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Global Markets:

• Asian stock markets: Nikkei down 0.50 %, Shanghai Composite fell 0.20 %, Hang Seng declined 0.45 %, ASX 200 lost 0.90 %
• Commodities: Gold at $1220 (-0.25 %), Silver at $15.89 (-0.60 %), WTI Oil at $45.00 (-1.20 %), Brent Oil at $47.55 (-1.15 %)
• Rates: US 10-year yield at 2.38, UK 10-year yield at 1.32, German 10-year yield at 0.57

News & Data

• Japanese Labour Cash Earnings (Y/Y) May: 0.7% (exp 0.4%; prev 0.5%)
• Australian AiG Perf of Construction Index Jun: 56.0 (prev 56.7)
• PBoC Fixes USDCNY Reference Rate At 6.7914 (prev fix 6.7953 prev close 6.8035)
• Asia hit by Wall St. stumble, debt yields spike after ECB minutes – RTRS
• Oil prices slump over 1 percent on rise in U.S. output – RTRS

Markets Update:

Markets were mostly quiet as traders are waiting for the NFP. The largest move overnight was seen in the JPY pairs. USD/JPY rallied to 113.85 despite Asian stock markets being under pressure. However, breakout above 114 seems unlikely prior to the US employment data at 1330 BST. To the downside, support is noted at 113.30 and 112.75.

EUR/USD consolidated between 1.1410 and 1.1425 in Asia. Strong resistance is seen around 1.1450. Should US data disappoint, EUR/USD will likely clear the resistance without much struggle. Above 1.1450, there is little resistance until 1.16.

Large moves were seen in precious metals overnight. Silver had a flash crash and collapsed more than 3 %. It quickly recovered, but remains under $16. The technical outlook is negative, and the downtrend is likely to continue in the near-term. Support is seen at $15.60, but the next major level is $15.00.

In Gold, there was no reaction to the Silver flash crash, but the metal had a weak performance as well. The break below $1220 support suggests it could test $1200 soon. Further, Gold is struggling despite the recent USD weakness, which indicates that selling interest on rallies remains high.

Upcoming Events:

• 07:00 BST – German Industrial Production
• 08:30 BST – UK Halifax House Price Index
• 09:30 BST – UK Manufacturing Production
• 09:30 BST – UK Industrial Production
• 09:30 BST – UK Trade Balance
• 13:30 BST – US NFP
• 13:30 BST – US Unemployment Rate
• 13:30 BST – Canadian Unemployment Rate
• 13:30 BST – Canadian Employment Change
• 15:00 BST – Canadian Ivey PMI

Daily Pivots: (S1) 0.8769; (P) 0.8793; (R1) 0.8831; More...

Intraday bias in EUR/GBP remains neutral for consolidation below 0.8879. On the downside, break of 0.8718 support will argue that rise from 0.8312 has completed. In that case, intraday bias with be turned back to the downside for lower side of the range at 0.8312. Meanwhile, break of 0.8879 and sustained trading above 0.8851 will pave the way to retest 0.9304 high.

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.

Asia Summary

Following the negative leads out of the US session and rise in European bond yields, Asian equities generally opened modestly lower. The Nikkei225 opened down by 0.7%, but has since pared losses. This came as the Bank of Japan (BOJ) announced that it would increase purchases of 5-10 year JGBs to ¥500B from ¥450B at its upcoming QE operation. The BoJ acted as earlier during the session the 10-yr JGB yield moved above 0.10% and hit the highest level since February.

The Australian S&P ASX 200, which is lower by over 1%, was the biggest mover, amid declines in the banking sector. This tracked the weakness in US banks. South Korean tech giant Samsung Electronics has traded marginally lower, after guiding its Q2 results above estimates. It was, however, speculated back in early June that the operating profit for the company's chip unit would total KRW7.0T.

Fed members Mester and Vice Chair Fischer did not have any noticeable impact on currency markets. Looking ahead, traders are focused on the later US June payrolls report and start of the G20 meeting, including the speculated sideline meeting between Russia's President Putin and US President Trump.

Key economic data

(JP) BoJ announces amounts to buy in upcoming QE operation: Increases regular purchases of 5-10 yr JGBs to ¥500B from ¥450B prior; To purchase 10-yr JGBs at 0.110%; Offers to buy unlimited amount in fixed-rate bond operation

(JP) JAPAN MAY LABOR CASH EARNINGS Y/Y: 0.7% V 0.4%E; REAL +0.1% V -0.1%E; Government said the May, regular pay (base wages) had the largest annual gain since March 2000.

(JP) JAPAN JUNE OFFICIAL RESERVE ASSETS: $1.249T V $1.257TE

(CN) PBoC skips open market operations (11th straight session)

(AU) AUSTRALIA JUNE CONSTRUCTION INDEX: 56.0 V 56.7 PRIOR

Speakers and Press

China

(CN) PBOC China Financial Market Development Report: Market orientated interest rate formation, regulation and transmission mechanism will be improved to enhance PBOC's regulatory capacity on interest rates; Will also raise the efficiency of the central bank operations, including standing lending facility, medium-term lending facility and reverse repos.

Japan

(JP) BoJ Official: Carried out increased JGB purchases and fixed-rate operations given 'big' rise in long-term yields

South Korea

(KR) South Korea confirms considering Red Cross talks and military meeting with North Korea; Also says may consider sending envoy to North Korea to discuss peace; However, says North Korea did not respond to civil contact request.

US

(US) Fed's Mester (hawkish, non-voter): Fed should launch portfolio runoff sooner rather than later; Expects inflation to resume climb toward 2%, but recent slowdown requires attention.

(US) Fed Vice Chair Fischer: US may be in 'productivity lull'; No comment on monetary policy; Debt ceiling debate is a 'dangerous game of chicken'

Asian Equity Indices/Futures (00:30ET)

Nikkei -0.5%, Hang Seng -0.50%, Shanghai Composite -0.2%, ASX200 -1.1%, Kospi -0.3%

Equity Futures: S&P 500 flat, Nasdaq +0.1%, DAX flat, FTSE 100 -0.1%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.1408-1.1425 ; JPY 113.11-113.84; 0.7572-0.7588; NZD 0.7274-0.7293

In the currency markets, the volatility has been driven by USD/JPY which has risen over 0.4% to trade above ¥113.70, following the BoJ's bond buying announcement. Other pairs have shown less volatility ahead of the US payrolls report.

(CN) PBOC SETS YUAN REFERENCE RATE: 6.7914 V 6.7953 PRIOR

Asian government bond yields track rise in global yields: Australia 3-year yield +6bps, 10-year +8bps. Despite the BoJ's bond buying announcement, the 40-yr JGB yield traded to highs not seen since Feb 2016, near 1.090%. US 10-yr Treasury yield rises 2bps to above 2.380%. In terms of corporate supply, Wal-Mart priced ¥170B in 5,7 and 10-year bonds.

US corporate high-yield funds had outflows of $1.16B in the week ended July 5th, according to Lipper.

In sovereigns, Australia sold A$600M in Dec 2021 bonds at an average yield of 2.1693% (1.980% prior) and bid to cover of 5.46x (3.48x prior). The country also announced a syndicated tap of the June 2039 bonds, which is scheduled for next week.

Some volatility has been seen with regards to the precious metals ahead of US payrolls. Notably, Silver Futures have declined by over 0.7%. In the energy space, WTI and Brent Crude are lower by over 1%

Asia equities notable movers

Australia

Mount Gibson Iron, MGX.AU Announced settlement agreement; +8.5%

China

COSCO Shipping, 1919.HK Profit guidance +11%

Vanke, 2002.HK Resumed trading following acquisition of CNY55.1B in assets from Guangdong International Trust +0.6%

Japan

Canon, 7751.JP EU fine -2.5%

New Zealand

Steel & Tube Holdings, STU.NZ Cut FY17 guidance -5%

Singapore

Noble Group, NOBL.SG Shares rose over 36% on prior session on speculation of debt waiver request -1.5%

South Korea

Samsung Electronics, 005930.KR Guided Q2 results above estimates -0.2%

US Session Highlights

(US) JUN ADP EMPLOYMENT CHANGE: 158K V 188KE; Prior revised lower from +253K to 230K

(US) DOE CRUDE: -6.3M V -2.5ME

US markets on close: Dow -0.7%, S&P500 -0.9%, Nasdaq -1.0%, Russell -1.5%***

Daily Pivots: (S1) 1.4953; (P) 1.5009; (R1) 1.5115; More...

EUR/AUD's rise from 1.4625 resumed by taking out 1.4997 and reaches as high as 1.5074 so far. Intraday bias is back on the upside for 1.5226 resistance. Rise from 1.3624 is possibly resuming. Break of 1.5226 will confirm and target 1.5455 fibonacci level next. On the downside, however, break of 1.4901 minor support will dampen this bullish view and turn bias back to the downside.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed at 1.3624 after defending 1.3671 key support. Rise from 1.3642 would extend to 61.8% retracement of 1.6587 to 1.3624 at 1.5455. Sustained break there will pave the way to retest 1.6587. However, sustained break of 1.4669 support will dampen this bullish view. We'll assess the outlook later after looking at the structure and depth of the pull back.

Daily Pivots: (S1) 1.0942; (P) 1.0967; (R1) 1.0995; More...

Despite relatively unconvincing upside momentum, EUR/CHF's rally extended through 1.0986, which confirms resumption of rise from 1.0629. Intraday bias is back on the upside for 1.0999 and then 61.8% projection of 1.0652 to 1.0986 from 1.0830 at 1.1036. On the downside, break of 1.0936 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Such correction could have completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance will target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0830 support holds.

Daily Pivots: (S1) 146.15; (P) 146.71; (R1) 147.39; More....

GBP/JPY's rally continues to as high as 147.60 and intraday bias stays on the upside 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. On the downside, break of 146.03 support is needed to indicate short term topping. Otherwise, outlook will remains bullish in case of retreat.

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.

For the 24 hours to 23:00 GMT, the AUD declined 0.32% against the USD and closed at 0.7583.

LME Copper prices rose 0.2% or $10.5/MT to $5828.5/MT. Aluminium prices rose 0.7% or $12.5/MT to $1925.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7585, with the AUD trading a tad higher against the USD from yesterday's close.

Earlier today, data showed that Australia's AiG performance of construction index declined to a level of 56.0 in June, following a level of 56.7 in the previous month.

The pair is expected to find support at 0.7566, and a fall through could take it to the next support level of 0.7548. The pair is expected to find its first resistance at 0.7609, and a rise through could take it to the next resistance level of 0.7634.

Moving ahead, investors will look forward to Australia's NAB business confidence and Westpac consumer confidence data, slated to release next week.

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 EUR rose 0.62% against the USD and closed at 1.1421, after minutes of the European Central Bank (ECB) June meeting indicated that policymakers are tilting towards tapering the central bank's quantitative easing programme.

According to minutes, board members mulled over the possibility of tapering the ECB's asset purchases in coming months if confidence in the region's inflation outlook improves further. However, officials decided against it for now as recovery in the Euro-bloc's economic activity had yet to result in higher inflation. Moreover, the ECB stressed on the need to maintain caution in communication as it could trigger unwarranted movements in financial markets.

In other economic news, data showed that Germany's seasonally adjusted factory orders rebounded 1.0% on a monthly basis in May, undershooting market expectations for a rise of 1.9%. In the prior month, factory orders had registered a revised drop of 2.2%. Meanwhile, the nation's Markit construction PMI fell to a level of 55.1 in June, compared to a reading of 55.3 in the previous month.

The greenback lost ground against its major counterparts, on the back of softer than expected jobs data in the US that pointed to some loss of momentum in the nation's job growth.

Data revealed that the ADP private sector employment in the US climbed less-than-expected by 158.0K in June, compared to market consensus for a rise of 188.0K. The private sector employment had recorded a revised increase of 230.0K in the previous month. Further, the nation's initial jobless claims registered an unexpected rise to a level of 248.0K in the week ended 01 July 2017, rising for the third straight week and confounding market expectations of a drop to a level of 243.0K. Initial jobless claims had registered a level of 244.0K in the previous week. Also, the nation's trade deficit narrowed less-than-anticipated to a level of $46.5 billion in May, after registering a deficit of $47.6 billion in the prior month.

Another set of economic data showed that the US ISM non-manufacturing PMI surprisingly rose to a level of 57.4 in June, while investors had envisaged for a drop to a level of 56.5. In the previous month, the PMI had registered a reading of 56.9. Additionally, the nation's final Markit Markit services PMI unexpectedly advanced to a level of 54.2 in June, expanding at its fastest pace since January 2017 and compared to a reading of 53.6 in the previous month. The preliminary figures had recorded a drop to a level of 53.0. Moreover, the nation's MBA mortgage applications rebounded 1.4% in the week ended 30 June 2017, following a decline of 6.2% in the prior week.

In the Asian session, at GMT0300, the pair is trading at 1.1414, with the EUR trading 0.06% lower against the USD from yesterday's close.

The pair is expected to find support at 1.1354, and a fall through could take it to the next support level of 1.1294. The pair is expected to find its first resistance at 1.145, and a rise through could take it to the next resistance level of 1.1486.

Going ahead, investors will focus on Germany's industrial production data for May, slated to release in a few hours. Additionally, in the US, the crucial non-farm payrolls, unemployment rate and average hourly earnings data, all for June, slated to release later today, will attract significant amount of market attention.

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

For the 24 hours to 23:00 GMT, the GBP rose 0.26% against the USD and closed at 1.2969.

In the Asian session, at GMT0300, the pair is trading at 1.2970, with the GBP trading slightly higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2933, and a fall through could take it to the next support level of 1.2895. The pair is expected to find its first resistance at 1.2996, and a rise through could take it to the next resistance level of 1.3021.

Trading trends in the GBP today is expected to be determined by the release of Britain’s industrial, manufacturing and construction output data along with total trade balance figures, all for May, slated to release in a few hours. Also, the NIESR GDP estimate for the three months to June, will also be on investors’ radar.

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

For the 24 hours to 23:00 GMT, the USD slightly declined against the JPY and closed at 113.13.

In the Asian session, at GMT0300, the pair is trading at 113.70, with the USD trading 0.5% higher against the JPY from yesterday's close.

The pair is expected to find support at 113.11, and a fall through could take it to the next support level of 112.53. The pair is expected to find its first resistance at 114.06, and a rise through could take it to the next resistance level of 114.43.

Next week, investors will keep a close watch on Japan's (BOP basis) trade balance, Eco-Watchers survey, tertiary industry index and final industrial production data.

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