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Daily Pivots: (S1) 0.9852; (P) 0.9873; (R1) 0.9890; More...

USD/CHF recovers after hitting 0.9855 and intraday bias is turned neutral first. For now, the consolidation pattern from 1.0056 is still in favor to extend with another fall. Below 0.9855 will target 0.9787 support and below. But we'd expect strong support from 0.9720/4 cluster support (38.2% retracement of 0.9186 to 1.0056 at 0.9724, 100% projection of 1.0056 to 0.9787 from 0.9989 at 0.9720) to bring rebound. On the upside, above 0.9989 will bring retest of 1.0056 high first.

In the bigger picture, medium term decline from 1.0342 has completed with three waves down to 0.9186. Rise from there is currently viewed as a leg inside the long term range pattern. Hence, while further rally would be seen, we'd be cautious on strong resistance from 1.0342 to limit upside. For now, further rise is expected as long as 38.2% retracement of 0.9186 to 1.0056 at 0.9724 holds. 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) 1.3223; (P) 1.3279; (R1) 1.3337; More...

For now, the corrective from 1.3101 could still extend higher. But even in that case, we'd expect strong resistance from 1.3471 to limit upside. GBP/USD's fall from 1.4376 is expected to resume later. On the downside, break of 1.3101 will target 61.8% retracement of 1.1946 to 1.4376 at 1.2875 next.

In the bigger picture, current development suggests that whole medium term rebound from 1.1936 (2016 low) has 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 1.4177). 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 55 day EMA (now at 1.3490) holds, even in case of strong rebound.

The Canadian dollar continues to have a quiet week. In Tuesday’s North American session, USD/CAD is trading at 1.3319, up 0.19% on the day. On the release front, there are no Canadian events until Thursday, so U.S indicators will have an added impact on the movement of USD/CAD. In the U.S, the key event is CB Consumer Confidence, which is expected to drop to 127.6 points. On Wednesday, the U.S releases durable goods reports.

The Bank of Canada has dropped hints that it is ready to raise rates in the second half of 2018, but policymakers have concerns both internally and on the global stage. The escalating trade war between the U.S and China could have serious repercussions for the Canadian economy. President Trump hasn’t spared Canada from tariffs, and with 80% of Canadian exports headed to the U.S, Canada can ill-afford a trade spat with its giant southern neighbor. On the domestic front, Canadian consumer inflation and spending data was softer than expected. Retail Sales was dismal, with a sharp drop of 1.2 percent. Despite these soft numbers, the BoC remains confident about the economy, and a July rate hike remains a reasonable possibility. Inflation is still above the target of 2.0%, and in its May policy statement the BoC removed its reference to “cautious”, replacing it with “gradual” describing its approach to rate adjustments. The markets viewed this as a signal that the bank is preparing to press the rate trigger. A rate hike would likely boost the Canadian dollar, as it makes the currency more attractive to investors.

There is widespread concern among central bankers that recent protectionist moves could hamper global growth and financial stability. This was the message on Sunday from the Bank of International Settlements (BIS), which acts as an umbrella group for some 60 central banks. The BIS also warned that the escalating trade war could have negative side effects on the currency markets. At the same time, the BIS expressed support for the Federal Reserve raising interest rates gradually and for the ECB heading towards normalization as it winds up its massive asset program.

Daily Pivots: (S1) 1.1649; (P) 1.1682 (R1) 1.1736; More.....

EUR/USD retreats after hitting 1.1720 but it's staying above 1.1628 minor support. Outlook is unchanged that corrective rise from 1.1507 might extend higher. But upside should be limited by 1.1851 resistance to bring fall resumption eventually. On the downside, below 1.1628 will bring retest of 1.1507 first. Break will resume the whole fall from 1.2555 through 50% retracement of 1.0339 to 1.2555 at 1.1447 to 61.8% retracement at 1.1186.

In the bigger picture, current development suggests that 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.

The stock markets are rather steady today so far even though US continues with its tariff threats on other countries. At the time of writing, European indices are mixed with DAX nearly flat while CAC is up 0.2%. FTSE is indeed registering 0.5% again thanks to the slightly weaker Sterling, US stock futures also just point to a mixed open. Markets could take a bit of time to digest yesterday's loss. In the currency markets, Yen continues to trade as the strongest one but there is no clear cut follow through buying. Dollar attempts to rebound against Europeans today but strength is so far limited. Sterling is weighed down slightly as new BoE policy maker Haskel is seen as less hawkish than Ian McCafferty, the one he replaces.

For now, it will take some more time for the forecast markets to determine the main near term direction. The rebound in EUR/USD from 1.1507, GBP/USD from 1.3101 and AUD/USD from 0.7345 are all seen as corrective. These corrections could take some more time to develop. But in the end, Dollar is expected to regain strength after the corrections complete. EUR/JPY, GBP/JPY and AUD/JPY are also in near term correction and decline is expected at a later stage. The question is, whether Dollar or Yen will pick up buying momentum first. Yen is in favor based on the outlook in USD/JPY. But let's see.

Trump blasts Harley Davidson again, finishing study of car tariffs

In a series of tweets, Trump blasts Harley-Davidson for using tariffs/trade wars as excuse for moving production to Thailand. And he warned that HD won't be able to sell back into the US "without paying a big tax.

Also, he said the administration is "finishing" the study of tariffs on cars from EU. Trump blamed EU again as "they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs." Trump promised "in the end it will all even out – and it won't take very long!"

UK Hammond: Full scale trade war a disaster for everyone, not least for US

UK Chancellor of Exchequer Philip Hammond said today that "I very much hope that we can avoid a full scale trade war (because) that would be a disaster for everyone, not least for the United States". He added that "but what I can say is this: whatever happens the UK will remain an outspoken proponent of open markets and free trade, low tariff barriers and low non-tariff barriers."

Also Hammond said that "we live in uncertain times because the old certainty for many decades has been that the United States was completely wedded to open markets and free trade."

BoE Haskel agrees with MPC's broad direction of travel

New BoE MPC member Jonathan Haskel testifies in the parliament today. On interest rates he said that "at this stage, I would merely say that given current conditions and current economic data, I agree with the broad direction of travel (of the BoE's current guidance)."

But he pointed out that "ultimately, long run consumer demand depends on how much (perceived long run) incomes grow and how much is saved or spent." And, "in recent years savings rates seem to have declined and thus consumption has been stronger than was expected. I would expect that savings rates would fall assuming the outlook for wages and productivity remains subdued." Therefore, he predicted that " outlook for consumer spending in the UK is that it will be similarly subdued."

On Brexit, Haskel said "what all of this hangs on is the extent to which we can re-negotiate advantageous supply trade relationships, trade and services and all of those kinds of things." And, "If they can be negotiated and we can be in a good place, then the economy can keep on growing. If we're in a bad place, then I think most people will agree there may at least be a temporary lull."

Haskel's term will start in September. That is, after the highly anticipated August BoE MPC meeting, when a rate hike is on the table.

China drops tariffs on soybeans, soybean cake and fishmeal from Asian neighbors

China announced to drop tariffs on some animal feed ingredients from five Asian neighbor countries. The products include soybeans, soybean cake and fishmeal. There are currently 3%, 5% and 2% tariffs on these products currently. And, tariffs on these products originating from Bangladesh, India, Laos, South Korea and Sri Lanka will be dropped effective July 1.

The move is seen as a preparation for US initiated trade war. China announced to retaliate to US section 301 tariffs. Soybean is on the list of US goods to be imposed 25 tariffs, effective July 6.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1649; (P) 1.1682 (R1) 1.1736; More.....

EUR/USD retreats after hitting 1.1720 but it's staying above 1.1628 minor support. Outlook is unchanged that corrective rise from 1.1507 might extend higher. But upside should be limited by 1.1851 resistance to bring fall resumption eventually. On the downside, below 1.1628 will bring retest of 1.1507 first. Break will resume the whole fall from 1.2555 through 50% retracement of 1.0339 to 1.2555 at 1.1447 to 61.8% retracement at 1.1186.

In the bigger picture, current development suggests that 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.

Economic Indicators Update

In a series of tweets, Trump blasts Harley-Davidson for using tariffs/trade wars as excuse for moving production to Thailand. And he warned that HD won't be able to sell back into the US "without paying a big tax.

Also, he said the administration is "finishing" the study of tariffs on cars from EU. Trump blamed EU again as "they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs." Trump promised "in the end it will all even out - and it won't take very long!"

So, it's clear that Trump is continuing with his confrontational approach on trade. For those who's still expecting de-escalation, it's time to wake up.

https://twitter.com/realDonaldTrump/status/1011568906992017408

https://twitter.com/realDonaldTrump/status/1011571026034089984

https://twitter.com/realDonaldTrump/status/1011574256117993472

https://twitter.com/realDonaldTrump/status/1011577303023980544

Here are the latest developments in global markets:

FOREX: The US dollar held steady versus the Japanese yen today (-0.10%), taking a breather after today's earlier sell-off movement. The US dollar index rose by 0.22% though, currently hovering near the 94.48 level. Traders are awaiting the figures on the Fed's preferred inflation measure, the core PCE (personal consumption expenditures) index on Friday. Moreover, investors will keep their focus on the Trump administration's trade and investment restrictions as yesterday the US Treasury Secretary Steven Mnuchin said that potential investment curbs will not target only China but all countries acting unfairly in the US technology sector. Euro/dollar was trading lower by 0.30% during today's European session, while pound/dollar dived by 0.23% after BOE MPC member John Haskel argued that there must be more slack in the economy which if true, chances for a rate rise could weaken. On the other hand, BOE MPC member, Ian McCafferty, messaged today that waiting too long to put up rates could create bigger shocks in the UK economy. The Antipodean currencies were in bearish mode, with aussie/dollar and kiwi/dollar down at 0.7397 (-0.22%) and at 0.6868 (-0.42%) respectively. Dollar/loonie was last seen at 1.3322 handle (+0.23%).

STOCKS: Following the sell-off in US stocks, European equities retreated on Tuesday after they completed the biggest bearish day in two months during yesterday's trading session. Today, the benchmark European STOXX 600 advanced by 0.12% at 1100 GMT, while the blue-chip Euro STOXX 50 was up by 0.17%. The German DAX 30 rose by 0.08%, the French CAC 40 edged up by 0.22%, the Spanish IBEX 35 moved higher by 0.20% and the British FTSE 100 jumped by 0.34%. US stock futures were in the sea of green, pointing to a positive open after the aggressive selling interest on Monday.

COMMODITIES: Oil prices held onto gains on Tuesday, finding support from production losses in Canada's largest oil sands facilities and uncertainties over Libyan exports which are under threat since the official state-owned oil company NOC in Tripoli – the only legal entity to sell oil – will no longer be allowed to handle the oil in the region according to Eastern Libyan commander Khalifa Haftar's forces. Instead, the control of the oil ports has been transferred to the NOC based in the east. In other news, Iran's oil minister claimed that there was no figure specifying supply increases in the OPEC agreement, saying that a number of 800,000 was an interpretation by some OPEC members. West Texas Intermediate (WTI) crude was last seen down at $68.35/barrel (+0.21%), while Brent was standing higher at $75.42/barrel (+0.92%). In precious metals, the safe-haven gold was posting significant losses, reaching a fresh 6-month low of $1,256.20/ounce (-0.70%), pressured by the prospect of rising US interest rates amid a strengthening economy.

Day ahead: Trade uncertainties to keep weighing on risk sentiment; Merkel meets coalition for migration talks

Investors will continue to trade with caution amid fears the US trade policy which has recently turned more protectionist against the EU and China, could take risks in global trade wild. Should the US dig its heels in, refusing to drop its threats over a new round of import tariffs imposed against the EU and its fresh warnings of restrictions in Chinese investments, safe havens could see additional demand, while riskier assets such as stocks could face further pressure.

Meanwhile, in Germany, politics will be in the spotlight on Tuesday as the German Chancellor Angela Merkel will be holding private talks with other parties in her coalition government for the first time since last year's elections, with refugee policy topping the agenda. Note that Merkel's migration issue became a threat for Merkel's leadership as her CDU party recently got into a dispute with its CSU junior coalition partner on whether to leave asylum seekers, who have registered elsewhere in the EU, to pass the German border.

In terms of data, Tuesday's calendar will be relatively light ahead of a busy Friday, with the US CaseShiller house price index for the month of April and June's Consumer confidence index attracting the most interest. In the absence of any trade headlines and major data releases, the above measures could push the dollar higher if the numbers come in stronger than expected.

In oil markets, investors will turn focus to the API weekly report on US crude oil inventories at 2030 GMT after OPEC and non-OPEC oil suppliers decided last week to raise output by 1mn barrels, lifting crude oil prices near 1-month highs. A decline in US crude oil stocks could add further gains for oil prices.

As of today's public appearances, ECB Vise President Luis De Guindos will be talking at 1200 GMT, while Atlanta Fed President Raphael Bostic (voting FOMC member in 2018) and Dallas Fed President Robert Kaplan (non-voting FOMC member in 2018) will be making comments at 1715 GMT and at 1745 GMT respectively.

EURUSD - The pair may be seeing piece hesitation but still face risk of a recovery higher. On the upside, resistance comes in at 1.1750 level with a cut through here opening the door for more upside towards the 1.1800 level. Further up, resistance lies at the 1.1850 level where a break will expose the 1.1900 level. Conversely, support lies at the 1.1650 level where a violation will aim at the 1.1600 level. A break of here will aim at the 1.1550 level. Below here will open the door for more weakness towards the 1.1500. All in all, EURUSD faces further upside pressure but with caution of a recovery.

The euro has fallen back towards key technical support against the US dollar, after the pairs recent rally above the 1.1700 level faded during the European trading session. The EURUSD pair found strong technical resistance from the 1.1719 level, and was sold lower as demand for euro waned about the 1.1700 level. Sellers will now try to break the 1.1674 level, while buyers will try to move price back above the 1.1700 level.

The EURUSD pair is only intraday bearish while trading below the 1.1674 level, key technical support is located at the 1.1628 and 1.1599 levels.

If the EURUSD pair moves back above the 1.1700 level the intraday trend will turn bullish again, and buyers may test towards the 1.1719 and 1.1744 levels.

The US dollar continues to fall to fresh weekly trading low against the Japanese yen currency, with the USD/JPY pair earlier hitting, 109.36. The USDJPY pair briefly moved above the 110.00 on comments from the Bank of Japan but the pair was quickly sold lower back towards the 109.54 level. Buyers will need to keep price above the 110.00 level, while sellers will need to hold price below the 109.54 level.

The USDJPY pair is intraday bearish while trading below the 109.54 level, further downside towards the 109.36 and 109.00 levels seems possible.

If the USDJPY pair moves above the 110.00 level, buyers will likely test towards the 110.25 and 110.40 resistance levels.