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Daily Pivots: (S1) 1.5780; (P) 1.5826; (R1) 1.5903; More....

EUR/AUD retreats sharply after hitting 1.5886 and intraday bias is turned neutral again. As long as 1.5696 minor support holds further rise is still in favor. Above 1.5886 will target 1.6139/89 resistance zone. However, as the rebound from 1.5271 is not clearly impulsive yet and momentum isn't too convincing. Break of 1.5695 minor support could be an early sign of near term topping. In such case, focus will be back on 1.5425 support.

In the bigger picture, current development suggests that fall from 1.6189 is a corrective move and has completed at 1.5217 already. Key support levels of 1.5153 and 38.2% retracement of 1.3624 to 1.6189 at 1.5209 were defended. And medium term rise from 1.3624 (2017 low) is not completed yet. Break of 1.6189 will target 1.6587 key resistance (2015 high).

The US Dollar Index is looking more neutral as prices are still developing within the 93.80 support level and the 95.20 resistance barrier. It is worth mentioning that the price jumped to an almost fresh one-year high of 95.22 on June 28 after the bounce on the 93.80 support and the 20-day simple moving average (SMA) but later reversed sharply to the downside.

The neutral bias in the near term is also supported by the RSI, which has been hovering near the 50-neutral level in the past few days and the MACD oscillator is flattening above the zero line and below its red-trigger line.

Should the index manage to strengthen its positive momentum, the next resistance could come around 96.20, taken from the high on July 2017. A break above 96.20 would shift the bias to a more bullish one and open the way towards the 97.50 hurdle.

However, if prices are unable to break 95.20 in the next few sessions, the risk would shift back to the downside, with the 93.80 support once again coming into focus. A drop below this level and the 40-day SMA of 93.41 would take prices to the 92.70 support barrier.

Having a look at the bigger picture on the weekly timeframe, the index seems to be in a bullish correction mode after the exit from the consolidation area from the end of January until mid-April.

The Canadian dollar has recorded small gains on Tuesday, after starting the week with slight losses. Currently, USD/CAD is trading at 1.3160, down 0.21% on the day. On the release front, there are no key indicators on the schedule. Canada will release Manufacturing PMI. In the US, Factory Orders are expected to rebound to 0.1% in May, after a dismal decline of 0.8% in April.

With the first week in July marked by holidays in Canada and the U.S, we are unlikely to see much movement from USD/CAD until later in the week. That could change on Friday, as Canada will release key employment data. Investors are also keeping a watchful eye, as the Bank of Canada holds a key policy meeting on July 11. The bank has been dropping strong hints that a rate hike could be coming soon. Last week, BoC Governor Stephen Poloz had a hawkish message for the markets, noting that inflation was on target and the domestic economy was performing well. However, Poloz also mentioned that the trade war between Canada and the U.S was hurting business investment.With the U.S showing no signs of easing its tariffs with major trading partners, including Canada, the BoC may decide to sit on fence and wait for trade tensions to ease before raising interest rates. A strong showing from Canadian job numbers on Friday could sway the bank to press the rate trigger next week.

Daily Pivots: (S1) 1.1589; (P) 1.1641 (R1) 1.1691; More.....

Intraday bias in EUR/USD remains neutral as sideway consolidation is in progress. Recovery from 1.1507 could extend higher. But upside should be limited by 1.1851 resistance. The larger decline from 1.2555 is expected to resume sooner or later. Firm break of 1.1507 will send EUR/USD 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) 1.3087; (P) 1.3151; (R1) 1.3208; More...

GBP/USD continues to stay in consolidative trading above 1.3048 and intraday bias remains neutral. Further recovery could be seen. But upside should be limited by 1.3314 minor resistance to bring fall resumption. On the downside, break of 1.3048 will resume the fall from 1.4376 and target 61.8% retracement of 1.1946 to 1.4376 at 1.2875 first. However, break of 1.3314 will bring stronger rebound back to 1.3471 key resistance.

In the bigger picture, whole medium term rebound from 1.1936 (2016 low) should have completed at 1.4376 already, with trend line broken firmly, on bearish divergence condition in daily MACD, after rejection from 55 month EMA (now at 1.4121). 61.8% retracement of 1.1936 (2016 low) to 1.4376 at 1.2874 is the next target. We'll pay attention to the reaction from there to asses the chance of long term down trend resumption. For now, outlook will stay bearish as long as 1.3471 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 0.9901; (P) 0.9933; (R1) 0.9969; More...

Intraday bias in USD/CHF remains neutral at this point while range trading continues inside 0.9855/9991. On the downside, below 0.9855 will resume the corrective decline from 1.0056, likely through 0.9787 support. But downside should be contained by 0.9722/4 cluster support (38.2% retracement of 0.9186 to 1.0056 at 0.9724, 100% projection of 1.0056 to 0.9787 from 0.9991 at 0.9722) to bring rebound. On the upside, firm break of 0.9991 will target a test on 1.0056 high.

In the bigger picture, rise from 0.9186 is seen as a leg inside the long term range pattern. For now, further rise is expected as long as 38.2% retracement of 0.9186 to 1.0056 at 0.9724 holds. Above 1.0056 will target 1.0342 (2016 high). In that case, we'd be cautious on strong resistance from 1.0342 to limit upside. However, sustained break of 0.9724 will dampen this bullish view and would at least bring deeper fall to 61.8% retracement at 0.9518.

Daily Pivots: (S1) 110.39; (P) 110.67; (R1) 110.96; More...

A temporary top is in place at 111.31 with 4 hour MACD crossed below signal line. Intraday bias is turned neutral first with focus on 110.55 minor support. The overall outlook remains unchanged that , the corrective pattern from 111.39 could then extend with another down leg. On the downside, break of 110.55 minor support will turn bias to the downside for 109.36 support first. Break will target 108.10 support to extend that consolidation. On the upside, above 111.13 will bring retest of 111.39 high. Break there will also resume the rise from 104.62 and target 114.73 key resistance.

In the bigger picture, at this point, we're slightly favoring the case that corrective decline from 118.65 (2016 high) has completed with three waves down to 104.62. Above 111.39 will affirm this view and target 114.73 for confirmation. However, it should be noted that USD/JPY is bounded in medium term falling channel from 118.65 (2016 high). Sustained break of 61.8% retracement of 104.62 to 111.39 at 107.20 will likely resume the fall from 118.65 through 104.62 low.

Dollar trades broadly lower today, followed by Swiss Franc and Japanese Yen, as risk aversion eased. News that Germany Chancellor Angela Merkel averted an immediate political crisis is sentiment supporting. But that impact could be mainly confined to Germany or Europe. The more broad based support come from the reversal in Chinese stocks. That came after comments from PBoC Governor Yi Gang around the Chinese Yuan, which is seen by some as a sign that the government is ready for intervention. Australian Dollar is trading as the strongest one for today, followed by New Zealand Dollar, Sterling and then Canadian Dollar.

Technically, outlook is generally unchanged though, EUR/USD and GBP/USD remain in tight range above 1.1507/1.3048 respectively. More consolidations would be seen. USD/JPY should have made a temporary top already and some consolidations should be seen first. AUD/USD failed to sustain below 0.7328 key cluster support. But upside is limited below 0.7408 minor resistance so far, maintaining near term bearish outlook.

China SSE rebounds ahead of key support level.

The Shanghai SSE composite dropped to as low as 2722.45 earlier today but closed up 0.41% at 2786.88. The decline in the past three weeks has been steep, after the index gapped down 3000 psychological level. The government showed no intention of intervention. But it's now very close to 2016 low at 2638.30. Based on increasing rhetorics from officials, on Yuan and stocks, the government could be ready to step in.

PBoC Yi: Yuan fluctuation due to USD strength and external uncertainties

China's Central Bank, PBoC, issued a statement in its website regarding Governor Yi Gang's response to China Securities Journal regarding recent decline in the Yuan. Yi acknowledged the fluctuation in the exchange rate and said the central bank is "pay closing attention". He attributed to the decline of Chinese Yuan to strength of the US Dollar, external uncertainties and some procyclical behaviors.

He also noted that the "managed floating exchange rate system" is based on market supply and demand. And "practice over the years has proven that this system must be effective and must be adhered to". At the same time, China is committed to deepen the reform of exchange rate marketization and use sufficient policy tools to " maintain the basic stability of the RMB exchange rate at a reasonable and balanced level."

Suggested reading, our report Has China Given Green light to Renminbi Selloff?

German coalition immigration deal lifts sentiments

Euro and German DAX are relieved today. DAX leads European stocks higher and is trading up 1.43% at the time of writing. CAC is up 1.03% while FTSE is up 0.77%. Sentiments are lifted by news that Chancellor Angela Merkel made a last minute deal with the rebellious Interior Minister Horst Seehofer in immigration. That came after five hours of talks between the leader of Christian Democrats and Christian Social Union. European Commission President Jean-Claude Juncker also acknowledge the deal as he said "I have not studied it in detail but at first glance, and I have asked the legal services to look at it, it seems to me to be in line with the law." Merkel should have finally averted a political crisis for the near term.

Released from Eurozone, PPI rose 0.5% mom, 0.8% yoy in May. Retail sales rose 0.0% in May.

BoE Saunders: Rates may need to go up a little faster

BoE policymaker Michael Saunders warned the markets that their the central bank's tightening path could be faster then they expected. Saunders is known hawk that started voting for a hike since March meeting. He refers to market pricing of a little bit more than one hike over the next twelve months, and said "if the economy plays out as I expect, it may be that rates need to go up a little faster than that."

He also laid out his expectations for the developments in UK. On the condition that "Brexit unfolding in sort of a smooth and gradual way", "the economy will continue to grow at around the pace we have seen over the last couple of years … (I) expect the jobless rate to fall a little further; and pay growth will pick up a bit."

Against that background, Saunders believed that "rates might need to rise a little faster". Still he emphasized that "the general picture is still limited and gradual, not too far and not too fast."

UK PM May to meet ministers to work on another Brexit white paper

UK Prime Minister Theresa May will meet with senior ministers this Friday, with an effort to resolve all differences regarding Brexit. May would also want to conclude another "white paper" on the issue. Her spokesman said "the PM looked forward to the full discussion which will take place at Chequers on Friday when decisions will be taken on the future partnership the UK is seeking with the EU and the content of the upcoming white paper."

Chancellor of Exchequer Philip Hammond also said "on Friday the cabinet will meet to set out our way forward in our negotiations with the European Union. We recognize that this is now urgent and that we need to make progress."

UK PMI construction rose to 53.1, marks three months of sustained recovery

UK PMI construction rose to 53.1 in June, up from 52.5 and beat expectation of 52.0. Markit noted in the release that house building remains best performing area of activity. Also, new orders rise at fastest pace since May 2017 and input cost inflation accelerates in the month.

Tim Moore, Associate Director at IHS Markit, said in the release that it marked "three months of sustained recovery from the snow-related disruption seen back in March" And, " Survey respondents suggested that improved opportunities for industrial and distribution work were the main bright spots, which helped to offset some of the slowdown in retail and office development." Meanwhile, "higher transportation costs and rising prices for steel-related inputs led to the fastest increase in cost burdens across the construction sector since September 2017"

RBA left cash rate unchanged at 1.50% as widely expected

RBA left the cash rate unchanged at 1.50% for a 21st meeting in July. The outcome had been widely anticipated. Indeed, the market has expected no interest rate adjustment at least until late 2019. As a result, market reaction outcome was rather muted. The monetary policy stance was merely a repeat of the previous meetings, signaling that keeping the policy rate unchanged is consistent "with sustainable growth in the economy and achieving the inflation target over time". More in RBA Left Cash Rate Unchanged at 1.5%, Content with Aussie Depreciation

Also from Australia, building approvals dropped -3.2% mom in May versus expectation of -1.0% mom.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 110.39; (P) 110.67; (R1) 110.96; More...

A temporary top is in place at 111.31 with 4 hour MACD crossed below signal line. Intraday bias is turned neutral first with focus on 110.55 minor support. The overall outlook remains unchanged that , the corrective pattern from 111.39 could then extend with another down leg. On the downside, break of 110.55 minor support will turn bias to the downside for 109.36 support first. Break will target 108.10 support to extend that consolidation. On the upside, above 111.13 will bring retest of 111.39 high. Break there will also resume the rise from 104.62 and target 114.73 key resistance.

In the bigger picture, at this point, we're slightly favoring the case that corrective decline from 118.65 (2016 high) has completed with three waves down to 104.62. Above 111.39 will affirm this view and target 114.73 for confirmation. However, it should be noted that USD/JPY is bounded in medium term falling channel from 118.65 (2016 high). Sustained break of 61.8% retracement of 104.62 to 111.39 at 107.20 will likely resume the fall from 118.65 through 104.62 low.

Economic Indicators Update

UK Prime Minister Theresa May will meet with senior ministers this Friday, with an effort to resolve all differences regarding Brexit. May would also want to conclude another "white paper" on the issue. Her spokesman said "the PM looked forward to the full discussion which will take place at Chequers on Friday when decisions will be taken on the future partnership the UK is seeking with the EU and the content of the upcoming white paper."

Chancellor of Exchequer Philip Hammond also said "on Friday the cabinet will meet to set out our way forward in our negotiations with the European Union. We recognize that this is now urgent and that we need to make progress."

Here are the latest developments in global markets:

FOREX: Ahead of the Independence Day celebration in the US on Wednesday and the FOMC meeting minutes on Thursday, dollar/yen paused at 110.87 (-0.01%) early in the European session, while the dollar index which gauges the greenback’s strength against a basket of six major currencies was weaker at 94.67 (-0.37%) as the euro and the pound were attracting some interest. Euro/dollar fully recovered yesterday’s losses as the leading coalition parties in Germany managed on Monday to break the migration deadlock, calming concerns over Merkel’s political career and worries about the lifetime of the current coalition government. Eurozone data published early today indicated an unexpected improvement in PPI indicators, though in the retail sector sales came in surprisingly slightly weaker. Following the stats, euro/dollar continued to move upwards. Pound/dollar was also in a bullish mode, coming close to overpassing the 1.32 round level after the BoE member Michael Sanders, who was among the three policymakers who voted in favor of a rate increase at June’s meeting, messaged in an interview today that if the British economy evolves in line with his estimates, the BoE may raise interest rates faster than what financial markets are currently anticipating. Note that markets expect the BoE to hike rates once in the next twelve months. Besides the comments, the UK’s construction PMI for the month of June beat forecasts and reached the highest since December, boosting the pound even further. Speculation that the UK government has a new plan on how to handle customs – a thorny issue in the Brexit negotiations – was also supporting the market. At the Chequers summit on Friday, May will meet her cabinet to shape UK’s preferred economic relationship with the EU. Euro/pound changed hands lower at 0.8830 (-0.26%). In antipodean currencies, aussie/dollar and kiwi/dollar remained on the upside, with the former stretching up to 0.7393 (+0.74%) and the latter moving up to 0.6738 (+0.34%). The rebound in antipodeans early today came after China’s central bank talked up the yuan after it fell below the 6.7 psychological level raising suspicion the central bank could intervene in FX markets to support the currency. The central bank expressed that it will seek to keep the currency stable and at a reasonable level. Dollar/Swedish krona was among the worst performers losing 1.26% after Sweden’s central bank maintained borrowing costs steady but revised upwards its inflation forecasts for this year. Moreover, it reiterated that it would push up rates at the end of the year.

STOCKS: European stocks opened higher on Tuesday, underpinned by the political breakthrough in Germany. The pan-European STOXX 600 and the blue-chip Euro STOXX 50 were up by 1.00% and 1.14% respectively at 1150 GMT, with all sectors except energy being in the sea of green. The German DAX 30 gained 1.36%, the French CAC 40 climbed by 1.04%, while the Italian FTSE MIB and the Spanish IBEX 35 surged by 1.81% and 1.32% respectively. UK’s FTSE 100 climbed more modestly by 0.69% as the index was dragged down by a plunge in the shares of Glencore following the US Justice Department issuing a subpoena to the company for a money laundering investigation. In the US, futures tracking major indices such as S&P 500 and NASDAQ 100 were pointing to a positive open.

COMMODITIES: Oil prices continued to head north early in the European afternoon as Canada’s Syncrude oil sand facility which was hit by a power outage last month was said to remain shut during July, while military conflicts in Libya signaled further supply tightening. WTI crude and Brent were last seen higher at $74.78(+1.14%) and at $78.03 (+0.94%) respectively. In precious metals, gold bounced off 7-month lows to touch $1,248 (+0.50%).

Day Ahead: US durable goods, New Zealand Global dairy prices and Australia retail sales eyed

The economic calendar has few economic releases to deliver in the remainder of the day, which in the absence of any trade and political updates could spur positioning in the markets before Thursday’s FOMC meeting minutes and Friday’s non-farm payrolls come into view.

In the US, factory orders and total vehicle sales for May are scheduled for release at 1400 GMT and at 1930 GMT respectively. Factory orders are expected to show no change on a monthly basis in May after retreating by 0.8% in April, while the number of vehicles is projected to improve to 17 million, slightly up from 16.91 million seen earlier. The dollar could come under renewed selling pressure if the data disappoint.

In energy markets, investors will be waiting for the API weekly report to show changes in the US oil inventories at 2030 GMT for the week ending on June 25.

Kiwi pairs could face volatility as the outcome of the bi-weekly milk auction is made public later today; dairy products are New Zealand’s largest goods export earner. The relevant print lacks a specific time of release.

In terms of public appearances, ECB Chief Economist Peter Praet will give a speech at Gala Dinner hosted by the National Bank of Romania in Bucharest, Romania at 1600 GMT.

Trade tensions will be one of the major themes in markets before US tariffs on Chinese imported goods become effective on July 6. Also, the strong movement in the yuan is being monitored by officials in the Chinese central bank (PBOC).

Early tomorrow, Australia will see the release of retail sales numbers at 0130 GMT; aussie pairs will be eyed. Month-on-month, sales are expected to expand by 0.3% in May versus 0.4% the prior month. At the same time, the nation’s trade balance for the same month will be published as well, with analysts predicting the measure to come at 1,200M from 977M before.

A bit later at 0145 GMT, investors will be looking at China’s Caixin services PMI readings.