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The British Pound has been trading in a junior ascending channel against the Australian Dollar. The exchange rate bounced off the bottom border of the pattern on June 5 and has since rallied.

The currency pair tested the upper boundary of a downtrend line during the early hours of yesterday session and made a pullback. As a result, the pair dashed through the three SMAs.

Given that the GBP/AUD currency exchange rate is moving toward the lower boundary of the junior ascending channel pattern, a breakout south could be expected within the next trading sessions.

The common European currency has extended its decline against the US Dollar even more than it as initially expected. Moreover, significant support levels were passed on Friday morning.

Namely, the support levels of the medium and large scale patterns was passed together with the weekly S1 near the 1.1640 mark.

Without this support the rate can fall as low as the 1.1580 level without finding any level of significance to pause the decline. Meanwhile, note that the 1.1580 level is mentioned because that is where a lower trend line of a speculated channel down pattern is located at.

The Pound bounced off the upper trend line of a medium term descending channel pattern against the US Dollar in the second half of Thursday's trading session. The event resulted into the rate plummeting as low as the 1.3120 mark on Friday morning.

The decline was only shortly slowed down by a Fibonacci retracement level near the 1.3170 mark.

In regards to the near term future, the pair is set to decline down to the support of a dominant pattern below the 1.31 level.

The narrow ascending pattern of the USD/JPY currency pair, which was drawn on Thursday, has held its ground, as the surge of the currency exchange rate has extended into Friday. Namely, on Friday morning the rate had reached above the 112.75 level.

The rate was expected to continue its surge in the future, as it faced no resistance as high as the 113.65 mark, where a historical high level was located at. In addition, the high level was supported by a pivot point at 113.75.

Meanwhile, note that the 55-hour SMA was approaching near the 112.00 mark to provide support.

On Friday, the junior channel down pattern was adjusted, as it turned out that it had a slightly different shape. However, if one used the addition of the 55-hour SMA as a guide to properly confirm the change in short term directions, the move could have been caught.

During the morning hours of the day's trading session it was clear that the rate was declining and reaching for the historical low level of 1,236.60. Until that level there were no other notable support observable, which could stop the decline of the commodity price.

Notes/Observations

• China Trade Surplus with US rose to a record high, esaclating trade war concerns
• President Trump says PM May's plan for Brexit could 'kill' chances of bilateral trade deal with the US -Earnings season officially starts with major banking names JP Morgan, Citigroup and Wells Fargo set to report

Asia:

• (JP) Bank of Japan (BoJ) might note that inflation could be short of its 2% target for up to 3 additional years (in line with Nikkei report)
• China June trade surplus higher than expectations, surplus with US widens and hits record high
• New Zealand June PMI hits lowest level since Dec 2017
• China June M2 supply falls to record low of 8%

Europe:

• President Trump tell UK newspaper that soft Brexit would 'probably kill' potential for future trade deal with US. "If they do a deal like that, we would be dealing with the European Union instead of dealing with the UK.
• Trump also reveals to me PM ignored his advice on Brexit negotiations

Economic Data:

• (DE) Germany Jun Wholesale Price Index M/M: 0.5% v 0.8% prior; Y/Y: 3.4% v 2.9% prior
• (NO) Norway Jun Trade Balance (NOK): 22.0B v 16.3B prior
• (NO) Norway Q2 House Price Index Q/Q: +2.2% v -0.3% prior
• (FI) Finland May GDP Indicator WDA Y/Y: 3.4% v 1.8% prior
• (FI) Finland Jun CPI M/M: 0.2% v 0.1% prior; Y/Y: 1.2% v 1.0% prior
• (FI) Finland May Current Account: -€0.5B v -€1.6B prior
• (CH) Swiss Jun Producer & Import Prices M/M: 0.2% v 0.2% prior; Y/Y: 3.5% v 3.2% prior
• (CN) Weekly Shanghai copper inventories (SHFE): 234.7K v 258.7K tons prior
• (PL) Poland Jun Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 2.0% v 1.6% prelim
• (RU) Russia Narrow Money Supply w/e July 6th: 10.21T v 10.10T prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 +0.2% at 3,453, FTSE +0.6% at 7,694, DAX +0.2% at 12,523, CAC-40 +0.3% at 5,423; IBEX-35 -0.2% at 9,745, FTSE MIB +0.4% at 21,887, SMI +0.3% at 8,840, S&P 500 Futures +0.1%]
• Market Focal Points/Key Themes: European indices opened higher across the board and stayed largely positive; technology and consumer discretionary lead better performers; financials underperforming ahead of major bank earnings reports in US; focus on UK news with Trump visit; upcoming earnings expected in the US session include JPMorgan, PNC Financial services and Citigroup

Equities

• Consumer discretionary: Carrefour CA.FR -0.7% (analyst action), DCC DCC.UK +2.9% (earnings, acquisition), Halfords HFD.UK +1.9% (new CFO), L'Oreal OR.FR -0.1% (analyst action)
• Energy: Aker BP AKERBP.NO -6.2% (results), Solaria Energia SLR.ES -11.1% (share issue)
• Financials: Gam Holding GAM.CH -8.6% (results), International Personal Finance IPF.UK +5.5% (trading update), Storebrand STB.NO +2.0% (results)
• Healthcare: Capio CAP.SE +22.0% (receives unsolicited bid)
• Industrials: Orkla ORK.NO -5.3% (results)
• Technology: Altran Technologies ALT.FR -20.9%(discovery of forged sales in unit), Dassault Systems DSY.FR +0.3% (analyst action), Fugro FUR.NL +3.7% (analyst action)
• Telecom: Proximus PROX.BR -2.8% (acquisition)

Speakers

• (UK) Foreign Office Minister Duncan: mood at Trump dinner was fantastically positive
• (UK) UK Chancellor of the Exchequer Hammond (Fin Min): EU should engage with UK to deliver Brexit solution
• (JP) Japan Chief Cabinet Sec Suga: No problem for bond market from keeping monetary policy easing
• (UK) UK Chancellor of the Exchequer Hammond (Fin Min): EU should engage with UK to deliver Brexit solution; determined to protect financial services in UK
• (RU) Russia Energy Min Novak: June Opec+ decision means gradual easing of output caps; OPEC+ weighs ongoing cooperation after 2018 - speaks at FED council

Currencies

• US Dollar strengths across the board, USD/YEN cross trades highest in 5 months helping propel the Nikkei, as the Yen is on course for biggest weekly loss since Septemeber
• GBP/USD falls on Trump comments regarding UKs soft Brexit stance.

Fixed Income

• Bund Futures trade 24 ticks higher at 162.92 as the German Bund yield hovers below 0.30%. Upside targets 163.25 followed by 163.85, while a return lower targets the 159.75 level.
• Gilt futures trade at 123.35 higher by 27 ticks as Trump's comment weigh on sterling. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
• Friday's liquidity report showed Thursday's excess liquidity rose from €1.867T to €1.871T. Use of the marginal lending facility rose from €56 to €135M.
• Corporate issuance saw 4 issuers raise $5.0B in the primary market

Looking Ahead

• 07:30 (IN) India Weekly Forex Reserves
• 08:00 (BR) Brazil May IBGE Services Sector Volume Y/Y: -4.0%e v 2.2% prior
• 08:00 (IS) Iceland Jun Unemployment Rate: No est v 2.2% prior
• 08:15 (UK) Baltic Dry Bulk Index
• 08:30 (US) Jun Import Price Index M/M: 0.1%e v 0.6% prior; Y/Y: 4.6%e v 4.3% prior, Export Price Index M/M: 0.2%e v 0.6% prior; Y/Y: No est v 4.9% prior, Import Price Index ex Petroleum M/M: 0.2%e v 0.1% prior
• 09:00 (CA) Canada Jun Existing Home Sales M/M: 1.5%e v -0.1% prior
• 10:00 (US) July Preliminary University of Michigan Confidence: 98.0e v 98.2 prior
• 11:00 (CO) Colombia May Industrial Production Y/Y: 4.9%e v 10.5% prior
• 11:00 (CO) Colombia May Retail Sales Y/Y: 5.0%e v 6.3% prior
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 14:00 (CO) Colombia Central Bank Jun Minutes

The US dollar has surged towards a fresh monthly trading-high against the Japanese yen during the European trading session, hitting 112.80. The USDJPY has now started to move away from the 112.80 level and we may see a correction back towards the 112.30 support zone. Sellers will look to target below the 112.30 level, while buyers will continue to push towards the 113.40 level.

The USDJPY pair is now strongly bullish while trading above the 112.00 level, key resistance is now found at the 112.80 and 113.40 levels.

If the USDJPY pair falls below the 112.30 level, sellers will likely test towards the 112.00 and 111.39 support levels.

The euro currency has continued to tumble lower against the greenback during the European trading session, with today’s strong intraday decline extending to the 1.1612 level. The EURUSD pair has come under heavy selling pressure as the U.S. Dollar Index moves to a fresh monthly trading-high. Sellers will try to break the 1.1600 level, while buyers will try to stabilize price back above the 1.1650 level.

The EURUSD pair is strongly bearish while trading below the 1.1650 level, key support is now found at the 1.1600 and 1.1540 levels.

If the EURUSD pair moves above the 1.1650 level, key technical resistance is located at the 1.1674 and 1.1691 levels.

The GBPJPY pair has tested resistance at 148.805 overnight and was sold down to the 147.945 level after US President Trump reportedly said that there would be no trade deal between the US and UK unless the UK made a hard brexit from the EU. GBP weakened considerably on the news. The support is now seen at the 100 DMA with a break under here on continued selling looking to test the 50 DMA as support at 147.135. A loss of 147.000 could push price down to the next support at 146.000. The Low from March comes in at 144.979 which is supported by the rising red trend line. Below are the lows from May and June at 143.184 and 143.765 respectively.

Resistance at the blue rising trend line is found at 148.991 today followed by the 200 DMA at 149.496. A break above the 150.000 level would need to continue above 150.500 to confirm the move which could extend towards 151.736. Above this area the high at 153.850 comes into play

The EURAUD pair is consolidating around the 1.58000 level using its 50 DMA and the 1.56962 level as support and its 1.58888 level as resistance. These levels set the range for traders and a break out can develop into a bigger move. The chart remains bullish on a break above the resistance with the 1.58153 level the initial point to cross. A move above 1.59000 can see the 1.60000 level tested and the recent highs beyond above 1.60597 at 1.61396 and 1.61896 followed by the 1.62000 round number level.

Support has been tested twice at 1.56962 and the 100 DMA remains in close proximity at 1.56823. A break under these levels can target support around 1.56057. The 200 DMA is at 1.55367 with the 1.55525 level just above. The next support area is located at 1.54938 and the 1.55000 level. A loss of this support can see price revisit the 1.54147 level on its way to the recent lows from early June around 1.53000.