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USDJPY (110.65): The USDJPY currency pair managed to post strong gains with price action, seen currently testing the resistance level at 110.62. A breakout above this level is essential in order to post further gains. However, we expect to see the USDJPY maintaining its range within the resistance level and the lower support at 109.57 in the near term. An unlikely breakout above 110.62 could signal further gains that could push the currency pair to highs of 111.37 that was briefly tested previously.

EURUSD (1.1745): The EURUSD currency pair was seen closing bearish on Tuesday as price action fell back to the support level of 1.1730. With the daily chart signaling a hidden bearish resistance, a break down below the support level could signal further declines. As price trades outside the minor rising price channel, the support level is likely to be critical. In the near term, we expect the EURUSD to maintain the range between 1.1846 - 1.1825 level of resistance and 1.1730 support. The pending retest of support at 1.1610 - 1.1577 is most likely to be the downside target in case the support gives way.

The U.S. dollar was seen strengthening on the day after data showed that consumer prices had increased 0.2% on the month as expected. Core inflation rate increased 0.2%, beating estimates of a 0.1% increase.

In the European trading session, the UK's labor market data showed that average earnings including bonuses increased just 2.5% as forecast was and slower than the previous month's print of 2.6%. The UK's unemployment rate held steady at 4.2%.

The economic calendar is busy today starting with the release of the UK's inflation data. Economists forecast that consumer prices increased 2.4% on the year ending May 2018. This would mark the same pace of increase compared to the previous month's data. Core CPI is also expected to rise at a pace of 2.1%.

Data from the Eurozone will focus on the quarterly employment change. The report is expected to show a 0.3% increase marking a same pace of increase compared to the previous quarter.

In the NY trading session, following the release of the producer prices index data, the FOMC meeting becomes the focus. The Federal Reserve is expected to hike interest rates by 25 basis points and will also release the economic projections and the press conference chaired by Jerome Powell.

The euro has turned sharply lower against the US dollar in early Wednesday trading, as traders start to square positioning and book profits ahead of today’s key rate decision from the US Federal Reserve. The EURUSD pair currently trades below the key 1.1750 level, after being strongly rejected from the 1.1800 level once again. Traders now look towards the release of key Employment and Industrial Production data from the eurozone economy.

The EURUSD pair is intraday bearish while trading below the 1.1750 level. Key support is located at the 1.1726 and 1.1700 levels.

If the EURUSD pair moves above the 1.1750 level, buyers may try to push price towards the 1.1800 and 1.1839 resistance levels.

The US dollar has moved to a fresh monthly trading-high against the Japanese yen, hitting 110.68, as the greenback gains broadly ahead of today’s FOMC Interest Rate Decision. The USDJPY pair trades close to session high’s and remains strongly intraday bullish while trading above the 110.25 level. Traders now look towards the release of US PPI Inflation data, and the Federal Reserve’s much awaited policy decision later today.

The USDJPY pair is strongly intraday bullish while trading above the 110.25 level, key resistance is now found at the 111.00 and 110.39 levels.

If the USDJPY pair falls below the 110.25 level, key technical support is found at the 110.00 and 109.60 levels.

In early April, the ETH/USD pair started an upward trend, rising from a low of $349 to a high of $794 in early May. Since then, the pair has continued a downward trend, reaching a monthly low of $473 yesterday. The pair’s decline during this time was attributed to the Consensus summit in New York, which failed to live up to expectations.

This week’s decline is associated with the hack of a South Korean cryptocurrency exchange called Coinrail which had 30% of its virtual currencies stolen. While Coinrail is a small exchange, the hack highlighted the risks of the cryptocurrency industry as a whole.

The decline was also attributed to a Wall Street Journal story about the cryptocurrency EOS. This digital token is one of the most funded cryptocurrencies in the world with more than $10 billion in market value. During its ICO, the company received more than $4 billion – a record-breaking figure. The founders promised investors that their blockchain product would change the way the internet works. Months after the ICO ended, disagreements among the developers are putting the entire project at risk.

Ethereum is currently trading at $486, which is close to the monthly low of $473. The pair is trading below the 100-day moving average of $572 and the 200-day moving average of $640. After trading in a symmetrical triangle pattern, the pair has broken out below the support level as shown below. The pair is now trading at the oversold level, which means that there could be some gains. However, traders should be cautious because lower demand could see the pair test the two-month low of $353.

Monetary policy will dominate the headlines on Wednesday, as traders turn their attention to the Federal Reserve. The US central bank will conclude its policy meeting with a highly anticipated press release that could provide a blueprint for future interest rate adjustments.

Ahead of the Fed, traders can expect a steady stream of economic data from Europe, beginning at 07:15 GMT with reports on Swiss industrial production and producer prices.

About an hour later, the UK’s Office for National Statistics will release a deluge of inflation data, including the retail price index, consumer price index and producer price index. The highly anticipated consumer inflation report is expected to show CPI growth of 2.5% annually in May, compared with 2.4% the month before.

Shifting gears to the broader Eurozone, data on industrial production and employment will make headlines at 09:00 GMT. Industrial output in the 19-member currency zone likely fell 0.5% for April. Employment is projected to rise 0.3% in the first quarter.

In the United States, the Department of Labor will issue its monthly report on producer inflation at 12:30 GMT. The producer price index is forecast to rise 2.8% annually in May, up from the previous month’s 2.6% rate.

The Federal Open Market Committee (FOMC) will conclude on Wednesday with an official press release at 18:00 GMT. The central bank is widely expected to raise interest rates at that time. Investors will be carefully reviewing the official policy statement for clues about the future path of interest rates. The June statement will be accompanied by a revised summary of economic projections covering GDP, unemployment and inflation.

EUR/USD

Europe’s common currency backtracked against the dollar on Tuesday, as regional tensions continued to dampen the outlook for the single currency. Meanwhile, rate-hike bets fueled modest gains for the dollar ahead of the Fed’s highly anticipated rate announcement. EUR/USD is back to trading in the mid 1.1700 region after opening the week above 1.1800. The pair faces immediate resistance at 1.1830. On the opposite side of the spectrum, initial support is located at 1.1767.

GBP/USD

After a strong buildup last week, cable is back on the defensive. GBP/USD has pulled back roughly 130 pips from last week’s highs and is currently trading around 1.3363. The recent skid pulled cable back below the 1.3395 support level. The pair is now testing the 1.3360 support zone. On the flipside, immediate resistance is located at 1.3450.

USD/CAD

The North American pair is back above 1.3000 as monetary policy continues to impact investor sentiment. USD/CAD is currently trading at 1.3018 with an eye for bigger gains later in the day. The Canadian dollar, meanwhile, is at the mercy of oil-price uncertainty tied to OPEC

• Rates: Fed will hike its policy rate, but what about the rest?
  Many questions remain about tonight's FOMC meeting with a new dot plot, new forecasts and probable changes to the communication in the policy statement. Some items could cancel each other out and mute the market impact. It's hard to assess the short term direction, but we hold our long term negative view on US Treasuries.
• Currencies: Will the Fed revive the USD's positive momentum?
  The Fed is largely expected to raise its policy rate tonight. A hawkish tone/dot plot might support some further USD gains. Especially USD/JPY might profit. The gain of the dollar against the euro might be more modest as the ECB is also expected to announce a less easy policy tomorrow. Sterling remains in the defensive as Brexit uncertainty persists

The Sunrise Headlines

• The US equity markets closed all in surplus but one, the DOW JONES (-0.01%). Asian markets opened in red this morning, with the exception of the Japanese TOPIX (+0.47%) and the NIKKEI 225 (+0.40%).
• Therese May has narrowly avoided a humiliating defeat over Brexit bill 'the meaningful vote', that would give parliament more power to steer negotiations with the EU, after she made promises to make significant concessions to the bill.
• Poland's president Andrzej Duda has laid out plans to address the country's relationship with the EU as part of a wide-ranging constitutional referendum. He's stating 'the Poland's 1997 constitution needs updating'.
• Czech billionaire tycoon Andrej Babis and his Ano party are close to a provisional coalition deal with the Social Democratic party. A deal would end eight months of Czechs waiting for a government.
• Bulgaria will seek to join membership in both ERM-2 and the banking union within the year, hinting Bulgaria's path to the euro is moving forward.
• Australia's central bank chief Philip Lowe stated that policy tightening Is 'still some time away', since inflation is not picking up enough to be in line with the RBA's medium-term target.
• In the US, the PPI Final Demand MoM/YoY (May) is taking place, as is the FOMC rate decision. For the UK we see the CPI MoM/YoY and CPI core YoY for last month and in the EMU the Industrial Production SA MoM/WDA YoY is issued

Currencies: Will The Fed Revive The USD's Positive Momentum?

How much will USD profit from a hawkish Fed?

An early euro rebound was capped after a poor ZEW investor confidence release yesterday. US inflation trended higher with the headline figure printing at 2.8% Y/Y. The report was as expected. The dollar reaction was initially limited, but the US currency captured again a better bid later in the session as markets pondered the chances for a potentially hawkish outcome of today's Fed meeting. EUR/USD closed the session at 1.1745 (from 1.1784). USD/JPY also maintained a cautiously positive bias and finished the session at 110.37.

Asian equitiesy mostly show modest losses this morning as markets await this evening's Fed decision. A hawkish Fed is potentially negative for (Asian) EM. Japan is the exception to the rule as USD/JPY extends gains. The dollar also maintains most of yesterday's late session gain against the euro. EUR/USD hovers in the mid 1.17 area. The Aussie dollar (AUD/USD 0.7575) stays in the defensive on USD strength. RBA's Lowe indicated that a first RBA rate hike was still ‘some time away'.

European production data and US PPI probably won't have a market impact today as markets are looking forward to this evening's Fed meeting. A rate hike is considered a done deal. We expect the Fed dots to indicate two additional rate hikes this year. Maybe the indication of the neutral policy rate might also be raised to 3.0%. Markets will also look out for any guidance from Fed Powell on the strategy the Fed will apply as the US economy is becoming ‘late cycle'. We expect a rather hawkish assessment. This might be USD supportive short-term. Especially USD/JPY might profit. The picture for EUR/USD is more diffuse as the ECB is also expected to indicated a less easy policy tomorrow. We expect any EUR/USD decline to remain modest. In a MT perspective, we maintain the working hypothesis that a further decline of EUR/USD below the 1.1510 support won't be easy.

Sterling showed some nervous intraday swings yesterday. The UK currency finally gained some ground (against the euro) as UK PM May survived a key Brexit vote in Parliament. However, the amendment on the ‘meaningful vote' is still subject to debate in the conservative party and will return to Parliament. UK CPI is expected stable at 2.4% Y/Y (core 2.1%) today. There is probably a big positive surprise needed to reinforce market expectations on an August BoE rate hike. We assume that the downside in EUR/GBP is rather well protected in the 0.87 area.

USD (DXY-trade-weighted): will Fed revive positive USD momentum

EUR/USD

Current level - 1.1735

Intraday allow a dip to 1.1650 before bouncing back again towards 1.1830 hurdle. Key intraday resistance  lies at 1.1775.

USD/JPY

Current level - 110.56

My outlook here is counter-trend, for a sell-off through 110.10, en route to 109.20 and 107.80.

GBP/USD

Current level - 1.3357

The consolidation pattern below 1.3460 is still underway and the intraday bias is bearish, for a dip to 1.3290. The later would provide a reliable base for another leg upwards on the senior frames, towards 1.3620.

SPX short-term Elliott wave view suggests that the rally to 2742.24 high ended Minor wave 3 as Elliott wave impulse. Below from there the pullback to 2676.81 on 5/29/2018 low ended Minor wave 4 as Zigzag structure. Up from there, Minor wave 5 rally is unfolding as impulse Elliott wave structure with extension in 3rd wave higher. As an impulse, the internal subdivisions of Minute degree wave ((i)), ((iii)) and ((v)) should unfold as 5 waves structure. On the other hand, the corrective Minute degree wave ((ii)) & ((iv)) should unfold in any 3 wave corrective sequence i.e double three, triple, flats etc.

The first leg of the rally from Minor wave 4 at 2676.81 low ended Minute wave ((i)) as 5 waves structure at 2729.34. Then the pullback to 2700.88 low ended Minute wave ((ii). Above from there, the index rallied higher in extended Minute wave ((iii)) which ended at 2790.21 high. Down from there, Minute wave ((iv)) pullback looks complete at 2778.78 low and index can now see the last push higher towards 2801.31-2820.07 area before ending Minor wave 5. The last push higher should also complete Intermediate wave (1). Afterwards, the index is expected to do an intermediate wave (2) pullback in 3, 7 or 11 swings to correct cycle from April 3 low before further upside is seen. We don’t like selling the proposed pullback.

SPX 1 Hour Elliott Wave Chart