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Daily Pivots: (S1) 146.51; (P) 146.98; (R1) 147.34; More....

With 146.03 minor support intact, further rise is expected in GBP/JPY for 148.09/42 resistance zone. Decisive break there will extend whole rally from 122.36 to long term fibonacci level at 150.43 next. Nonetheless, break of 146.03 minor support will indicate short term topping. In such case, bias will be turned back to the downside for pull back towards 55 day EMA (now at 143.44).

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.

AUDUSD made a sharp and strong reversal down recently, which we now see it as a start of a new bearish turn after recently broken channel support line connected from start of June. Notice that fall also appears to be impulsive so more weakness will be expected to follow after a short-term minor recovery up into wave 2/B, which can see potential resistance near the lower channel line and around the Fibonacci ratios of 38.2/61.8.
Invalidation level is at 0.7712 level, as long as price trades below this levels we are looking bearish.

AUDUSD, 4H

With the absence of any top tier news and the markets waiting for further indications on the Fed's policy when Janet Yellen testifies before Congress on Wednesday, investors and traders are currently in ‘wait and see' mode. The week kicked off with most major asset classes moving in tight ranges. The S&P 500 closed 0.1% higher on Monday, while U.S. Treasury yields fell slightly after rallying on Friday's Non-Farm Payrolls report and the dollar index remained stuck in a very narrow trading range.

It seems we will have to wait for another day for volatility to resume. The two key events on Wednesday are Yellen's semi-annual testimony and Bank of Canada's monetary policy announcement. Dollar bulls are counting on the Fed Chair's continued hawkishness, and whether she will provide more details on monetary policy becoming tighter. So far, she is still convinced that inflation weakness is temporary and expects that the sub 5% unemployment rate will eventually boost prices. However, it has been more than one year since the unemployment rate dipped below 5% and wage growth is still anemic, making it difficult for many investors to believe that interest rates will increase at the pace suggested by monetary policy makers. It will require more than retracting her latest FOMC statement to encourage bulls to jump in again, such as a more specific timing to unwind the $4.5 trillion balance sheet.

Given that other central banks have shifted towards a tighter stance, Bank of Canada's meeting on Wednesday is going to be of great interest to traders. 13 out the 30 economists recently surveyed by Reuters expect the central bank to hike rates by 25 basis points tomorrow. If BoC joins the Fed this will not only boost the Loonie, but other major currencies as well, as investors will start to anticipate similar moves by the European Central Bank, Riksbank and the Bank of England. I suggest keeping a close eye on yield differentials as they will be the major factor impacting currencies for the foreseeable future.

Pound traders will get the chance to hear again from Andrew Haldane, BoE's Chief Economist, later today. The economist who was usually on the dovish end of policymakers surprised the markets on 21 June when he joined the Hawks. Given that inflation in the U.K. breached the 2% target and the economy did not fall into recession, he thinks that beginning the process of withdrawing some of the stimulus measures provided last year would be reasonable. If he ignores the recent bunch of weak economic releases and continued supporting the idea of policy normalization, the pound will likely make another attempt towards 1.3, but a break above this psychological resistance requires strong labor data on Wednesday.

Daily Pivots: (S1) 129.70; (P) 130.04; (R1) 130.33; More...

EUR/JPY's rally continues today even though it's losing upside momentum. Intraday bias remains on the upside. Current rally should target 100% projection of 114.84 to 125.80 from 122.39 at 133.35 next. On the downside, break of 127.99 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 would now target 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will remain bullish as long as 122.39 support holds.

Yen remains generally weak today but it's weakest spot was overtaken by New Zealand Dollar. Meanwhile, Dollar, Euro and Sterling are staying in recently established range against each other. Economic calendar is rather light and traders are generally holding their bets ahead of the key events later this week. In particular, BoC rate hike tomorrow will catch as much attention as Fed chair Janet Yellen's testimony. Meanwhile, Euro could stay mixed until there are fresh inspirations about ECB's timing for tapering. In other markets, gold recovered ahead of 1200 handle but struggled to find follow through buying above 1210. WTI crude oil is trying to regain 45 after dipping through 44 last week.

Fed Williams still expected another hike and balance sheet unwinding this year

San Francisco Fed President John Williams spoke in an event in Sydney today and reiterated his expectation of one more rate hike this year. Also, He expects Fed to start shrinking the balance sheet this year too. He noted that job data showed that US economy is strong and the slow down in inflation is transitory. However, he emphasized that if inflation did not accelerate as expected, Fed should adopt a slower rate path. The main focus for US will be on Fed chair Janet Yellen's testimony to Senate Banking Committee on Wednesday.

Staying in US, it's reported that Republicans are working on bringing up a revised version of the Senate healthcare bill later this week. And there could be a vote on the bill next week. The vote bill to replace Obamacare was forced to postpone due to insufficient support. And it remains unclear whether the new version would have enough vote to be passed. The issue has been dragging on US President Donald Trump's work on tax reforms and other economic policies.

Australia business condition back to pre-crisis level, but confidence lags

Australia NAB business confidence rose 1 point to 9 in June. Business conditions gauge improved 4 points to 15. Most industrial performed well with strongest gains in wholesale, construction and manufacturing. On the other hand, mining was the worst performer due to falling commodity prices. The business conditions index is indicate back at pre-financial crisis level. But confidence lagged behind and recorded slower rise in recent months. NAB noted that "we continue to be pleasantly surprised by just how upbeat the business sector is, given the context of a fairly beleaguered household sector that has been weighed down by limited wages growth and record levels of debt". However, it also warned that long term outlook could easily "underperform the RBA's upbeat expectations as important growth drivers (LNG exports, commodity prices and housing construction) begin to fade". Also from Australia, home loans rose 1.0% in May.

Kiwi tumbles after data

New Zealand dollar tumbles today as government data showed retail spending on credit and debit cards was unchanged in June. Some economists pointed out that's an import miss as there was expectations of a boost from the British and Irish Lions' rugby tour. The sharp fall in NZD/USD today, with daily MACD diving deeper below signal line, suggests short term topping at 0.7345. And that could be seen as rejection fro 0.7374 resistance too. Near term focus is back on 0.7961 support. Break will send NZD/USD to 55 day EMA (now at 0.7155) and below.

Elsewhere, UK BRC retail sales monitor rose 1.2% yoy in June. Japan M2 rose 3.9% yoy in June, machine tools orders rose 31.1% in June. Canada will release housing starts later today.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 129.70; (P) 130.04; (R1) 130.33; More...

EUR/JPY's rally continues today even though it's losing upside momentum. Intraday bias remains on the upside. Current rally should target 100% projection of 114.84 to 125.80 from 122.39 at 133.35 next. On the downside, break of 127.99 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 would now target 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will remain bullish as long as 122.39 support holds.

Economic Indicators Update

The markets were trading flat yesterday on lack of any clear data to drive the markets. The US dollar remained broadly unchanged, holding on to the meager gains from last Friday's payrolls data.

Earlier, the San Francisco Fed chief, Williams told a panel of experts in Sydney that the pace of US wage growth and inflation are around where he expected them to be. Williams said that another rate hike remained a reasonable base case as well as normalization of the Fed's balance sheet.

In Germany, the trade data reached new highs as the total export of goods increased 1.4% marking a fifth consecutive month over month increase.

Looking ahead, Lael Brainard from the FOMC will be speaking today ahead of further Fed speeches lined up this week. The economic calendar continues to remain quiet today with Canadian housing starts and Japan PPI data lined up over the day.

EURUSD intraday analysis

EURUSD (1.1390): The EURUSD closed flat yesterday just a few pips below the $1.1400 handle. Price action is expected to remain trading subdued ahead of the Janet Yellen testimony starting tomorrow. On the 4-hour chart, the bias remains flat with support seen at 1.1357 and 1.1300. Further declines can be anticipated only on a break down below this support. In this case, expect further declines to see EURUSD test the support at 1.1190 level where there is a potential for a head and shoulders neckline support to be established.

GBPUSD intraday analysis

GBPUSD (1.2877): The GBPUSD also closed rather flat yesterday slowing the momentum of the declines from last week. Any near-term retracement could see price action test 1.2935 where minor resistance could be formed. But the overall bias remains to the downside. To the downside, GBPUSD continues to target the next main support at 1.2800. The bearish bias will shift in the event that GBPUSD manages to break past 1.2900 - 1.2935. In this case, expect the near-term retracement to push GBPUSD back towards the resistance at 1.2975 region.

USDJPY intraday analysis

USDJPY (114.34): USDJPY is seen pushing higher as the bullish momentum continues to keep the price higher. Currently, USDJPY is seen testing the resistance level at 114.37. A breakout above this level is required to confirm further upside in price. The next main resistance is seen at 115.35 region. To the downside, in the event of a reversal, then USDJPY could be seen pushing back to the lower support at 112.00 which is pending a retest after previously serving as a resistance level. Ahead of the declines to 112.00, watch for the minor support at 113.36 to offer some short-term support to prices.

US equities continued to advance, helped by technology companies, with the S&P 500 rising on Monday following last week's sell-off with the index moving from 2421.06 up to 2429.13 on Monday. The market is now starting to analyze Q2 earnings for more indications that global economic growth is progressing as expected by many analysts – in turn helping push USD higher. As Global equities close in on reaching record highs, political uncertainty has taken a back seat to expected global economic growth. Recently released data indicated that Germany had a higher than expected trade surplus and recent employment data out of the US showed employers adding the most jobs for the past 4 months – suggesting a degree of buoyancy in growth. On Tuesday, in Sydney, San Francisco Federal Reserve President Williams stated “that it was a reasonable view to expect one more rate hike this year, and his own view was to start adjusting the central bank's balance sheet in the next few months”.

USDJPY rose to a high on Monday of 114.298, a 0.3% gain and the highest it has traded at since May 11th. BOJ Governor Kuroda reiterated his stance to maintain ultra-loose monetary policy until inflation is stable above its 2% target, a sign the BoJ will not join its U.S. and European counterparts in easing stimulus anytime soon. Currently, USDJPY is trading higher at around 114.38.

EURUSD traded in a narrow range on Monday of less than 40 pips, 0.4% compared to the average trading range for 2017 of 0.7%; 1.13813 to 1.14177. Currently, EURUSD is trading around 1.1388.

GBPUSD also traded in a narrow range compared to recent trading sessions of 0.4% compared to the average trading range for 2017 of 0.8%. An early morning high of 1.29079 retraced lower to 1.28545. Currently, GBPUSD is trading around 1.2874.

Oil traded up 0.2% on the day as traders analyzed the potential effectiveness of both Libya and Nigeria capping production. Both countries have been invited to a meeting in Russia on July 24th to discuss their production outlook. If Libya and Nigeria both agree to production cuts the markets are expecting oil prices to rise even with the heavy supply from non-OPEC producers. On Monday, WTI traded up from a low of $43.76pb to trade to a high of $44.96pb. Currently, WTI is trading lower at around $44.68pb.

Gold hit a 4-month low on Monday trading as low as $1,204.71 before rebounding higher to $1,215.44. Gold is currently trading lower at $1,211.

At 13:15 BST Canadian Housing Starts (YoY) (Jun) are scheduled to be released. CAD has been strong against USD of late as the markets are expecting an imminent rise in Canadian Interest rates. The previous release of 194.7K is expected to be bettered with the consensus suggesting a figure of 201.5K. Any stronger number will likely see CAD appreciate further against USD.

For the 24 hours to 23:00 GMT, the AUD declined 0% against the USD and closed at 0.7606.

LME Copper prices declined 0.5% or $29.0/MT to $5780.0/MT. Aluminium prices declined 0.3% or $6.0/MT to $1914.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7613, with the AUD trading 0.09% higher against the USD from yesterday's close, after Australia's NAB business conditions index advanced to a level of 15.0 in June, notching its highest level in nearly ten years, reflecting growing optimism amongst

businesses about the nation's growth prospects. In the preceding month, the index had recorded a revised reading of 11.0.

Additionally, the nation's NAB business confidence index edged up to a level of 9.0 in June, compared to a revised reading of 8.0 in the previous month. Meanwhile, the nation's seasonally adjusted home loan approvals rebounded less-than-expected by 1.0% in May, compared to a fall of 1.9% in the prior month.

The pair is expected to find support at 0.7595, and a fall through could take it to the next support level of 0.7577. The pair is expected to find its first resistance at 0.7623, and a rise through could take it to the next resistance level of 0.7633.

Moving ahead, investors will focus on Australia's Westpac consumer confidence index for July, slated to release overnight.

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

For the 24 hours to 23:00 GMT, the EUR declined 0.11% against the USD and closed at 1.1396.

Macroeconomic data showed that the Euro-zone's Sentix investor confidence index fell less-than-expected to a level of 28.3 in July, after hitting a 10-year high level of 28.4 in the prior month, while market participants had anticipated a fall to a level of 28.1.

Separately, Germany's seasonally adjusted trade surplus widened more-than-expected to a level of €22.0 billion in May, as growth in exports outpaced that of imports, thus reaffirming a solid upswing in the Euro-zone's largest economy. In the prior month, the nation had registered a trade surplus of €18.1 billion, while markets were expecting the country's surplus to rise to a level of €18.7 billion.

In economic news, the US labour market conditions index declined more-than-expected to a level of 1.5 in June, compared to market expectations for a drop to a level of 2.5 and following a revised reading of 3.3 in the preceding month. On the other hand, the nation's consumer credit jumped to a level of $18.4 billion in May, hitting its highest level in six months and compared to a revised advance of $12.9 billion in the previous month. Market participants were anticipating consumer credit to advance to a level of $13.5 billion.

In the Asian session, at GMT0300, the pair is trading at 1.1393, with the EUR trading a tad lower against the USD from yesterday's close.

The pair is expected to find support at 1.1377, and a fall through could take it to the next support level of 1.1362. The pair is expected to find its first resistance at 1.1413, and a rise through could take it to the next resistance level of 1.1434.

In absence of any major economic releases in the Euro-zone today, investors will look forward to the US NFIB small business optimism index for June followed by JOLTS job openings and final wholesale inventories, both for May, slated to release later in the day.

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 declined 0.15% against the USD and closed at 1.2879.

In the Asian session, at GMT0300, the pair is trading at 1.2875, with the GBP trading slightly lower against the USD from yesterday's close.

Overnight data revealed that Britain's BRC retail sales across all sectors rebounded 1.2% on an annual basis in June, surpassing market expectations for a rise of 0.8% and following a decline of 0.4% in the previous month.

The pair is expected to find support at 1.2851, and a fall through could take it to the next support level of 1.2826. The pair is expected to find its first resistance at 1.2904, and a rise through could take it to the next resistance level of 1.2932.

With no major economic releases in the UK today, investor sentiment will be governed by global macroeconomic news.

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