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Global Markets:

• Asian stock markets: Nikkei up 0.10%, Shanghai Composite lost 0.10%, Hang Seng gained 0.15%, ASX 200 rose 0.30%
• Commodities: WTI Oil at $46 (0.20%), Brent Oil at $48.35 (0.20%), Gold at $1216 (-0.20%), Gold at $1216 (-0.10%), Silver at $15.60 (-0.40%)
• Rates: US 10 year yield at 2.36, UK 10 year yield at 1.30, German 10 year yield at 0.60

News & Data:

• Japan Capacity Utilization (M/M) May: -4.10% (Prev 4.30%)
• Japan Industrial Production (M/M) May F: -3.60% (Prev -3.30%)
• Japan Industrial Production (Y/Y) May F: 6.50% (Prev 6.80%)
• New Zealand Business Manufacturing PMI: 56.2 (Rev Prev 58.2)
• PBoC Fixes USDCNY Reference Rate At 6.7774 (Prev 6.7802)

Markets Update:

Markets remained relatively quiet ahead of today's US CPI release. Recent US inflation data has been rather weak, so today's numbers will be important and could determine the short-term direction of the US Dollar.

Commodity currencies are performing well. The Australian Dollar broke above a major resistance level at 0.7730, which signals that it could test 0.7850 soon. The New Zealand Dollar also caught a bid and rallied back above 0.73. Meanwhile, a rise in oil prices is giving the Canadian Dollar additional support. USDCAD is moving back towards 1.27. The charts suggest the pair could test 1.25 in the near-term.

EURUSD retraced a bit yesterday, but demand below 1.14 proved to be strong. Further gains are likely. Should US data disappoint today, the Euro should have no difficulties clearing the resistance at 1.15.

Upcoming Events:

• 10:00 BST – Euro Zone Trade Balance
• 13:30 BST – US CPI
• 13:30 BST – US Retail Sales
• 14:15 BST – US Industrial Production
• 15:00 BST – US Michigan Consumer Sentiment

EURUSD

The EURUSD was indecisive yesterday. The bias is neutral in nearest term probably with a little bearish bias but overall I remain bullish and any downside pullback should be seen as a good opportunity to buy. We have an interesting fact as you can see on my H4 chart below, where the H4 EMA 200 provides a valid and strong support during the bullish run, a good place to buy this pair, located around 1.1285 area. Immediate resistance is seen around 1.1455. A clear break above that area could trigger further bullish pressure testing 1.1500 – 1.1530 or higher. On the downside, a clear break and daily/weekly close below 1.1285 would interrupt the bullish outlook.

GBPUSD

The GBPUSD had a bullish momentum yesterday broke above 1.2925 resistance after bounced-off the daily EMA 200 as you can see on my daily chart below. This fact cancels the bearish pin bar scenario. The bias is bullish in nearest term testing 1.3000 – 1.3050 resistance area which remains a good place to sell with a tight stop loss above 1.3050. Immediate support is seen around 1.2900. A clear break below that area could lead price to neutral zone in nearest term as direction would become unclear testing 1.2850/15 region. Overall I remain neutral.

USDJPY

The USDJPY attempted to push lower yesterday bottomed at 112.86 but closed higher at 113.28 and hit 113.57 earlier today in Asian session. We have a bullish pin bar near 112.75 support area as you can see on my daily chart below suggests that price is probably ready to continue its bullish run after corrected lower from 114.50 on Tuesday. The bias is bullish in nearest term testing 114.00 – 114.50 region. On the downside, a clear break and daily/weekly close below 112.75 would activate my neutral mode with a short-term bearish bias.

USDCHF

The USDCHF was indecisive yesterday. The bias remains neutral in nearest term. Price has been moving sideways without clear direction this week and now struggling around 0.9675 resistance area as you can see on my daily chart below. Immediate resistance is seen around 0.9696. A clear break above that area would expose 0.9765 resistance area. Immediate support is seen around 0.9600 but key support remains between 0.9550 – 0.9450 region which remains a good place to buy with a tight stop loss below 0.9450.

For the 24 hours to 23:00 GMT, the AUD rose 0.72% against the USD and closed at 0.7732.

LME Copper prices rose 0.3% or $19.5/MT to $5902.0/MT. Aluminium prices rose 1.8% or $34.0/MT to $1911.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7736, with the AUD trading marginally higher against the USD from yesterday's close.

The pair is expected to find support at 0.7694, and a fall through could take it to the next support level of 0.7652. The pair is expected to find its first resistance at 0.7762, and a rise through could take it to the next resistance level of 0.7788.

Next week, market participants will focus on the Reserve Bank of Australia's July meeting minutes accompanied with Australia's labour market report.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the EUR declined 0.16% against the USD and closed at 1.1397.

In economic news, Germany's final consumer price index (CPI) rose 1.6% on an annual basis in June, confirming the flash estimate. The CPI had advanced 1.5% in the previous month.

In the US, data showed that the number of Americans filing for fresh jobless claims eased to a level of 247.0K in the week ended 08 July, dropping for the first time in a month, suggesting that the nation's labour market remains buoyant. In the previous week, initial jobless claims had registered a revised reading of 250.0K, while markets were anticipating for a fall to a level of 245.0K. Additionally, the nation's producer price index (PPI) advanced 2.0% on an annual basis in June, surpassing market consensus for a rise of 1.9%. The PPI had registered a rise of 2.4% in the prior month.

On the other hand, the nation's budget deficit widened more-than-expected to a level of $90.2 billion in June, compared to market expectations of a deficit of $38.0 billion. In the previous month, the nation had registered a budget deficit of $6.3 billion.

In the Asian session, at GMT0300, the pair is trading at 1.1408, with the EUR trading 0.1% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1367, and a fall through could take it to the next support level of 1.1327. The pair is expected to find its first resistance at 1.1452, and a rise through could take it to the next resistance level of 1.1497.

Going ahead, investors will look forward to the Euro-zone's trade balance figures for May, slated to release in a few hours. Moreover, traders would closely monitor a slew of crucial economic releases in the US, consisting of the consumer price index, advance retail sales, industrial and manufacturing production, all for June followed by the flash Michigan consumer confidence index for July, all scheduled to release later today.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average

For the 24 hours to 23:00 GMT, the GBP rose 0.39% against the USD and closed at 1.2941, after the Bank of England (BoE) member, Ian McCafferty, struck a hawkish tone on monetary policy.

The BoE rate-setter, Ian McCafferty, stated that it is appropriate for the BoE to consider tapering its £453.0 billion asset purchase programme sooner rather than later.

Separately, the BoE's credit conditions survey report revealed that availability of unsecured credit to households had decreased in the previous three months and banks are expected to further tighten the screw on consumer credit over the coming quarter as the outlook for household finances darkens amid uncertainty over Britain's economic prospects.

In the Asian session, at GMT0300, the pair is trading at 1.2944, with the GBP trading a tad higher from yesterday's close.

The pair is expected to find support at 1.2906, and a fall through could take it to the next support level of 1.2869. The pair is expected to find its first resistance at 1.2968, and a rise through could take it to the next resistance level of 1.2993.

With no economic releases in the UK today, investors await Britain's crucial inflation and retail sales data, slated to release next week.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.06% against the JPY and closed at 113.38.

In the Asian session, at GMT0300, the pair is trading at 113.40, with the USD trading marginally higher against the USD from yesterday's close.

On the economic front, Japan's final industrial production fell 3.6% in May, while the preliminary print had indicated a drop of 3.3%. In the previous month, industrial production had advanced 4.0%.

The pair is expected to find support at 112.98, and a fall through could take it to the next support level of 112.56. The pair is expected to find its first resistance at 113.7, and a rise through could take it to the next resistance level of 114.00.

Going ahead, traders will closely monitor the Bank of Japan's interest rate decision, slated to be announced next week.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.2% against the CAD and closed at 1.2733.

Macroeconomic data indicated that Canada's new housing price index rose more-than-expected by 0.7% on a monthly basis in May, compared to market expectations for a rise of 0.3%. The index had recorded a rise of 0.8% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.2729, with the USD trading slightly lower against the CAD from yesterday's close.

The pair is expected to find support at 1.2710, and a fall through could take it to the next support level of 1.2690. The pair is expected to find its first resistance at 1.2760, and a rise through could take it to the next resistance level of 1.2790.

Moving ahead, Canada's consumer price index, retail sales and existing home sales data, all due to release next week, will be on investors' radar.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.22% against the CHF and closed at 0.9673.

On the macro front, Switzerland's producer and import prices unexpectedly fell 0.1% MoM in June, compared to market expectations for a flat reading. The producer and import price index had dropped 0.3% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 0.9668, with the USD trading a tad lower against the CHF from yesterday's close.

The pair is expected to find support at 0.9627, and a fall through could take it to the next support level of 0.9586. The pair is expected to find its first resistance at 0.9698, and a rise through could take it to the next resistance level of 0.9728.

Going forward, investors will keep a close watch on Switzerland's trade balance data for June, the sole important release next week.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

• Has the Fed become more dovish in light of persistent subdued inflation?
• Weak retail sales and inflation data could dent rate hike hopes further.

European futures are pointing to a slightly higher open on Friday, adding to gains from earlier in the week which have broadly been triggered by the possibility of slower tightening from the Federal Reserve.

Yellen's comments on Wednesday regarding the neutral rate and subdued inflation sent a more dovish message to the markets than we've become accustomed to, particularly of late with a number of central banks suddenly appearing in a rush to tighten monetary policy. The recent commentary has weighed a little on equity markets and it would appear the prospect of a less hawkish Fed has offered a little reprieve.

While we may not be hearing from many central bankers during today's session – Fed's Robert Kaplan the only policy maker due to make an appearance – it is likely that focus will remain on the Fed as we get some important US economic data. Retail sales and CPI inflation are two of the most important pieces of US data we get each month and both are due to be released shortly before the open on Wall Street.

With the first half of the European session looking very quiet, the US will be the primary focus today. The Fed is currently expected to raise interest rates once more this year, most likely in December, and announce plans to start reducing its roughly $4.5 trillion balance sheet following years of US Treasury and Mortgage Backed Securities purchases. Market have struggled to get on board with one more rate hike though and Yellen's comments on Wednesday suggest Fed officials are not entirely convinced either.

Weakness in the data today will only fuel these concerns, particularly with regards to inflation which has remained stubbornly low throughout the tightening process so far. While CPI may not be the Fed's preferred measure of inflation, it is released earlier and identifies whether prices are ticking higher or remain subdued. Should we see the latter today, as expected, and it be accompanied by uninspiring spending data, it will only harden people's belief's that the Fed should hold off on the next hike until next year and could therefore weigh further on the dollar and Treasury yields.

Key Points:

• The near-term technical bias is now looking rather bearish.
• A reversal could see the pair back at the 1.24 handle.
• Long-term bias remains bullish

A surprise rally of around 80 pips has brought the GBPCHF into conflict with some robust resistance which could mean a sharp correction is now on the way for the pair. Indeed, the bears could swing into action in the coming session or early next week as, at least on the face of it, the bull's latest bid to break above the 1.2538 handle seems to have failed.

As shown below, despite some strong buying pressure, the 38.2% Fibonacci level has remained intact once again. Of course, this isn't entirely surprising given the presence of the 100 day moving average – a decent source of dynamic resistance. Additionally, the movement of the stochastics into overbought territory will be stifling any hopes that a breakout is on the way. As result, there is really little where else for the pair to go but down over the coming days

Nevertheless, things aren't entirely grim looking ahead as the trend of higher-lows is also still in play which should see losses limited to the 1.24 handle. What's more, the unexpected push higher over the prior 48 hours has revived the bullish parabolic SAR bias which will help to keep support intact around the 1.24 handle. Furthermore, it will also enable the pair to reverse to the upside once it has tested that trendline again.

If we do see a secondary reversal, it will be worth watching exactly to where the subsequent uptrend extends to. This is largely due to the fact that it will help us to confirm whether we are amidst a rising wedge or a bullish channel. Determining this will allow us to judge the pace of the apparent long-term recovery of the pair – something the bulls are keenly monitoring.

Overall, expect to see losses in the near-term followed by a recovery, potentially above the 38.2% Fibonacci level. However, don't neglect the fundamental side of things as the GBP has been having some strong reactions to both the hard data and the rhetoric which could upset this technical forecast. Indeed, a suitably bullish reaction to a fundamental upset could spark a breakout above the 1.2538 level that might actually see the pair surge to the 1.2650 handle before moderating.