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EUR/USD bullish pressures continue. Hourly resistance given at 1.1712 (25/07/2017 high) has been broken. Hourly support can be found at 1.1371 (13/07/2017 high). Stronger support lies at 1.1292 (28/06/2017 low). Expected to show continued bullish pressures.

In the longer term, the momentum is now turning largely positive. We favour a continued bullish bias. Key resistance is now holding at 1.1871 (24/08/2015 high)t while strong support lies at 1.0341 (03/01/2017 low).

Dollar under pressure as US yields slide amid dovish FOMC statement

As broadly expected, FOMC members decided to leave monetary policy unchanged, maintaining the target range for the federal funds rate to 1% to 1.25% and not providing a clear timing about its balance sheet reduction plan. Little changes were made to the statement compared to the June version. The Federal Reserve acknowledged that inflation measures have declined and are now running below the 2% target. Most importantly, changes were made to the expected start of the balance sheet normalization program. In June statement, the Fed expected the program to be launched this year and it expects to be implemented 'relatively soon'. Does the market has to worry about such a change?

From our standpoint, we think this is definitely a dovish adjustment to the statement as it removes clarity regarding the timing, giving more room to start the balance sheet run off. In reaction to this dovish modification, the US dollar was heavily sold off yesterday amid the release. The dollar index fell another 1.10% to 93.15, the lowest level since mid-June last year. Higher yielding currencies were the big winners with the New Zealand and Australian dollar rising 1.60% and 1.15% respectively.

A fresh batch of US data is due for release later today. Initial jobless claims should come in at 1960k versus 1977k a week ago. More importantly, after shrinking two months in a row, durable goods orders should have risen 3.7%m/m in June. Excluding transportation, the indicators should rise by 0.4%m/m compared to 0.3% in July.

After months of lacklustre data, investors have a real need to see some solid and uninterrupted flow of encouraging data from the US. This only under these conditions that we’ll see a bounce back of the US dollar and the pursuit of recovery in US yields.

VIX at an all-time low

The news did not make massive headlines. The VIX, the US volatility index which is also known as the 'Fear Index', just collapsed to an all-time low below 10. We recall that the 20-year average is above 20 for the index. A few weeks ago, Janet Yellen, Fed Chairman, warned markets about asset valuation which she considers as too high. Fed definitely believes that stocks markets are in a bubble. This is ironic as the Fed largely participated to underpin asset prices with free money.

While the volatility is at an all-time low, stocks prices are at an all-time high. There is then the potential relation between low volatility and high stock prices which could drive investors towards a sell-off. Markets are now in a pausing mode certainly fearing that consequence. However, stocks markets are not losing steam and may further head higher.

All eyes are on Fed now which balance sheet reduction should be discussed in November. Currency-wise the dollar is now trading at 14-month low on recent disappointment of Trump expected fiscal policies and Fed failing to fully deliver what was expected.

The pair bounced above 111.00 handle after dipping to 110.77 low in Asia but struggles to firmly break above daily cloud top (111.23).

Near-term focus remains shifted lower after previous rally’s rejection at strong 112.10 barrier and subsequent weakness on profit-taking, accelerated by Fed.

While daily cloud caps upside attempts, risk of further weakness and retest of key supports at 110.62 (24 July low / daily cloud base) will remain in play, with break here to trigger fresh extension of larger downleg from 114.49.

Initial requirement for bearish resumption is close below 110.97 (Fibo 61.8% of 108.80/114.49 rally) after several probes below support proved to be false breaks.

Conversely, lift above daily cloud needs to regain minimum 111.74 (falling daily Tenkan-sen) to sideline immediate downside risk and open way towards key resistance at 112.10 barrier (Fibo 38.2% of 114.49/110.62 downleg / 200SMA).

Res: 111.33, 111.74, 111.95, 112.10
Sup: 110.77, 110.62, 110.23, 110.00

Cable posted fresh multi-month high at 1.3157 on Thursday and eventually broke above previous high at 1.3125, after Wednesday's strong post-Fed rally peaked at 1.3122.

Strong bullish signal has been generated on eventual close above important barrier at 1.3109 (Fibo 38.2% of 1.5106/1.1930 descend) which resisted several attacks in past two weeks.

Close above 1.3125 barrier would signal fresh bullish extension towards Fibo 138.2% projection at 1.3225, with corrective action to be anticipated in the near-term as daily indicators are approaching overbought zone.

Initial support lies at 1.3105 (session low/near Fibo 38.2% of Wed/Thu 1.2998/1.3157 rally), followed by 1.3060 (Fibo 61.8%) and key near-term support at 1.3000.

Res: 1.3157, 1.3200, 1.3225, 1.3245
Sup: 1.3120, 1.3105, 1.3060, 1.3000

The FOMC kept its policy unchanged yesterday as was widely anticipated, while the statement accompanying the decision had very few changes compared to the previous. The only changes related to the inflation outlook and the timing of the balance sheet normalization. With regards to inflation, the Committee acknowledged that it is 'running below 2%', a downgrade from the previous description that it was 'running somewhat below' 2%. This may be a signal that the Fed is somewhat more concerned with persistently sluggish inflation. However, officials still expect it to stabilize around 2% over the medium term.

With regards to the balance sheet, the FOMC changed its language to signal that its reduction will begin 'relatively soon' instead of 'this year' as it was noted in the previous statement. Even though this may look like a hawkish upgrade, the dollar collapsed. This suggests to us that some market participants may have expected a direct reference to a B/S reduction announcement in September, or some may have even expected an announcement yesterday for the reduction to begin in September. In our view, 'relatively soon' is not a direct reference to September, but rather leaves the Committee some maneuvering room, which may have disappointed some overly optimistic investors.

As for the dollar, we maintain our view that it could remain on the back foot for a while, amid low expectations for another rate hike this year, soft economic data, and elevated uncertainty over whether Trump's fiscal plans will be implemented at all. The probability for another hike this year is roughly 50% according to the Fed funds futures. We think that a material rebound in inflation and economic growth is needed for that probability to rise and help the greenback recover somewhat. In this respect, the preliminary estimate of GDP for Q2 due out tomorrow will be closely watched.

EUR/USD rallied following the FOMC decision, breaking above the all-important barrier of 1.1710 (S1), which acted as the upper bound of the long-term sideways range that had been in place since January 2015. In our view, the clearing of that level combined with the fact that both the short-term and medium-term outlooks remain positive, opens the door for further advances. Even if the rate corrects lower on a possible increase in US durable goods rates today (see below), we expect the bulls to regain control soon and perhaps aim for the 1.1880 (R1) resistance.

USD/JPY tumbled yesterday in the aftermath of the Fed meeting. The pair fell after it hit resistance near the 112.25 (R3) resistance zone to stop slightly above the key support of 110.60 (S1). In our view, the short-term outlook remains negative, but we stay mindful that a corrective rebound from near 110.60 (S1) may be on the cards before the bears decide to shoot again. The catalyst for such a rebound may be today's US durable goods orders.

Today's highlights:

During the European morning, we get lots Swedish economic indicators. The unemployment rate for June is expected to have risen notably, which may hurt SEK somewhat. We also get the consumer and manufacturing confidence indices for July, but neither of these is usually a major market mover. In Eurozone, the M3 money supply for June is due out.

From the US, as we already noted, we get durable goods orders for June. The forecast is for both the headline and the core rates to have risen. The case for solid durable goods is supported by the nation's ISM manufacturing PMI for June, the new orders sub-index of which rose notably, indicating accelerating growth in orders. Such durable goods prints may help the dollar to recover some of its latest losses, but given the negative sentiment currently surrounding the currency, any positive reaction may remain relatively short-lived. We also get initial jobless claims for the week ended July 21st.

EUR/USD

Support: 1.1710 (S1), 1.1615 (S2), 1.1585 (S3)

Resistance: 1.1880 (R1), 1.1980 (R2), 1.2110 (R3)

USD/JPY

Support: 110.60 (S1), 110.30 (S2), 109.90 (S3)

Resistance: 111.30 (R1), 111.70 (R2), 112.25 (R3)

EURJPY is neutral on the 4-hour chart and has been consolidating around the key psychological level at 130.00. After hitting a more-than one-year high of 130.76 on July 11, there was a slight pullback in prices since the market reached overbought conditions, as was indicated by the RSI rising to 70.

Upside momentum has weakened and a neutral phase is expected in the near term. Any corrective move lower would likely find support at 130.00. This is considered to be an important level since it has held as support in the past couple of days. Further weakness below this level may see EURJPY slip towards 128.57 (July 19 low). A fall from here would start to increase downside pressure as the market would be below the Ichimoku cloud. A break from here would target 127.43 (June 30 low).

Looking at the bigger picture, the uptrend that started from the June 15 low of 122.39 to the July 11 high of 130.76 is still intact. There are no signs of a reversal in the uptrend yet. The risk is to the upside based on the bullish market structure on the daily chart. The Tenkan-sen line is above the Kijun-sen line and the market is above the Ichimoku cloud. Meanwhile, RSI remains above 50 in bullish territory.

A successful break above the 130.76 high would open the way towards the next significant high of 132.00 that was reached in January 2016. Such a move would strengthen the medium-term bullish bias.

The Euro is consolidating under fresh high at 1.1776 posted in Asia, in extension of Wednesday's strong post-Fed rally. The pair is trading at levels last seen in Jan 2015 and looks for clear break above pivotal 1.1735 barrier (Fibo 38.2% of 1.3992/1.0340 descend) to trigger fresh acceleration higher.

The single currency is driven higher by weak dollar which fell further after wording of Fed's statement sent signals that the US central bank might not hike interest rates again this year.

On the other side, technical studies are strongly overbought on larger timeframes, suggesting that bulls might take a breather. Bearish divergence on daily chart slow stochastic is supporting the notion.

The pair faced headwinds ahead of next strong barrier at 1.1795 (weekly 200SMA), which may temporarily cap the action.

Today's close in red would be seen as initial negative signal. First good supports lay at 1.1620 zone (daily higher base, reinforced by rising 10SMA) with key near-term support laying at 1.1525/00 (Fibo 38.2% of the upleg from 1.1188 to 1.1776, reinforced by rising 20SMA) which is expected to contain extended dips.

Otherwise, break and close above 1.1795 pivot would signal bullish continuation and open was towards psychological 1.2000 resistance (also monthly cloud base).

Res: 1.1776, 1.1795, 1.1848, 1.1896
Sup: 1.1681, 1.1620, 1.1583, 1.1525

EURUSD

The EURUSD had a bullish momentum yesterday, topped at 1.1739 and hit 1.1747 earlier today in Asian session. The bearish pin bar scenario I showed you yesterday is no longer valid. My bullish mode is now reactivated. The bias is bullish in nearest term testing 1.1750 – 1.1875 area. Immediate support is seen around 1.1700. A clear break below that area could lead price to neutral zone in nearest term testing 1.1640 – 1.1580 support area which is a good place to buy with a tight stop loss. On the upside, a clear break above 1.1875 would expose 1.2000 region.

GBPUSD

The GBPUSD had a strong bullish momentum yesterday, broke above 1.3100 key resistance and hit 1.3149 earlier today in Asian session. This fact cancels the bearish pin bar scenario and activates my bullish mode. The bias is bullish in nearest term testing 1.3200 before targeting 1.3350 region. Immediate support is seen around 1.3100. A clear break below that area could lead price to neutral zone in nearest term testing 1.3050 – 1.3000 support area which is a good place to buy with a tight stop loss

USDJPY

The USDJPY failed to continue its bullish momentum yesterday bottomed at 111.06 and hit 110.87 earlier today in Asian session. As long as stay above 110.61 the bullish pin bar scenario should remain valid but the bias is bearish in nearest term. A clear break below 110.61 would expose 110.25/00 area before revisit the trend line support as you can see on my daily chart below, which is a good place to buy. Immediate resistance is seen around 111.45. A clear break back above that area could lead price to neutral zone in nearest term testing 112.00 region. Overall I remain neutral.

USDCHF

The USDCHF attempted to push higher yesterday topped at 0.9595 but whipsawed to the downside and closed lower at 0.9506. We have another bearish pin bar as you can see on my daily chart below suggests a bearish view. The bias is bearish in nearest term testing 0.9450 key support. A clear break below that area could trigger further bearish pressure testing 0.9250 area. Immediate resistance is seen around 0.9550. A clear break above that area could lead price to neutral zone in nearest term but overall I remain bearish and any upside pullback should be seen as a good opportunity to sell.

The Dollar tumbled to fresh 13-month lows against a basket of currencies during early trading on Thursday, after July's Federal Reserve policy statement was presented with a dovish touch. Although the central bank signaled that it would begin shrinking its massive holding of bonds "relatively soon", the concerns over inflation remaining "somewhat below 2%" in the near term simply stole the spotlight. With weakness in inflation presenting a risk to the Federal Reserve's hiking cycle and weighing on the prospects for further interest rate hikes, the Greenback remains vulnerable to steeper losses.

As the Dollar wallows at 13-month lows, investors may direct their attention towards a duo of economic reports later today which could offer further insight into the health of the U.S economy. The U.S Core Durable Goods Order figures will be in focus, with markets expecting a 0.4% m/m print for June, while unemployment claims are expected to hit 241k for the week ended July 22. With the Greenback struggling to nurse its deep wounds, further downside may be on the cards if Core Durable Goods and unemployment claims fail to meet expectations.

From a technical standpoint, the Dollar Index remains heavily bearish on the daily charts as there have been consistently lower lows and lower highs. Bearish investors who were itching for an opportunity to attack prices further, received encouragement in the form of lagging inflation concerns and this was represented in price action on Wednesday. With the currency becoming increasingly sensitive to monetary policy speculations and markets now pricing in a 46.8% probability of a 25 basis point rate hike in December, price weakness is likely to remain a recurrent theme.

Commodity Spotlight – Gold

Gold sprinted to a fresh 6-week high above $1260 during late trading on Wednesday, after the Federal Reserve's cautious inflation assessment in July's policy statement weighed on prospects for higher US interest rates. The upside was complimented by a sharply depreciating US Dollar which created a solid foundation for bulls to install fresh rounds of buying. With the zero-yielding metal notoriously known for being dictated by US rate hike expectations, there is a strong possibility of prices marching higher if speculations of the Federal Reserve taking action this year decline even further.

Gold bulls may find further support in the form of Brexit related uncertainty and political risk in Washington that continue to drive the flight to safety in the background. From a technical standpoint, a decisive breakout and daily close above $1260 should encourage a further appreciation higher towards $1268.

EURUSD advanced to its highest level since January 2015 today, hitting 1.1776. The bullish trend was strengthened after prices broke out of a range following a period of consolidation around the key psychological level of 1.1400.

The pair is expected to trend higher as the technical picture is strongly bullish following a crossover of the 50-day moving average above the 200-day moving average on May 23. The 50-day MA continues to point north. Meanwhile, the market is above the daily Ichimoku cloud and the Tenkan-sen and Kijun-sen lines are positively aligned. RSI is trending higher although the indicator has entered overbought territory above 70. This would raise caution for a possible consolidation in EURUSD in the near term.

A decline in prices would find support at the key 1.1600 level. This area has already proven to be strong support in the past few days as drops in prices remained above this level. A break below this would increase downside pressure to target 1.1400.

The overall trend structure and momentum does not favor a very deep retracement and the bull run is expected to remain intact, with scope to rise towards 1.2000. In the meantime, ahead of this, the round level of 1.1800 would be an important barrier to the upside, which if cleared would open the way to the January 2015 high of 1.1870.