B prior; Net: drain CNY210B v CNY90B prior
• (HK) Former HKMA Chief Yam: see China govt keeping yuan at 7 to the USD
• (CN) US Treasury Dept Spokesperson: PBoC Gov Yi Gang to meet with US Treasury Sec Mnuchin at G20 Finance Meeting
• (CN) China National Development and Reform Commission (NDRC) held meeting seeking advice from industry experts on rare earths industry; raised issues ranging from unauthorized exploitation and production, inefficient environmental protection, to the insufficient utilization
• (CN) China President Xi: China's economy is stable and improving, confident of handling various risks, challenges; China has ample room to use policies to deal with risks
• (CN) China Automobile Dealers Association (CADA): Estimated CNY500B worth of dealer inventories will be illegal to sell after new emissions standards take effect July 1 - Chinese press
• (CN) Concerns related to trade war drive record foreign outflow from China stocks; Chinese equity markets had largest foreign capital outflow on record of $12B in April and May – FT
• (HK) Hong Kong May PMI: 46.9 v 48.4 prior; New orders has largest contraction in 3-years
• (CN) China steel making city Tangshan extends pollution related production cuts to the end of June - China local press
• (CN) China PBoC sets yuan reference rate: 6.8903 v 6.8822 prior

Other Asia

• (PH) Philippines May CPI Y/Y: 3.2% v 2.9%e (first acceleration since Oct 2018)
• (PH) Philippines Central Bank (BSP) Chief Diokno: Sees Q3 CPI at ~2%; CPI to avg ~3% to 2020

North America

• (US) Interior Dept plans to accelerate permitting process for rare earths mining
• (US) Fed's Kaplan (dove, non-voter): wants to see if trade tensions ease before considering a rate cut; right now it pays to be patient and vigilant - press interview
• GM Trump Administration denies GM request for tariff relief for China-made Buick Envision SUV - financial press
• (MX) President Trump: Not bluffing on Mexico tariffs (responding to Schumer)
• (US) Former Treasury Sec Summers: Urges Fed to cut 50bps this summer; Fed should be ready to do more if needed in the fall

Europe

• (UK) US President Trump: 'I don't see it [NHS] being on the table. That's something I would not consider part of trade. That's not trade.- interview with Piers Morgan (full interview out later today)
• (UK) Conservative Party spokesperson: confirms party will name new PM by week of July 22nd - press

Levels as of 01:20ET

• Hang Seng +0.6%; Shanghai Composite +0.7%; Kospi +0.2%; Nikkei225 +1.8%; ASX 200 +0.5%
• Equity Futures: S&P500 +0.3%; Nasdaq100 +0.4%, Dax +0.1%; FTSE100 +0.1%
• EUR 1.1251-1.1266; JPY 108.03-108.28; AUD 0.6986-0.7005; NZD 0.6604-0.6637
• Commodity Futures: Gold +0.2% at $1,331/oz; Crude Oil -0.7% at $53.13/brl; Copper +0.2% at $2.67/lb

Market movers today

The ongoing ' Fed Listens' conference remains the centre of attention, with any interviews/speeches scrutinised for policy hints following the recent days' remarks, see below.

Otherwise, the market is primarily awaiting the ECB meeting tomorrow and the US labour market report on Friday. Today's ADP report could give an indication of what to expect on the latter even if the predictive power has been mediocre recently. We also get US ISM non-manufacturing, which will receive more attention than usual given the disappointing US flash Markit Service PMI two weeks ago - we get the final Markit print 15 minutes prior to the ISM today. A series of Markit Service PMIs will also be released across Europe.

The weekly US crude inventory report could prove interesting in the current weak macro environment and in light of the recent oil sell-off. The story since mid-April has been a rise in US crude stocks, which has raised concerns about weakening US demand.

In the Scandies, focus turns to the general election in Denmark and Real Estate Norway house prices in Norway . Neither of these should trigger any significant market reaction. For more information, see the Scandi section on page 2 in the report.

Selected market news

This morning, most Asian equity indices are trading in green following yesterday's equity rally driven by Fed Chair Powell (see below) and encouraging remarks on both Mexican and Chinese trade negotiations. US market inflation expectations have rebounded from their lowest levels since January while US 10Y treasury yields have moved above 2.10% again. USD FX moved modestly lower overnight while both oil and gold are little changed.

At the 'Fed Listens' conference, Fed Chair Powell showed a willingness to cut interest rates. He initiated his opening speech with an odd one out paragraph on the current policy situation, on which he stated the Fed "will act as appropriate to sustain the expansion" amid "trade negotiations and other matters" . In our view, this supports our call for a rate cut signal at the June FOMC meeting and a subsequent rate cut at the July or September meeting, see here .

The big question now is whether the ECB will also make a new dovish turn tomorrow. In that respect, remember the ECB is already on an 'easing bias' but inflation markets are clearly doubting the ECB's ability to react. This was illustrated yesterday following Euro area inflation that came in on the low side with 5y5y Euro area inflation expectations dropping close to a historical low, see chart . For more, see our ECB cheat sheet here and our ECB preview here .

FX reserves data in Denmark published yesterday showed that Danmarks Nationalbank (DN) opted to see through the rise in EUR/DKK to the highest level this year. In our view, it signals patience from DN with respect to the weak DKK.

Elliott wave view in DAX calls the pullback to 11625.31 as ending wave (W). This move lower ended the decline from May 3 high. The Index thus is within wave (X) rally to correct the cycle from May 3 high (12435.67) before the it resumes lower again. On the chart below, we can see the rally from June 3 low (11625.31) is unfolding as an impulse Elliott Wave structure. Up from 11625.31, Wave (i) ended at 11744.93, wave (ii) ended at 11689.51, and wave (iii) remains in progress. Wave (iii) subdivides as another impulse Elliott Wave structure in lesser degree.

Expect the Index to see 1 more high before ending wave ((a)) as 5 waves. It should then pullback in wave ((b)) to correct the cycle from June 3 low in 3, 7, or 11 swing before turning higher. As the first leg of the rally from June 3 low is in 5 waves, there’s a good chance that the rally can extend at least another leg higher in wave ((c)) as far as pivot at 11625.31 low remains intact during the pullback. We don’t like selling the Index.

DAX 1 Hour Elliott Wave Chart

EUR/USD recovered recently above 1.1200 and 1.1240, with positive signs. Conversely, there were strong losses in USD/JPY below the 109.00 and 108.50 support levels.

Important Takeaways for EUR/USD and USD/JPY

• The Euro started a strong upward move above the 1.1150 resistance level.
• There is a key bullish trend line in place with support near 1.1235 on the hourly chart of EUR/USD.
• USD/JPY declined heavily and traded below the 109.40 and 109.00 support levels.
• There is a short term breakout pattern forming with resistance near 108.30 on the hourly chart.

EUR/USD Technical Analysis

The Euro found support near the 1.1120 level and recently started an upward move against the US Dollar. The EUR/USD pair traded above the key 1.1180 and 1.1200 and 1.1220 resistance levels.

The pair gained strength above the 1.1230 level and the 50 hourly simple moving average. The pair even gained pace above the 1.1260 and traded as high as 1.1276 on FXOpen.

At the moment, the pair is correcting lower and it recently traded below the 1.1250 level. There was a break below the 23.6% Fib retracement level of the recent wave from the 1.1160 low to 1.1276 high.

However, declines were limited and the pair found support near the 1.1230 level. The 38.2% Fib retracement level of the recent wave from the 1.1160 low to 1.1276 high also acted as a decent support.

Moreover, there is a key bullish trend line in place with support near 1.1235 on the hourly chart of EUR/USD. The 50 hourly SMA is also near the trend line and the 1.1230 support.

As long as the pair is above the trend line, there are chances of more gains above the 1.1260 and 1.1270 levels. The next main resistance is near the 1.1300 level.

On the downside, an initial support is near the 1.1235 and 1.1230 levels. If there is a downside break below the 1.1230 support, there are chances of more losses below the 1.1220 and 1.1210 levels.

USD/JPY Technical Analysis

The US Dollar failed to move above the 110.00 resistance and declined heavily against the Japanese Yen. The USD/JPY pair broke the 109.50 and 109.00 support levels to move into a bearish zone.

The decline was such that the pair even broke the 108.40 support and the 50 hourly simple moving average. The pair even spiked below the 108.00 level and traded as low as 107.84.

At the moment, it is consolidating losses above the 108.00 level. It traded above the 23.6% Fib retracement level of the recent decline from the 109.92 high to 107.84 low. There is also a short term breakout pattern forming with resistance near 108.30 on the hourly chart.

If there is an upside break above the 108.40 level, there are chances of more upsides towards the 108.80 and 109.00 levels. The next key resistance is near the 109.20 level.

Conversely, if there is a downside break, the USD/JPY pair could accelerate losses below the 108.00 level. An initial support is near the 107.80 level, below which there is a risk of a sharp decline towards the 107.50 level.

If sellers remain in action, the pair might even test the 107.20 support area in the near term.

For the 24 hours to 23:00 GMT, the EUR rose 0.07% against the USD and closed at 1.1253.

Macroeconomic data showed that Euro-zone's final consumer price inflation slowed to 1.2% on an annual basis in May, compared to market consensus for a rise of 1.3%. In the previous month, the inflation had recorded a level of 1.7%. Moreover, the region's unemployment rate unexpectedly dropped to a decade low rate of 7.6% in April, compared to 7.7% in the prior month. Market participants had anticipated the unemployment rate to record an unchanged reading.

In the US, data indicated that factory orders fell 0.8% on a monthly basis in April, compared to a revised rise of 1.3% in the prior month. Market participants had envisaged factory orders to register a fall of 1.0%. Further, the nation's final durable goods orders slid 2.1% on a monthly basis in April, confirming the preliminary print. In the prior month, durable goods orders had recorded a revised gain of 1.7%.

The Federal Reserve Chairman, Jerome Powell signalled that the central bank will cut its key interest rates if necessary. Additionally, he pledged that the bank will take appropriate actions to sustain the US economic expansion. However, Powell expressed concerns over the impact of trade and tariff tensions on the economy.

In the Asian session, at GMT0300, the pair is trading at 1.1262, with the EUR trading 0.08% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1234, and a fall through could take it to the next support level of 1.1205. The pair is expected to find its first resistance at 1.1284, and a rise through could take it to the next resistance level of 1.1305.

Going forward, traders would keep an eye on Euro-zone's producer price index and retail sales, both for April along with the Markit services PMI for May, slated to release across the euro bloc. Later in the day, the US ADP employment change, the Markit services PMI and the ISM non-manufacturing/services composite index, all for May, along with the MBA mortgage applications will pique significant amount of investors' attention. Also, the US Federal Reserve's Beige Book release, will be on investors radar.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.27% against the USD and closed at 1.2700.

On the data front, UK's construction PMI unexpectedly contracted to a level of 48.6 in May, declining to its lowest level since March 2018 and compared to a level of 50.5 in the prior month. Markets had expected the PMI to climb to a level of 50.6.

In the Asian session, at GMT0300, the pair is trading at 1.2705, with the GBP trading a tad higher against the USD from yesterday's close.

The pair is expected to find support at 1.2660, and a fall through could take it to the next support level of 1.2615. The pair is expected to find its first resistance at 1.2732, and a rise through could take it to the next resistance level of 1.2759.

Trading trend in the Sterling today, is expected to be determined by UK's Markit/CIPS services PMI for May, scheduled to release in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.21% against the JPY and closed at 108.21.

In the Asian session, at GMT0300, the pair is trading at 108.06, with the USD trading 0.14% lower against the JPY from yesterday's close.

Overnight data revealed that Japan's Nikkei services PMI declined to a level of 51.7 in May, following a level of 51.8 in the prior month.

The pair is expected to find support at 107.82, and a fall through could take it to the next support level of 107.58. The pair is expected to find its first resistance at 108.33, and a rise through could take it to the next resistance level of 108.60.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD traded flat against the CHF and closed at 0.9923.

In the Asian session, at GMT0300, the pair is trading at 0.9914, with the USD trading 0.09% lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9893, and a fall through could take it to the next support level of 0.9871. The pair is expected to find its first resistance at 0.9946, and a rise through could take it to the next resistance level of 0.9977.

With no macroeconomic releases in Switzerland today, investors would look forward to global macroeconomic releases for further direction.

The currency pair is trading below 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.38% against the CAD and closed at 1.3393.

In the Asian session, at GMT0300, the pair is trading at 1.3381, with the USD trading 0.09% lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3355, and a fall through could take it to the next support level of 1.3329. The pair is expected to find its first resistance at 1.3428, and a rise through could take it to the next resistance level of 1.3475.

Amid lack of economic releases in Canada today, traders would focus on global macroeconomic events for further direction.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.