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Daily Pivots: (S1) 0.9942; (P) 0.9987; (R1) 1.0013; More...

USD/CHF drops sharply to as low as 0.9926 and took out 4 hour 55 EMA decisively. The development dampens our bullish view. Intraday bias is turned to the downside for 0.9856 support next. On the upside, though, above 0.9989 minor resistance will bring retest of 1.0067. Decisive break there will revive the case of resumption of rise from 0.9186.

In the bigger picture, rise from 0.9186 is seen as a leg inside the long term range pattern. After drawing support from 55 day EMA, it's now resuming for 1.0342 key resistance. For now, we'd still cautious on strong resistance from there to limit upside. Meanwhile, break of 0.9787 support is needed to signal completion of the rise. Otherwise, outlook will remain bullish even in case of deep pull back.

Daily Pivots: (S1) 1.1681; (P) 1.1705 (R1) 1.1733; More.....

Intraday bias in EUR/USD is turned neutral again as it lost upside moment. Outlook is unchanged though as consolidation from 1.1507 might extend. In case of another rise, upside should be limited by 1.1851 resistance to bring fall resumption eventually. On the downside, below 1.1612 will bring retest of 1.1507 low first. Decisive break there will resume larger fall from 1.2555. In that case, EUR/USD should drop through 50% retracement of 1.0339 to 1.2555 at 1.1447 to 61.8% retracement at 1.1186.

In the bigger picture, EUR/USD was rejected by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. And, a medium term top was formed at 1.2555 already. Decline from there should extend further to 61.8% retracement of 1.0339 to 1.2555 at 1.1186 and below. For now, even in case of rebound, we won't consider the fall from 1.2555 as finished as long as 1.1995 resistance holds.

Daily Pivots: (S1) 1.3204; (P) 1.3248; (R1) 1.3280; More...

GBP/USD drops sharply today but stays in range of 1.3102/3362. Intraday bias is turned neutral first. The consolidation pattern from 1.3048 could still extend. But still, in case of another rise, upside should be limited by 1.3471 to bring larger decline resumption eventually. On the downside, break of 1.3048 will resume fall from 1.4376 for 1.2874 fibonacci level next.

In the bigger picture, whole medium term rebound from 1.1936 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA (now at 1.4179). Fall from 1.4376 should extend to 61.8% retracement of 1.1936 (2016 low) to 1.4376 at 1.2874 next. We'll pay attention to the reaction from there to asses the chance of long term down trend resumption. On the upside, sustained break of 38.2% retracement of 1.4376 to 1.3048 at 1.3555 is needed to indicate medium term bottoming. Otherwise, outlook will remain bearish in case of strong rebound.

Cable lost traction and fell back below 1.3200 handle after post-UK jobs data rally hit session high at 1.3268, but gains were short-lived and stalled again under strong offers at 1.3300 zone. UK average earnings came in line with expectations at 2.5% in May, but previous month’s release was revised higher (from 2.5% to 2.6%), giving positive signal and partially offsetting negative impact from weaker than expected jobless claims (7.8K in Jun vs 2.3K f/c) and employment change (137K vs 150K f/c) while unemployment rate remained unchanged at 4.2% in May. Overall soft UK jobs data offered little support to sterling, which accelerated lower on fresh dollar’s rise ahead of Fed Powell’s testimony, which is key event for the dollar on Tuesday. Fresh weakness moved below the cluster of daily MA’s supports (10;20;30) and cracked lower pivot at 1.3211 (20SMA) close below which would be negative signal.

Near-term bias turned lower as hourly techs weakened after recent fall, which retraced over 50% of the latest 1.3102/1.3292 upleg.

Extension below 1.3175 (Fibo 61.8% of 1.3102/1.3268) is needed to confirm reversal and risk return to last Friday’s spike low at 1.3102, loss of which would unmask key support at 1.3049 (28 June low). Additional pressure on pound comes from comments of BoE’s chief Carney who warned about big consequences on UK economy if Brexit transition deal, which is currently on agenda will not be ratified. All eyes are turned on Fed Chairman Powell’s testimony, which is expected to provide more clues about the US monetary policy outlook and signal fresh direction of the greenback.

Res: 1.3253; 1.3292; 1.3338; 1.3383
Sup: 1.3213; 1.3180; 1.3102; 1.3065

Daily Pivots: (S1) 112.15; (P) 112.35; (R1) 112.49; More...

USD/JPY recovers notably today but stays below 112.79 temporary top. Intraday bias remains neutral first and more consolidation could be seen. Below 112.21 will target 4 hour 55 EMA (now at 111.68). But downside should be contained well above 111.13 resistance turned support to bring rally resumption. On the upside, break of 112.79 will target 61.8% projection of 104.62 to 111.39 from 109.36 at 113.54 first. Break will put focus on 114.73 key resistance for confirming our bullish medium term view.

In the bigger picture, current development, with the solid break of medium term channel resistance from 118.65 (2016 high), affirm our view that corrective fall from there has completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will now be the preferred case as long as 119.36 support holds.

Dollar is regaining some ground as markets await Fed chair Jerome Powell's Congressional Testimony. But still, New Zealand Dollar is the strongest one today as lifted by inflation data. Swiss Franc trades as the second strongest as European indices are trading broadly in red. There are also speculations that SNB could finally raise interest rate by the end of 2019. Meanwhile, Sterling is trading as the weakest one for today as markets didn't take the job data positively. Yen follows as the second weakest.

Today will begin Powell's two-day testimony, starting with Senate Banking Committee. House Financial Services Committee comes tomorrow. Expectation is rather low on the event. Fed's rate path is clear for the near term, that is two more hikes in 2018. Recent economic data support the path, with solid job market and improving inflation. Powell will most likely reiterate the views as see in the minutes of the June 13 FOMC meeting.

Nonetheless, his views on the topic of flattening or even inverting yield curve might raise some eyebrows. Minneapolis Fed President Neel Kashkari said in an essay released yesterday that 'This time is different' are the four most dangerous words, in response to those who tried to talk down flattening yield curve and the link to recession. So, to Powell, it's this time the same? Or is it different?

Japan and EU signed landmark trade agreement, stand together against protectionism

European Union and Japan signed an unprecedented free trade agreement in Tokyo today. The signing was delayed from last Wednesday, as Japan Prime Minister Shinzo Abe needed to give more attention to the flood in southwester Japan. It's nevertheless a huge achievement in real terms by the two power houses after four years of negotiations. To name a few of the key points, it's estimated that Japan GDP will be boosted by 1% with around 290k jobs created. The 10% import duty on Japan car will be dropped. And, the majority of the EUR 1B duties by European exporters will also be removed.

Abe said today that "while protectionism is spreading in the world, Japan and the European Union will take the lead as flag bearers for free trade." European Council President Donald Tusk said "we are sending a clear message that we stand together against protectionism."

Sterling in delayed selloff after job data, employment rate hit record but wage growth slowed

Sterling's initial reaction to today's job data is rather muted. But markets seemed to make up their mind in delayed selloff. UK jobless claims rose 7.8k in June, above expectation of 2.3k. Average weekly earnings including bonus rose 2.5% 3moy in May, slowed from 2.6% 3moy. Average weekly earnings excluding bonus rose 2.7% 3moy, slowed from 2.8% 3moy. Unemployment rate was unchanged at 4.2% in the 3 months to May, staying a the joint-lowest since 1975. Employment rate rose to record high at 75.7%. UK employment rates (aged 16 to 64 years), seasonally adjusted, January to March 1971 to March to May 2018.

RBA reiterates next move is more likely an increase

RBA minutes of July meeting cleared up some confusions in the market as it stated that "members continued to agree that the next move in the cash rate would more likely be an increase than a decrease." Still, as the progress of wage growth and inflation will "likely to be gradual, "there was no strong case for a near-term adjustment in monetary policy." Instead, "the Board assessed that it would be appropriate to hold the cash rate steady and for the Bank to be a source of stability and confidence while this progress unfolds." Overall, the minutes reaffirmed the tightening bias of the central bank, but the rate hike will only happen at least deep into mid-2019.

On the economy, RBA noted that recent data has been consistent with the central forecast of GDP growth at a bit above 3% over 2018 and 2019. Non-mining business investments had "contributed significantly" to growth in Q1. Public infrastructure investment and business conditions "remained positive". But consumption "remained a source of uncertainty". Labor market outlook remain positive for solid growth ahead, with "vacancy rate" risen to historical high. And the conditions will lead to gradual decline in unemployment rate and push up wages.

New Zealand Dollar jumps as RBNZ sectoral factor model CPI improved

New Zealand CPI rose 0.4% qoq, 1.5% yoy in Q2, accelerated from Q1's 0.5% qoq and 1.1% yoy. The headline number missed expectations of 0.5% qoq, 1.6% yoy. However New Zealand Dollar later reacts to RBNZ's own prices data. Most notably, the sectoral factor model CPI rose to 1.7% yoy in Q2. There were continuous improvements since last year from 1.4% in Q3 2017 to 1.5% in Q4 2017 to 1.6% in Q1 2018.

The sectoral factor model CPI was created by RBNA to estimate  the common component of inflation in the CPI basket, the tradable basket, and the non-tradable basket, based upon separate factors for the tradable and non-tradable sectors. The data excludes GST. It's one of RBNZ's preferred core inflation gauge.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 112.15; (P) 112.35; (R1) 112.49; More...

USD/JPY recovers notably today but stays below 112.79 temporary top. Intraday bias remains neutral first and more consolidation could be seen. Below 112.21 will target 4 hour 55 EMA (now at 111.68). But downside should be contained well above 111.13 resistance turned support to bring rally resumption. On the upside, break of 112.79 will target 61.8% projection of 104.62 to 111.39 from 109.36 at 113.54 first. Break will put focus on 114.73 key resistance for confirming our bullish medium term view.

In the bigger picture, current development, with the solid break of medium term channel resistance from 118.65 (2016 high), affirm our view that corrective fall from there has completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will now be the preferred case as long as 119.36 support holds.

Economic Indicators Update

Global equity markets were mostly mixed while the Dollar dipped ahead of Fed Chair Jerome Powell’s first Congressional testimony later today.

Powell’s testimony could offer investors a fresh opportunity to appraise the Federal Reserve’s monetary policy approach for the second half of 2018. The central bank head is expected to reiterate that the Federal Reserve remains committed to gradual monetary policy tightening. However, investors may be more concerned with Powell’s thoughts on global trade tensions and the possible impact these could have on the Fed’s policy path. The Dollar has scope to appreciate further if Powell strikes a hawkish tone and reiterates his earlier comments on how the US economy ‘is in a good place’.

The Dollar’s fundamental outlook remains bullish amid robust US economic data and expectations of rising inflationary pressures on the economy. Market speculation that the Federal Reserve will be raising US interest rates two more times this year continues to heavily support the Dollar and this can be reflected in the bullish price action.

Focusing on the technical perspective, the Dollar Index could be experiencing a correction on the daily charts. Bulls need to gather enough inspiration and momentum to conquer the stubborn 95.00 resistance level. Sustained weakness below the 94.50 level could encourage a decline towards 93.90. However, bulls remain in firm control above the 93.20 lower high.

Pound shrugs off positive UK jobs report

Sterling has offered a fairly muted response to the UK employment data report, despite it printing in line with market expectations.

The unemployment rate has remained at a record low of 4.2% during the three months to May, while average earnings rose by 2.5%. With the number of people in work rising to a record 75.7%, expectations may heighten over the Bank of England raising interest rates in August. However, the fact that wage growth is at its weakest level since January could leave investors questioning whether the central bank will take action. When factoring in how Brexit uncertainty continues to weigh on sentiment, could markets be setting themselves up for another disappointment?

If UK interest rates are left unchanged in August, Sterling is likely to find itself exposed to downside shocks. Speaking of the Pound, the currency remains under pressure against the Dollar with prices trading around 1.3235 as of writing. A breakdown below 1.3190 could inspire a decline towards 1.3130.

Commodity spotlight – Gold

Gold seems to be on standby ahead of ahead of Jerome Powell’s testimony this afternoon.

The yellow metal could be in store for further pain if a hawkish Powell boosts the Dollar and reinforces market expectations of two more US rate hikes this year. Regarding the technical picture, Gold is bearish on the daily charts as there have been consistently lower lows and lower highs. Prices are clearly struggling to keep above the $1240 support level with bears waiting for the green light to send the commodity lower. A breakdown below the $1240 support level could trigger a decline towards $1236 and $1230, respectively.

Entering into US session, New Zealand Dollar remains the strongest one as supported by improvement in RBNZ's own preferred core inflation measure. Swiss Franc is trading as the second strongest one, partly on speculation that SNB could start to raise interest rate finally by the end of 2019. Dollar's fortune reversed as markets await Fed chair Jerome Powell's Congressional testimony. Meanwhile, Sterling is trading as the weakest one, receiving no support from an after all solid set of job data. Yen follows as the second weakest.

In other markets, Nikkei closed up 0.44% at 22697.36 today, but that came after hitting as high as 22832.22. Singapore Strait Times was up 0.21% at 3239.64. China Shanghai SSE pared back much losses to closed down -0.57% at 2798.13, barely unable to regain 2800 handle. WTI crude oil continues to press 68 handle while gold gyrates around 1240.

Today will begin Powell's two-day testimony, starting with Senate Banking Committee. House Financial Services Committee comes tomorrow. Expectation is rather low on the event. Fed's rate path is clear for the near term, that is two more hikes in 2018. Recent economic data support the path, with solid job market and improving inflation. Powell will most likely reiterate the views as see in the minutes of the June 13 FOMC meeting.

Nonetheless, his views on the topic of flattening or even inverting yield curve might raise some eyebrows. Minneapolis Fed President Neel Kashkari said in an essay released yesterday that 'This time is different' are the four most dangerous words, in response to those who tried to talk down flattening yield curve and the link to recession. So, to Powell, it's this time the same? Or is it different?

Traders have not introduced big changes in the USD/JPY exchange rate for the past three sessions. The US Dollar breached the 55-hour SMA to the downside late last week but nevertheless failed to decline. Instead, the pair has been+ pushed in a narrow range between the 55– and 100-hour SMAs.

This failure to approach the senior channel line during the past sessions might point to a change in sentiment. Technical indicators are likewise more in favour of the bearish scenario today.

The nearest support is the weekly PP at 111.85. However, a more probable point of reversal could be the monthly R1 and the 55-period (4H) SMA at 111.50.

It is apparent that the strong downside momentum which prevailed last week is starting to allay. Moreover, the pair is diminishing its trading range between a channel line and a short-term trend-line. The 55-hour SMA continues to guide the pair.

Despite pointing to a possible upside breakout on Monday, Gold lacked the necessary bullish momentum to breach this resistance and thus re-tested its 2018 low of 1.237.00.

It is likely that the rate continues to trade in the aforementioned triangle-like formation until the 55– and 100-hour SMAs are breached. A subsequent surge is unlikely to surpass the strong resistance of the 200-hour SMA and the monthly PP at 1,270.00.