Key Points:

• UK GDP likely to return a 0.3% q/q print.
• U.S. FOMC decision could provide some volatility.
• Watch for a challenge to the 1.31 handle in the week ahead.

The Cable had a relatively poor week after the UK Inflation figures surprised the market, coming in well below estimates at 0%, and sending the Cable in to selloff mode. Subsequently, the bears piled into short positions and the pair declined to close the week sharply lower at 1.2992. However, as we enter the new week it appears as if there might be some support for the Cable and a retest of the 1.31 handle is likely in the next few days.

Last week proved highly negative for the Cable as the pair reacted to a sharp slip in the UK CPI figures to 0% (0.2% prev). Subsequently, there was plenty of negative sentiment for the Cable and the pair fell sharply throughout most of the week to close at around the 1.2992 mark. Further supporting the short side push was the U.S. Initial Jobless Claims figures which came in below estimates at 233k. However, there was a bright spot for the Cable with the UK Retail Sales rising sharply to 0.9% m/m which was promptly ignored by the market.

Looking ahead, it could be a relatively volatile week for the Cable with the UK GDP and U.S. Core Durable Goods Orders due for release. In particular, the UK GDP figures could prove relatively critical with the key indicator set to return a slight uptick to 0.3% q/q. Subsequently, any surprises could bring with it some sharp volatility. In addition, the U.S. Core Durable Goods Order figures are due to hit the wires and most economists have the indicator returning a 0.4% m/m print. This represents a slight uptick and could prove bullish for the greenback as long as the FOMC doesn't spoil the party. Speaking of the FOMC, the central bank is likely to keep rates on hold at 1.25% in pending meeting. However, keep a close watch on the content of Yellen's speech following the event because it is highly likely that she may attempt to slowly play down the forward guidance around rates. The reality is that the central bank has largely been boxed into a corner and will now likely look towards QE taper as their next form of tightening.

From a technical perspective, the Cable's recent fall has taken it back below the 1.30 handle and as long as support at 1.2811 remains intact we could see a resumption of the uptrend soon. However, our initial bias is neutral for the week ahead given that the RSI Oscillator is still relatively close to overbought levels and price still has some distance to fall. Support is currently in place for the pair at 1.2810, 1.2713, and 1.2636. Resistance exists on the upside at 1.3112, 1.3168, and 1.3377.

Ultimately, the Cable could be in for a relatively volatile week as the pair faces down with the looming spectre of the U.S. FOMC meeting and the UK GDP results. However, the short term fundamental trend is one of the strength for the Cable so we should see the needed gains in the coming week but watch for potential jawboning from the Fed.

USD/CHF - 0.9461

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9468

Kijun-Sen level                    : 0.9463

Ichimoku cloud top                 : 0.9530

Ichimoku cloud bottom              : 0.9468

Original strategy :

Sell at 0.9555, target: 0.9455, Stop: 0.9590

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9555, target: 0.9455, Stop: 0.9590

Position : -

Target :  -

Stop : -

As the greenback has remained under pressure after recent selloff, bearishness is seen for the decline from 1.0340 top to resume after consolidation, whilst initial corrective bounce to 0.9500 and then 0.9520-25 cannot be ruled out, reckon the upper Kumo (now at 0.9530) would limit upside and bring another decline later, below support at 0.9438 would extend recent decline to 0.9405-10 but loss of momentum should limit downside to 0.9375-80, price should stay above 0.9350, risk from there is seen for a rebound later.

In view of this, we are looking to sell dollar on subsequent recovery as 0.9550-55 should limit upside and bring another decline. Above 0.9580-85 would suggest a temporary low is formed instead, bring a stronger rebound towards resistance at 0.9622 which is likely to hold from here.

GBP/USD - 1.3039

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3028

Kijun-Sen level                    : 1.3024

Ichimoku cloud top              : 1.2997

Ichimoku cloud bottom        : 1.2983

Original strategy :

Sell at 1.3100, Target: 1.2980, Stop: 1.3135

Position : - 

Target :  -

Stop : -

New strategy  :

Sell at 1.3100, Target: 1.2980, Stop: 1.3135

Position : -

Target :  -

Stop : -

Cable edged higher yesterday to 1.3058, suggesting near term upside risk remains for the recovery from 1.2933 to bring further gain to resistance at 1.3062, however, if our view that top has been formed at 1.3126 is correct, upside would be limited to 1.3100 and bring another decline later, below 1.2985-90 would signal an intra-day top is formed but break of 1.2950-55 is needed to signal the rebound from 1.2933 has ended, bring weakness to 1.2932-33 (61.8% Fibonacci retracement of 1.2812-1.3126 and said support), break there would extend the fall from 1.3126 top to previous support at 1.2912. 

In view of this, we are looking to sell cable on further recovery as 1.3100-10 should limit upside. A firm break above 1.3100 would abort and suggest the fall from 1.3127 has ended instead, bring retest of this level but only break there would shift risk back to upside for further gain to 1.3150-60.

ECB Following Its Renewed Focus On Growth

Market Movers Today

It will be a fairly thin data calendar today, where the main release will be German ifo expectations. The decline in the German manufacturing PMI suggests the ifo expectations index will decline and, in our view, there is downside risk to consensus expectations. Although the figure is expected to remain at an elevated level, a cont inued downward t rend could support a softer tone from the ECB following its renewed focus on growth.

US Conference Board consumer confidence is due for release in the afternoon. The figure is expected to decline in line with other indicators for consumer confidence but to stay at a high level. Overall, t he optimism expressed in t he survey indicators aft er T rump's victory is likely to continue to fade in coming months.

Please note we have published our FOMC preview ahead of the meeting on Wednesday. We expect the Fed to maintain the Fed funds target range and wait until September to make an announcement on ‘quantitative tightening'. See FOMC Preview - No major changes, 24 July 2017.

In the Scandies, the quarterly SSB Industrial Confidence release in Norway is due. In Q1, the manufacturing index returned to positive territory for the first time since Q3 14. We expect a further rise today, which would be in line with the signals from, e.g. the manufacturing PMIs, hinting at a re-acceleration in manufacturing product ion in 2017. In Sweden, the monthly PPI release will give us more insight into the inflation dynamics, which are important for the Riksbank.

Selected Market News

It was quiet overnight with most Asian equity indices roughly flat this morning. In currency markets, EUR/USD failed t o break through Friday's low as a rebound erased yesterday's losses, highlighting currency markets' current predisposition to buy the single currency. Oil has moved a little higher after Saudi Arabia promised yesterday to cut crude oil exports further in combating low oil prices. Otherwise, the key takeaway from the OPEC meeting in St . Petersburg was rising frustrations from Saudi Arabia and Russia with other countries' falling compliance with the current output cuts. Fundamentally, we st ill think OPEC has lost control with the oil curve amid increased global competition and we at tribute the past month's rise to a weaker USD, better-than-expected Chinese data improving the global demand out look and US producers adjust ing product ion (see rig count chart).

In the US, yesterday's PMI release saw the manufacturing index surprise posit ively by rebounding to 53.2 (consensus: 52.3) while the service index met expectat ions at 54.2 – both pointing to further expansion. The manufacturing index has over the past months painted a less upbeat picture than ISM manufacturing and as such, we regard part of yesterday's rebound as convergence. Overall, the US PMI package suggests a decent start to Q3 with GDP growth around 2%, which is more or less in line with our own project ions.

In Greece , the government has out lined a plan to return to debt markets for the first time since 2014, as a 5Y bond will prove an important market test . The announcement follows S&P 's decision on Friday to upgrade its Greek debt out look from ‘stable' to ‘positive'.

Daily Pivots: (S1) 144.17; (P) 144.58; (R1) 145.16; More

A temporary low is in place in GBP/JPY at 144.01 and intraday bias is turned neutral first. On the downside below 144.01 will extend the decline from 147.76 and target 138.65 support and below. But we'd expect strong support from 135.58 to contain downside and bring rebound. On the upside, above 146.27 minor resistance will turn bias back to the upside for 147.76 instead.

In the bigger picture, rise from medium term bottom at 122.36 is expected to continue to 38.2% retracement of 196.85 to 122.36 at 150.43. Decisive break there will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case the sideway pattern from 148.42 extends, we'd be looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.

Daily Pivots: (S1) 128.87; (P) 129.31; (R1) 129.76; More...

No change in EUR/JPY's outlook as consolidation from 130.76 is still in progress. Intraday bias stays neutral for the moment. Deeper fall could be seen. But downside should be contained by 127.43 cluster support (38.2% retracement of 122.39 to 130.76 at 127.56) and bring rebound. Above 130.76 will extend the larger rally to next key fibonacci level at 134.20.

In the bigger picture, the down trend from 149.76 (2014 high) is completed at 109.03 (2016 low). Current rally from 109.03 should be at the same degree as the fall from 149.76 to 109.03. Further rise is expected to 61.8% retracement of 149.76 to 109.03 at 134.20. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. Medium term outlook will remain bullish as long as 124.08 resistance turned support holds.

EUR/USD - 1.1665

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1650

Kijun-Sen level                  : 1.1651

Ichimoku cloud top             : 1.1664

Ichimoku cloud bottom      : 1.1582

Original strategy  :

Buy at 1.1580, Target: 1.1680, Stop: 1.1545

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1580, Target: 1.1680, Stop: 1.1545

Position : -

Target :  -

Stop : -

The single currency traded narrowly after meeting resistance at 1.1684 yesterday, suggesting further consolidation below this level would be seen and pullback to support at 1.1617 is likely, however, reckon previous resistance at 1.1583 would turn into support and contain downside, bring another rise later, above said resistance at 1.1684 would extend recent upmove to previous chart resistance at 1.1714 but break there is needed to retain bullishness for the rise from 1.0340 low to head towards 1.1750. 

In view of this, we are looking to buy euro on subsequent pullback as previous resistance at 1.1583 should limit downside. Below 1.1550 would defer and suggest a temporary top is formed instead, bring correction to 1.1510-15 but support at 1.1479 should remain intact.

Daily Pivots: (S1) 0.8908; (P) 0.8946; (R1) 0.8971; More

A temporary top is in place at 0.8994 in EUR/GBP and intraday bias is turned neutral for the moment. Downside of retreat should be contained by 0.8828 minor support to bring another rally. Break of 0.8994 will extend the whole rise from 0.8312 towards 0.9304 high. here is no clear sign of up trend resumption yet. Hence, we'll be cautious on strong resistance from 0.9304 to limit upside and bring another fall.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's uncertain whether it is finished yet. But in case of another fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes.

USD/JPY - 111.06

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 111.12

Kijun-Sen level                  : 110.98

Ichimoku cloud top             : 111.60

Ichimoku cloud bottom      : 111.21

Original strategy  :

Sell at 111.45, Target: 110.45, Stop: 111.80

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 111.45, Target: 110.45, Stop: 111.80

Position :  -

Target :  -

Stop : -

Although the greenback has retreated after meeting resistance at 111.34, as long as yesterday’s low at 110.62 holds, further consolidation is in store and another bounce to 111.34 cannot be ruled out, however, reckon upside would be limited to previous support at 111.48 (now resistance) and bring another decline, below said support at 110.62 would signal the selloff from 114.50 top is still in progress and extend to 110.60 (61.8% projection of 114.50-111.55 measuring from 112.42), then 110.30-35 but loss of downward momentum should prevent sharp fall below latter level.

In view of this, would not chase this fall here and would be prudent to sell dollar on subsequent recovery. Above previous support at 111.48-55 would defer and suggest a temporary low is formed, bring retracement of recent decline to 111.75-80, then towards resistance at 112.08.

Daily Pivots: (S1) 1.4637; (P) 1.4705; (R1) 1.4801; More...

A temporary top is in place at 1.4777 in EUR/AUD and intraday bias is turned neutral first. We'd holding on to the view that correction from 1.5226 could have completed with three waves down to 1.4421 already. There another rally is expected in the cross. Break of 1.4777 will turn bias to the upside for 1.5073 resistance first. Break there will indicate resumption of whole rise from 1.3624. However, break of 1.4221 will invalidate our view and extend the decline from 1.5226.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term has completed at 1.3624. Rise from 1.3624 is expected to resume to retest 1.6587. The corrective structure of the fall from 1.5226 is affirming this view. Above 1.5226 will target a test on 1.6587 key resistance. However, further downside acceleration will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.