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Daily Pivots: (S1) 1.1360; (P) 1.1407 (R1) 1.1445; More.....

Intraday bias in EUR/USD remains neutral for the moment. 1.1489 should be a short term top on bearish bearish divergence condition in 4 hour MACD. Deeper retreat could be seen to 1.1312 support and below. But downside should be contained by 1.1118 support to bring rise resumption. On the upside, break of 1.1489 will extend recent rally from 1.0339 to 1.1615 key resistance next.

In the bigger picture, the firm break of 1.1298 resistance further affirm medium term reversal. That is an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Further rise would be seen to 55 month EMA (now at 1.1763). Sustained break there will pave the way to 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 next. This will now remain the favored case as long as 1.1118 support holds.

Gold has lost significant ground since the eight-month high of 1,295.97 it reached on June 6th. The precious metal currently trades not far above the 1,200 level.

The MACD indicator is painting a bearish picture. Specifically, the MACD is negative as well as below its red signal line. Despite the bearish bias, momentum in the very short-term seems to be to the upside as indicated by the stochastics. In particular, the %K line maintains a steep positive slope, while it has crossed above the slow %D line.

If the price heads higher, resistance could be met around the 23.6% Fibonacci level (June 6 – July 10 downleg) at 1,226.11. Further advancing would shift focus to the area around the 200-day moving average (MA) at 1,230.31 as an additional barrier to the upside.

Should the price fall, the area around the four-month low of 1,204.67 from July 10 could provide support. Further down, support is likely to come around the 1,200 handle, which has served as a key psychological level in the past.

Turning to the medium-term picture, it remains neutral with significant sideways movement for the precious metal over the last number of months. The 50- and 200-day MAs being flat at the moment add to this conviction.

Daily Pivots: (S1) 1.2890; (P) 1.2922; (R1) 1.2970; More...

Intraday bias in GBP/USD remains on the upside for 1.3029/47 resistance zone. Decisive break there will extend the larger rally to 61.8% projection of 1.2108 to 1.3047 from 1.2588 at 1.3168 next. On the downside, sustained break of 1.2811 and 55 day EMA will dampen our bullish view and turn bias back to the downside for 1.2588 support instead.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern that is still in progress. While further upside is now in favor, overall outlook remains bearish as long as 1.3444 key resistance holds. Larger down trend from 1.7190 is expected to resume later after the correction completes. And break of 1.2588 will indicate that such down trend is resuming.

The US dollar was steady against the yen during the Asian session, but weakened against most other majors. The key inflation data out of the US could potentially dictate today's biggest forex market moves. The euro and the pound were both up, while oil came under some pressure ahead of the European open.

The dollar steadied against the yen, helped by upbeat US economic data, after earlier weakness due to a dovish-perceived testimony by Federal Reserve Chair Janet Yellen to Congress. The Fed Chair believes that the current level of interest rates is not far from a neutral policy stance and hence rates would not have to rise “all that much”. She also sounded less confident about the lack of inflationary pressure being just a temporary issue. A set of important US data releases, which could significantly impact dollar trading such as June consumer inflation and retail sales, is due later today.

The dollar index was down 0.05% at 95.68 ahead of European trading. The dollar was broadly flat against the yen and the loonie, but weakened against other major counterparts. Dollar/yen was last trading at 113.29.

Both, the Australian and New Zealand dollars gained against the dollar during the Asian session, continuing their rally from yesterday. Aussie/dollar was last up 0.32%, trading at 0.7751, while kiwi/dollar was up 0.05%, trading at 0.7326. The kiwi came under a bit of pressure after business PMI for June fell to 56.2, below last month's high of 58.5, though it quickly recovered.

The euro was up 0.20% against the dollar to last trade at $1.1415 ahead of the European open. The eurozone common currency got a lift yesterday following the report by the Wall Street Journal on the European Central Bank signalling the timing of QE tapering in September.

Sterling continued strengthening against the dollar for the third consecutive day as investors covered some short positions after the Fed Chair induced dollar weakness. Pound/dollar was up 0.20% to last trade at 1.2961. Following the recent hawkish comment by Bank of England member Ian McCafferty, no other obvious catalyst seems apparent in terms of economic releases and news today.

The Canadian dollar weakened slightly against its US counterpart, but at 1.2730 the loonie is still around the 12-month high level.

Crude prices were on the rise for most of the Asian session after a late-day rally during the preceding session. However, prices came under some pressure as European trading was starting. WTI was last trading at $45.92 a barrel, while Brent was at $48.31.

Gold prices rose erasing yesterday's losses. The precious commodity was last trading at $1,218.23 an ounce.

Daily Pivots: (S1) 0.9629; (P) 0.9657; (R1) 0.9700; More......

USD/CHF is still bounded in the consolidation pattern from 0.9551 and intraday bias remains neutral. Another decline is expected as long as 0.9770 resistance holds. Below 0.9595 minor support will turn intraday bias back to the downside. In such case, USD/CHF should fall through 0.9551 support resume the whole fall from 1.0342 and target 0.9443 key support level next. We'd expect strong support from there to bring rebound. Meanwhile, firm break of 0.9770 will indicate near term reversal, on bullish convergence condition in 4 hour MACD.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.

Daily Pivots: (S1) 112.92; (P) 113.22; (R1) 113.58; More...

Intraday bias in USD/JPY remain neutral with focus on 112.88 support. Firm break of 112.88 will argue that rebound from 108.81 has completed at 114.49 after being rejected by 114.36 key near term resistance. That would also argue that the correction from 118.65 is still in progress. In such case, intraday bias will be turned back to the downside for 55 day EMA (now at 111.98). On the upside, decisive break of 114.36 resistance will confirm that corrective pull back from 118.65 has completed at 108.12. In that case, further rally would be seen to retest 118.65.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85.

Sunrise Market Commentary

• Rates: US inflation data key with Fed comments in mind
  US inflation data will probably be determining for today's trading session. Recent warnings by several Fed governors suggest that a downward surprise could spook markets and question the Fed's tightening intentions. In that case, US Treasuries could profit, outperforming Bunds.
• Currencies: Key US data to decide on next directional USD move
  The dollar shifted in wait-and-see modus after recent Fed comments on inflation. Today's US data, including CPI and retail sales, might decide on the fate of the US dollar. Strong data are needed for markets to give further credence to the pace of Fed policy normalization and to prevent further USD losses

The Sunrise Headlines

• US stock markets eked out small gains (+0.1%-+0.2%) in an uneventful US trading session. Overnight, Asian stock markets trade mixed with Japan outperforming (+0.5%) and China underperforming (-0.2%).
• Britain has for the first time explicitly acknowledged it has financial obligations to the EU after Brexit, a move that is likely to avert a full-scale clash over the exit bill in talks next week.
• Fed chair Yellen has given the strongest signal yet that regulators are planning to relax a contentious financial safety standard for big banks (eSLR) that executives have complained could perversely encourage them to take more risk.
• Fed Governor Brainard said she's "most focused on getting inflation back up around our 2% target." Dallas Fed Kaplan also said he needs to see inflation moving toward the central bank's goal as he assesses further rate hikes.
• Fitch maintained its A+ rating on China with a stable outlook, citing the strength of the country's external finances and macroeconomic record. ST growth prospects remain favourable, and economic policies have been effective in responding to an array of domestic and external pressures in the past year.
• Republicans launched their latest attempt to secure a longed victory on US healthcare by dropping a planned tax rollback for the wealthy. The new bill already drew criticism from senators on both sides of the political divide.
• Today's eco calendar heats up in the US with CPI inflation, retail sales, industrial production and Michigan consumer confidence. JP Morgan, Citigroup and Wells Fargo publish Q2 earnings.

Currencies: Key US Data To Decide On Next Directional USD Move

US CPI to decide on dollar's fate?

There was no dominant story to guide FX trading yesterday. The dollar remained in the defensive in the wake of Yellen's testimony on Wednesday, but the pressure eased. Markets awaited today's key US data. EUR/USD dropped temporary below 1.14, but rebounded on rumours that ECB's Draghi might herald a policy change at Jackson Hole. EUR/USD closed the session at 1.1398. USD/JPY finished at 113.28.

Asian equities are trading mixed, awaiting key US data later today. Japanese equities outperform as USD/JPY regained the 113 mark. Markets are looking forward to next week's BOJ policy meeting. The BOJ is expected to maintain its cap on the 10-year government bond yield even as rates in other major economies are trending higher. The pair trades in the 113.40 area. The Aussie dollar maintains this week's gain and is near the 0.7750/0.7835 resistance area. EUR/USD remains in wait-and-see modus, holding in the low 1.14 area.

There are again no market moving European eco data today. However, US data might be decisive for the next directional move of the dollar, with June retail sales, CPI & production and July Michigan consumer confidence. Especially the retail sales and CPI are key. Core and headline CPI are both expected at 1.7% (0.2% M/M and 0.1% M/M). Retail sales are expected to regain traction after mediocre May data (but strong readings in March and April). Consensus expectations are not very high, both for the retail sales and the CPI. If inflation drifts further away from the 2%-mark (<1.7 % outcome) , it will almost certainly cause a further loss of interest rate support for the dollar. Consumer confidence from the University of Michigan is expected little changed at a high level (95).

Dollar sentiment remained fragile after Friday's payrolls. Yellen putting the focus on inflation made markets ponder the pace of Fed normalisation and weighed further on the dollar. Yesterday, the dollar decline took a breather, but the picture US currency's technical picture remains fragile. As we see a good chance for the data to meet the consensus, the dollar might start looking for a bottom after the recent setback. However, the is little room for miss, especially not for the CPI.

Technical picture: USD looking for a bottom

A combination of hawkish ECB comments and soft US data pushed EUR/USD above the 1.1300/66 resistance area end June. The payrolls were not good enough to trigger a sustained USD rebound. Next resistance in the 1.15 area is looming. LT-correction tops stand at 1.1616/1.1714. A break would end the long consolidation period that followed the sharp decline of EUR/USD in 2014/early 2015. Such a key area will be difficult to break for now. A return below the 1.13 area would be a first indication of a loss in upside momentum. EUR/USD 1.1119/10 is the next important support.

The USD/JPY rally ran into resistance in early May and the pair returned lower in the 108.13/114.37 range. The post-Fed USD rebound pushed the pair above the 112.13 correction top, but follow-through gains remain modest. USD/JPY 114.37 resistance was tested, but for now the test is rejected. This at least suggests a pause in the recent USD/JPY uptrend. We stay cautious on USD/JPY long positions despite the recent good performance.

EUR/USD: Today's data to decide on next USD move

EUR/GBP

Sterling rebound to slow?

Sterling regained further ground yesterday, extending the rebound that started after good UK labour data. We see the rebound in the first place as technical in nature. Cable profited from underlying USD softness. A topside test of EUR/GBP was rejected on Wednesday and the broader euro correction also triggered further profit taking on EUR/GBP longs. The UK government published the Brexit ‘Repeal Bill'. It will probably become a source of political noise, but we didn't see a big impact on sterling trading yesterday. BoE's McCafferty further complicated the BoE's monetary policy debate as he raised the issue of reducing the BoE's Balance sheet. His comments might have been slightly supportive for sterling. EUR/GBP closed the session at 0.8809. Cable finished the day at 1.2939.

There are no important eco data in the UK today. There might still be some political noise on the Repeal bill, but we don't expect it to change fortunes for the UK currency right now. So, the gyrations in the dollar might be decisive for sterling trading. The UK currency made a nice ST rebound, especially against the euro. This move might slow.

From a technical point of view, EUR/GBP set a minor top north of 0.8854/66 resistance (2017 top) and finally broke below the 0.8 barrier earlier this week. Quite some sterling negative news should already be discounted at current levels. Even so, the short-term trend remains euro positive/sterling negative. A test of the 0.90 barrier might be on the cards. A break below 0.8720 would suggest that upside momentum is easing.

EUR/GBP topside test rejected, for now

Download entire Sunrise Market Commentary

Daily Pivots: (S1) 1.2705; (P) 1.2738; (R1) 1.2755; More....

Intraday bias in USD/CAD remains on the downside. Current fall is expected to extend to retest 1.2460 low. On the upside, break of 1.2938 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The second leg should have finished at 1.3793. Break of 1.2460 will extend such correction to 50% retracement of 0.9406 to 1.4869 at 1.2048. At this point, we'd look for strong support from there to contain downside and bring rebound. However, firm break there will target 100% projection of 1.4689 to 1.2460 from 1.3793 at 1.1564.

EUR/USD

Current level - 1.1412

With the recent dip below 1.1380 there is a risk of another slide to 1.13+ area, but the overall bias remains positive, for a rise towards 1.1610. trigger on the upside is 1.1452 high.

USD/JPY

Current level - 113.22

The rebound above 1.1280 is corrective in nature, thus preceding another leg downwards, to 111.75 area. 

GBP/USD

Current level - 1.2957

Yesterday's break through 1.2920 confirms, that a low is in place at 1.2810 and my outlook remains bullish, for a rise towards 1.3050 area. Initial intraday support lies at 1.2900.

The Federal Reserve appears to be on track for a 3rd interest rate increase for the year as recent data releases appear to show US economic policies are on track. The US Labour Department released data that showed Initial claims for unemployment benefits dropped 3K to a seasonally adjusted 247K for the week ended July 8. This is the latest indication that the US labor market strength is sustaining economic growth. Separately, the Producer Price Index rose 0.1% in June, after being unchanged in the previous release. Core PPI increased 2% in the 12 months through June after climbing 2.1% in May. Fed Chair Yellen finished her testimony to Congress and expressed confidence in the US economy and monetary tightening would be a gradual process. This “slow and gradual” process came after indications from Central Bankers that stimulative policies may no longer be required as the overall global market strengthens.

US and European Equities were in striking distance of recent record highs, with some profit taking slowing the upward momentum. Asian equities have also performed strongly with the MSCI Asia Pacific Index up 2.6% and Hong Kong’s Hang Seng posting a 4% rise on the week.

USD is somewhat stagnant against its major counterparts, with little change overnight as the markets wait for today’s economic data releases. Currently EURUSD is trading around 1.1410, GBPUSD: 1.2960, USDJPY: 113.40, AUDUSD: 0.7745 & USDCAD: 1.2730.

Gold bounced from early lows of $1,214.67 to trade currently around $1,218.25.

WTI is trading near the day’s highs around $46.30pb and looks set to have a 4% rise on the week.

At 11:00 BST EUR Trade Balance for May will be released. The consensus calls for a moderate increase to €20.3 Billion from the previous €19.6 Billion. With markets expectations being met, by recent CPI readings from France & Germany, the EUR may stay in demand against its major counterparts.

At 13:30 BST the US will release a plethora of data; Retails Sales, Consumer Price Index & Industrial Production. There may be mixed reactions from the market as Retail Sales (MoM) (Jun) are expected to show a 0.1% rise compared to the previous reading of -0.3% and CPI (YoY) (Jun) is expected to come in at 1.7% down from the previous release of 1.9%. Retail Sales up should provoke USD buying but CPI down would typically result in USD selling. Industrial Production (MoM) (Jun) may help determine the direction of USD, as the market is expecting a release of 0.3% (previously 0.0%) – which may be regarded as inflationary, thereby seeing interest rates rising and USD buying.