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USD/CHF Bearish breakout.

USD/CHF has broken support given at 0.9553 (30/06/2017 low). Hourly resistance can be found at 0.9696 (09/06/2017 high). Strong resistance is given at 1.0107 (10/04/2017 high). Expected to to show further weakness.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USD/CAD Continued selling pressures.

USD/CAD is going lower and the pair remains in a strong bearish momentum. Hourly support given at 1.2681 (12/07/2017 low) has been broken. Resistance is located at 1.3014 (02/15/2017). Expected to show continued bearish pressures.

In the longer term, the pair lies in a bullish channel since a year. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low).

AUD/USD Continued bullish move.

AUD/USD's technical structure is bullish since early May despite some consolidation move. Hourly resistance is given at 0.7947 (19/07/2017 high). Hourly support is given at 0.7786 (18/07/2017 low).

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

EUR/USD Consolidating above 1.1500.

EUR/USD bullish pressures continue. Hourly resistance given at 1.1489 (12/07/2017 high) has been broken. Hourly support can be found at 1.1313 (05/07/2017 high). Stronger support lies at 1.1076 (18/05/2017 low). Expected to show continued bullish pressures.

In the longer term, the momentum is clearly negative. We favour a continued bearish bias towards parity. Key resistance holds at 1.1714 (24/08/2015 high) while strong support lies at 1.0341 (03/01/2017 low).

GBP/USD Short-term profit-taking.

GBP/USD still holds 1.3000 mark. Hourly resistance is now given at 1.3117 (16/07/2017 high). Support lies at 1.3047 (17/07/2017 low). Expected to show renewed bullish pressures.

The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY Continued weakness.

USD/JPY keeps on going lower. Hourly support is given at 111.99 (18/07/2017 low). Stronger support is located at a distance at 108.13 (17/04/2017 low). Expected to show continued bearish pressures.

We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

During the Asian morning Thursday, the BoJ will announce its policy decision. With inflation still hovering near 0%, we doubt that the Bank will make any changes to its policy at this meeting, or send any hawkish signals like many of its foreign counterparts have done lately. Our view is enhanced by recent comments from Governor Kuroda that the Bank will maintain QQE with yield curve control until it achieves 2% inflation in a stable manner.

As for the yen, we view the risks surrounding its reaction from this meeting as being tilted to the downside. We see the case for the Bank to revise down its short-term inflation forecasts given that inflationary pressures remain subdued. Even though CPI inflation picked up a bit in recent months, both the headline and core rates still rest at +0.4% yoy, while forward-looking indicators like the Tokyo CPIs suggest inflation could slow again soon.

Looking ahead, we see the case for the yen to continue to underperform the likes of EUR, CAD and AUD. Under its current framework the BoJ is keeping yields on longer-dated JGBs fixed near 0%, while the ECB, the BoC, and the RBA have turned optimistic recently, pushing their respective yields higher.

However, we don't expect the yen to underperform the US dollar in the near-term, given US political uncertainties and subdued expectations of further near-term Fed rate hikes. Having said that though, we think that USD/JPY could rebound in coming months, conditional upon US data picking up and markets repricing another Fed hike this year.

USD/JPY traded slightly lower yesterday, but hit support near 111.80 (S1) and then it rebounded somewhat. As long as the rate continues to trade below the short-term downtrend line taken from the peak of the 11th of July, and also below the longer-term downside resistance line drawn from the high of the 11th of January, we still see a negative short-term outlook. We would expect the bears to take charge again soon, perhaps near the 112.25 (R1) resistance, and drive the battle lower for another test at 111.80 (S1). A break below that level would confirm a forthcoming lower low on the 4-hour chart and is possible to aim for our next support of 111.45 (S2).

BoE rate hike bets fade after inflation slows

The UK's CPI rates declined in June, data showed yesterday, against expectations of remaining unchanged. Even though both the headline and the core rates remain notably above the target, their decline eases some pressure on the BoE to raise rates in order to curb overshooting inflation. The result was a weaker sterling, which could remain on the back foot for a while, perhaps until tomorrow's retail sales data are released.

GBP/USD fell on the data after it hit resistance slightly above 1.3115 (R2), breaking below 1.3060 (R1) to stop near the psychological round figure of 1.3000 (S1). Then, the rate rebounded somewhat. Given that the pair is now back below the 1.3060 (R1) key barrier, we believe that further setback may be on the cards, at least until the release of the UK retail sales tomorrow. We expect sellers to take the reins again soon and aim for another test near the 1.3000 (S1) zone. A dip below that level could initially aim for the 1.2975 (S2) barrier, marked by the inside swing peaks of the 6th and 7th of July. We should note though that Cable continues to trade above the longer-term upside support line drawn from the low of the 7th of October. This keeps the broader picture cautiously positive and thus, we would treat the latest slide, or any extensions of it, as a corrective phase.

Today's highlights:

The European economic calendar is almost empty. From the US, we get building permits and housing starts, both for June. The forecast is for both figures to have risen from the previous month, which could reverse some of USD's latest losses. From Canada, we get manufacturing sales for May and expectations are for a slowdown.

USD/JPY

Support: 111.80 (S1), 111.45 (S2), 111.00 (S3)

Resistance: 112.25 (R1), 112.85 (R2), 113.60 (R3)

GBP/USD

Support: 1.3000 (S1), 1.2975 (S2), 1.2920 (S3)

Resistance: 1.3060 (R1), 1.3115 (R2), 1.3180 (R3)

Short term SPX Elliott Wave view suggests the rally from 5/18 low (2352.7) to 6/19 peak (2453.8) ended Minor wave 3. The pullback from 2453.8 to 2405.70 on 6/29 low ended Minor wave 4. Up from there, the rally is unfolding as an impulse Elliott Wave structure with extension. This 5 waves move could be Minute wave ((a)) of an Elliott wave zigzag structure where Minute wave ((i)) ended at 2431 and Minute wave ((ii)) ended at 2407.7.

Minute wave ((iii)) is subdivided into another impulsive waves of a smaller degree. Minutte wave (i) ended at 2432, Minutte wave (ii) ended at 2412.8 and Minutte wave (iii) ended at 2463.5. Below from there Minutte wave (iv) ended at 2450.34 and above from there Minutte wave v of ((iii) is in progress towards 2466.82-2471.8 area. Afterwards, the Index should pullback in Minute wave ((iv)) before further upside, provided that pivot at 2405.70 low remains intact.

In case of further extension in Minutte wave (v) of ((iii)), the index could extend to (v)=(i) target area at 2474.7-2480.4 before a turn in Minute wave ((iv)) happens. If the pullback turns out to be rather strong then the Index could already end the cycle from 6/29 low (2405.7) as an Elliottwave Flat structure, and it should then correct the cycle from 6/29 low before the rally resumes. We don’t like selling the Index and favors more upside as far as pivot at 2405.70 low remains intact.

SPX 1 Hour Elliott Wave Chart

Weekly

    •    Last Candlesticks pattern: Shooting star 
    •    Time of formation: 03 May 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 3 May 2016
    •    Trend bias: Sideways

EUR/USD – 1.1384

The single currency has continued moving higher after brief pullback, adding credence to our bullish view that recent upmove is still in progress and price already exceeded indicated upside targets at 1.1480-85 (50% projection of 1.0570-1.1296 measuring from 1.1119) and 1.1565-70 (61.8% projection), upside bias remains for a test of previous chart resistance at 1.1616, break there would encourage for headway to 1.1660 and possibly towards another previous resistance at 1.1714 which is likely to hold on first testing due to near term overbought condition.

On the downside, whilst initial pullback to 1.1490-00 is likely, reckon downside would be limited to the Tenkan-Sen (now at 1.1477) and bring another rise later to aforesaid upside targets. Below support at 1.1435 would defer and risk correction towards  the Kijun-Sen (now at 1.1386) but only a daily close below support at 1.1370 is needed to suggest a temporary top is possibly formed, bring further fall to 1.1312 support but previous resistance at 1.1296 should remain intact. 

Recommendation: Buy at 1.1450 for 1.1650 with stop below 1.1350.

On the weekly chart, as the single currency has maintained a firm undertone, reinforcing our bullish view that recent upmove from 1.0340 low is still in progress and bullishness remains for this move to extend further gain to previous chart resistance at 1.1616, then 1.1660, however, near term overbought condition would prevent sharp move beyond previous chart resistance at 1.1714 and price should falter below 1.1800-10, risk from there is seen for a retreat later.

On the downside, expect pullback to be limited to 1.1450 and support at 1.1435 should hold, bring another upmove later. A drop below support at 1.1370 would defer and suggest top is possibly formed instead, risk correction to 1.1312 support but break there is needed to add credence to this view, bring retracement of recent upmove to 1.1250, then towards 1.1200 but price should stay well above support at 1.1109-19, bring another upmove later. 

The dollar index has stretched below the 95.00 key-level, extending its downleg that started on January 3, when it touched a multi-year high of 103.81.

Looking at the technical indicators, the index is likely to remain bearish but there is a possibility of an upside reversal in the near-term horizon. The RSI has been hovering in bearish territory since March 14 and attempted to break above 50 three times since then but struggled to hold above it. Currently, the indicator is showing that the index is oversold as it has recently dropped below 30, hinting that a trend reversal might take place. Additional evidence of the negative bias comes from the MACD, which continues trending below zero.

Should the index head down, a support to downside movements is expected to be first found around the psychological level of 94.00, where the lower line of the descending channel is also located. Then, if the price drops below that area, the next support could be provided by 93.00, which was also tested in the past. Note that if the price manages to fall below 91.87, this could signal the start of a longer-term downtrend.

On the upside, the zone around the Kinjun-sen point of 95.87 would act as a strong resistance as the middle-line of the channel is also passing through that area. Any increases from that point would bring into view the 96.64 level, which lies on the 50-day exponential moving average line (EMA), followed by the key level of 98.00. The latter is notable as it is settled inside the Ichimoku cloud and near the upper line of the channel.

Concerning the outlook in the medium-term, the index is bearish as it has been recording lower tops and lower bottoms since January, confirmed by the recent bearish crossover between the 50-day EMA and 200-day EMA.

'Falling inflation alleviates the squeeze on household finances – though pay is still shrinking in real terms for now. Last week's labour market update from the ONS showed wages growing by less than inflation for a third consecutive month.' - Ben Brettell, Hargreaves Lansdown

Britain's inflation fell unexpectedly in June from a four-year high reached in the previous month. The Office of National Statistics reported that the country's Consumer Price Index dropped 2.6% year-over-year, missing expectations for an unchanged reading of 2.9%, while the monthly rate slipped from 0.3% to 0.2% in the in June. The Core CPI, which excludes volatile items such as food and fuel, registered a weaker-than-expected reading of 2.4%, following May's 2.6% figure. The surprise fall, mainly driven by lower prices of oil and certain recreational and cultural goods, was partially offset by a rise in prices of furnishings and furniture. The strong decrease in the value of the British Pound after Brexit raised costs of imported goods, suggesting that inflation would show at least 3% pace of growth this year. Though, the UK economy being heavily dependent on consumers is expected to face further effects of subdued spending due to outpaced wage growth. Moreover, the weakness in recent reports hinted that the Bank of England is less likely to raise interest rates in the near term.

'The outlook for the German economic growth in the coming six months continues to be positive. This is now also reflected in the survey results for the eurozone.' - Achim Wambach, ZEW

The mood among German investors about the performance of the country's economy fell slightly in July. The Mannheim-based ZEW Institute reported on Tuesday that its Economic Sentiment Index for Germany dropped to 17.5, falling short of expectations for a decrease to 17.8 from May's 18.6 figure. Still, the report suggested that the outlook for the Euro zone's largest economy continued to be optimistic, with economists anticipating to see a solid economic expansion in the Q2 after growing 0.6% in the March quarter amid stronger private investments, rebounding exports and higher household spending. Meanwhile, the ZEW economic sentiment for the Euro zone's development fell to 35.6 for July, retreating from 22-month highs seen in the previous months. However, the Current Conditions Index marked a strong increase to 28.7 from 20.5 registered previously, supported by monthly improvements in expectations for both Italy and France. Overall, still strong economic expectations are set to diminish the need for the European Central Bank's expansionary monetary policy.

The pair is consolidating above solid support at 111.64 (daily Kijun-sen/50% of 108.80/114.49 rally) where Tuesday's fall found footstep. Bearish acceleration also cracked a plethora of supports provided by daily MA's (laying in 112.00/111.76 zone) but failed to close below and generate fresh bearish signal. Stronger upticks could be expected as slow stochastic is oversold on daily chart and reversing higher. Falling hourly cloud (spanned between 112.37 and 112.67) weighs and should cap extended upticks, with cloud top being reinforced by 20SMA. Eventual break below 111.64 pivot would signal fresh weakness and open 110.97 support (Fibo 61.8% of 108.80/114.49 rally) while extension above 112.75 (Fibo 38.2% of 114.49/111.64 pullback) would generate bullish signal and open way for fresh recovery. BoJ policy meeting on Thursday is in focus, with central bank expected to keep policy unchanged but may tweak forecast.

Res: 112.23, 112.37, 112.67, 112.75
Sup: 111.88, 111.64, 111.13, 110.97

Weekly

    •    Last Candlesticks pattern: Marubozu
    •    Time of formation: 14 Nov 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 15 Feb 2017
    •    Trend bias: Down

USD/JPY – 112.09

Although the greenback surged to as high as 114.50 early last week, lack of follow through buying on break of previous resistance at 114.37 and the subsequent sharp retreat suggest top has been formed there and consolidation with downside bias is seen for test of the Kijun-Sen (now at 111.66), a daily close below there would add credence to this view and extend weakness to the lower Kumo (now at 111.08), then towards 110.70. Having said that, as broad outlook remains consolidative, reckon downside would be limited to 110.00 and 109.40 support should remain intact.

On the upside, whilst initial recovery to 112.80 is likely, reckon upside would be limited to the Tenkan-Sen (now at 113.09) and bring another decline later. Above 113.55-60 would defer and risk a stronger rebound to 114.00, however, price should falter below said resistance at 114.50 and bring another decline later. Above 114.50 would extend the rebound from 108.13 to 114.65, then towards resistance at 115.51 which is likely to hold from here.
 
Recommendation : Sell again at 112.70 for 110.70 with stop above 113.70.

On the weekly chart, although dollar rose marginally to 114.50 last week, the subsequent retreat formed a black candlestick, suggesting top is possibly formed there and consolidation with downside bias is seen for weakness to the Tenkan-Sen (now at 111.66), below there would extend fall to 111.00, then test of 110.70, however, reckon the lower Kumo (now at 110.35) would limit downside and  price should stay well above support at 108.82, bring recovery later.

On the upside, although recovery to 112.70 cannot be ruled out, reckon upside would be limited to 113.00 and bring another decline later to aforesaid downside targets. Above 113.55-60 would risk another test of said resistance at 114.50 but only break there would signal the rebound from 108.13 is still in progress for gain towards resistance at 115.51 but a weekly close above there is needed to signal the fall from 118.66 top has ended at 108.13, then headway to 116.00-10 would follow but resistance at 117.53 should hold from here.