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For the 24 hours to 23:00 GMT, the USD declined 0.36% against the CHF and closed at 0.9606.

On the macro front, Switzerland's consumer price index (CPI) advanced less-than-expected by 0.2% on an annual basis in June, rising at its weakest pace in seven months. In the prior month, the CPI had risen 0.5%, while lower market participants expected for a rise of 0.3%. Meanwhile, on a monthly basis, the nation's consumer prices unexpectedly eased 0.1% in June, compared to an advance of 0.2% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 0.9611, with the USD trading slightly higher against the CHF from yesterday's close.

The pair is expected to find support at 0.9587, and a fall through could take it to the next support level of 0.9564. The pair is expected to find its first resistance at 0.9647, and a rise through could take it to the next resistance level of 0.9684.

Ahead in the day, traders will await the release of Switzerland's unemployment rate data for June.

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

For the 24 hours to 23:00 GMT, the USD rose 0.16% against the CAD and closed at 1.2978.

Macroeconomic data indicated that Canada's building permits jumped 8.9% on a monthly basis in May, higher than market expectations for a gain of 1.0% and after recording a revised advance of 0.5% in the previous month. On the contrary, the nation's international merchandise trade deficit expanded to a level of C$1.09 billion in May, following a revised deficit of C$0.55 billion in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.2985, with the USD trading a tad higher against the CAD from yesterday's close.

The pair is expected to find support at 1.2941, and a fall through could take it to the next support level of 1.2896. The pair is expected to find its first resistance at 1.3012, and a rise through could take it to the next resistance level of 1.3038.

Looking forward, Canada's unemployment rate data for June, due to release later in the day, will keep investors on their toes.

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

Key Points:

• Price action fails to breach trend line and turns negative.
• Key support level at 0.9585 nearing.
• Watch for a breakdown towards the 0.9550 mark in the coming week.

The USDCHF has been under some significant selling pressure of late as the pair continues to decline under the auspices of a bearish trend line. However, there has been some short term resurgence for the pair which saw a concerted move, which ultimately failed, back towards the falling trend line. Subsequently, the ill-fated, short term rally has set the wheels of a breakdown in motion that could yield some significant short side moves in the week ahead.

Fundamentally, there has been a significant swing around the greenback sentiment due to a range of confusing and mixed economic data emanating from the U.S. In particular, retail sales, consumer spending, and a lack of wage inflation appears to be clouding the current economic outlook for the U.S. and this is adding to slipping greenback sentiment. In addition, this is largely overshadowing some of the recent relatively poor data from Switzerland, including a slip in the monthly CPI figures.

In particular, a quick review of the major technical factors provides some illuminating hints as to what is coming for the embattled pair. Presently, the RSI Oscillator is demonstrating a definite downtrend but is yet to reach neutral territory which suggests that there is still room to move on the downside. Also, price action is currently well below the 100 hour moving average and there looks to be little prospect of an upside move towards that level any time soon.

Subsequently, the view is that the pair's recent decline from the 0.9688 mark towards support around the 0.9600 handle suggests that the longer term decline is not yet completed. The most likely scenario is then likely to be a challenge to support at 0.9585 before a sharp move towards our initial target of 0.9552, representing the recent low, and ultimately towards the 0.9500 handle.

Ultimately, the next week will likely be relatively critical for the pair with an impending breakdown and challenge to support at 0.9585. Subsequently, be on guard for a breach of this level because it will cause a fairly rapid Dollar depreciation.

Key Points:

• A flash crash has hit silver markets leaving many traders scratching their heads.
• Numerous explanations have been put forward, including the less reliable ones.
• Prices seem to have stabilised now.

Silver prices have been the subject of significant debate of the past few hours as a result of a flash crash that saw the metal plummet to the $14.27 handle before roaring higher within moments. Of course, this has brought out the usual speculations and accusations about exactly what was driving the movement so we have collected a few honourable mentions that might help to explain the crash.

Firstly, the classic 'fat finger' argument has been put forward by numerous analysts as a contributing factor to the tumble. To elaborate,a fat finger is when human input error generates a substantially erroneous trade – typically via an extra zero here or there. As entertaining as the notion is, such mistakes are typically safeguarded against by various fail safes. What’s more, a spike of this size in such a heavily followed market would almost certainly have been picked up prior to execution.

One slightly more plausible suggestion has been a sudden liquidity drain that sparked a bout of panic selling. Indeed, markets have been fairly thin over the 4th of July holiday period which could have compounded fears that silver was becoming illiquid in the wake of JP Morgan’s recent acquisitions. This being said, the extent to which JP Morgan has ‘rigged’ silver markets is constantly challenged and courts seem to be unable to agree on whether or not the institution is breaking antitrust legislation.

Stop loss orders have also been fingered as a cause for the sudden rout for all the usual reasons. Specifically, the hitting of numerous stop loss orders in rapid succession could have easily amplified the effects of a sell-off – even if they probably didn’t trigger the downtrend in the first place. Moreover, given that many traders may have been out of action due to the holiday’s in the US, it’s quite reasonable to expect more ‘set and forget’ trades to have been placed than is typical. This would have left the metal more exposed to this type of risk than we would usually expect.

Ultimately, there are many other potential explanations for what was hammering silver prices but we may never get to the bottom of it. These include, but are not limited to, algorithmic traders, glitches, stub quotes, and so on. Indeed, it was probably a mix of some, if not all, of the above. Nevertheless, it at least looks as though the metal has stabilised now and it could meander higher now that we are out of the woods. This should see the metal make a beeline for the $16 handle in the coming days, especially as political tensions from the G20 Summit begin to be felt.

Short term USDX (USD Index) Elliott Wave view suggests the rally to 97.88 high on 6/20 ended Intermediate wave (X). Decline from there is unfolding as an impulse Elliott Wave structure with extension and ended at 95.47 low on 6/29. This 5 wave move could be Minor wave A of an Elliott wave zigzag structure structure, where Minute wave ((i)) ended at 97.17 and Minute wave ((ii)) ended at 97.47. Minute wave ((iii)) ended at 96.15, Minute wave ((iv)) at 96.61 and Minute wave ((v)) of A ended at 95.47.

Revised view calls for Minor wave B bounce completed at 96.52. For this view, a break below Minor wave A at 95.47 will add more validity. Until then, a double correction in Minor wave B can’t be completely ruled out. The subdivision of Minor wave B is unfolding as an Elliott wave double three structure. Minute wave ((w)) ended at 96.24, Minute wave ((x)) ended at 96.04 and Minute wave ((y)) of B ended at 96.52. Near term, while bounces stay below Minor wave B at 96.52, expect the Index to resume lower. We don’t like buying the Index.

USDX 1 Hour Elliott Wave Chart

Daily Pivots: (S1) 128.40; (P) 128.90; (R1) 129.82; More...

EUR/JPY's rally extends and reaches as high as 129.91 and there is no sign of topping yet. Firm break of medium term projection level at 128.89 will pave the way to next near term projection level at 100% projection of 114.84 to 125.80 from 122.39 at 133.35. 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 has already met target of 100% projection of 109.03 to 124.08 from 114.84 at 129.89. Sustained break there will pave the way to 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will now remain bullish as long as 122.39 support holds.

Yen tumbles broadly as global bond rout continued and pushed yields higher again. German 10 year bund yields broke 0.5% level for the first time since January 2016. Meanwhile, US 10 year yield jumped to a near two month high and closed firmly at 2.37, up 0.036. The resumed selling in bonds were believed to be triggered by the hawkish ECB minutes which indicated the discussion of removing easing bias. Also, some believed that weak results of French 30 year bond-auction was another trigger. UD/JPY reaches as high as 113.83 as recent rise resumed. GBP/JPY also hits as high as 147.60. Meanwhile, EUR/JPY is even stronger and hits 129.91, set to take on 130 handle.

In response to the developments, BoJ announced to carry out an emergency fixed-rate bond buying operation to curb long term yields under the so called "Yield Curve Control" framework. The central bank said it will buy unlimited amount of JGB with maturities of 5 to 10 years. This is the third time BoJ carries out such operations since the announcement of YCC last year. The first offer in November drew no bids. Under the second operation in February, JPY 723.9b in bonds were purchased.

Yen follows yield, not stocks

We've pointed out before that Yen is decoupling from risk aversion and its now more correlated to yields. This is clearly seen again as global equities tumbled overnight. DOW lost -158.13 pts, or -0.74% to 21320.04. S&P 500 dropped -22.79 pts, or -0.94% to 2409.75. NASDAQ closed down -61.40 pts, or -1.0% at 6089.46. NASDAQ stays the more vulnerable one as last week's low was breached. Weakness carries on in Asia with Nikkei trading down -0.3% and broke 20000 handle at the time of writing. FTSE and DAX might set to take on last week's low at 7302.7 and 12319 respectively.

Euro boosted by hawkish ECB accounts

For the week so far, Euro is the second strongest major currency, behind Dollar by a thin margin. And yesterday's rebound in EUR/USD could actually be setting up for a break through 1.1444 resistance today. The minutes for the June ECB meeting turned out more hawkish than expected. The minutes unveiled that policymakers had discussed removing the guidance on the bond asset purchase program (QE), if necessary. Policymakers just shrugged off recent weakness in headline inflation as core inflation continued to climb higher. This came in line with President Mario Draghi's comments last week that "deflationary forces have been replaced by reflationary ones", pointing to a "strengthening and broadening recovery" in the Eurozone. More in June's Minutes Revealed ECB Discussed over Removing Asset Purchases Guidance, Euro Soars

NFP expectations setting up for downside surprise

Non-farm payroll report from US will be the main focus today. Economists expect 173k growth in the job market in June, with unemployment rate unchanged at 4.3%. Average hourly earnings are expected to show 0.3% mom growth. Looking at other related data, ADP private payroll was a disappointment with only 158k growth. Employment component of ISM services dropped from 57.8 to 55.8. But employment component of ISM manufacturing jumped sharply from 53.5 to 57.2. Four week moving average of initial jobless claims was relatively unchanged at 243k while continuing claims stayed below 2m level. Conference board consumer confidence improved slightly to 118.9. The data point to a solid NFP report today, which on the other hand, could be seen as a setup for a downside surprise.

Also on the data front, Japan labor cash earnings rose 0.7% yoy in May, while real cash earnings rose 0.1% yoy. UK production data will be the main focus in European session, where trade balance will also be released. Germany will release industrial production too. Swiss will release unemployment and foreign currency reserves. Later in the day, in additional to US NFP, Canada will also release employment data and Ivey PMI.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 128.40; (P) 128.90; (R1) 129.82; More...

EUR/JPY's rally extends and reaches as high as 129.91 and there is no sign of topping yet. Firm break of medium term projection level at 128.89 will pave the way to next near term projection level at 100% projection of 114.84 to 125.80 from 122.39 at 133.35. 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 has already met target of 100% projection of 109.03 to 124.08 from 114.84 at 129.89. Sustained break there will pave the way to 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will now remain bullish as long as 122.39 support holds.

Economic Indicators Update

Uh oh. It happened again.

Speaking to people around the traps this morning, it actually doesn’t even sound like it was a fat finger as such. It is a break of a daily trend line that has been in play since 2015 and it just happened to line up with the previous swing low from 2016.

There would have been a tonne of stops sitting just below this level and in illiquid Asian session trading, we know things can get out of hand quite quickly when sell orders all start triggering with nobody in sight to buy.

Take a look at what I’m talking about on the XAG/USD daily chart below:

Silver Daily:

STOCKS

Dow (21320.04, -0.74%) broke below 21400, indicating that the downward correction might not be over yet. Note that 21500 is a crucial long term resistance which could bring in sharp rejection towards 21200 or maybe even lower. Medium term looks bearish.

Dax (12381.25, -0.58%) has been trading exactly between 12500 and 12300 levels and as mentioned yesterday, while 12500 holds we could see some more downside in the near term possibly extending towards 12200 levels. Near term looks sideways to bearish.

Shanghai (3196.23, -0.50%) is in an uptrend and could see eventual rise towards 3220-3240 with some interim dips. We could see a bounce from 3190 back to higher levels next week.

Nikkei (19965.78, -0.14%) came down to test 19856 contrary to our expectation of a rise. There could be some chances of testing 19750 on the downside in the near term but overall medium term looks potentially bullish.

Nifty (9674.55, +0.38%) made an intra-day high of 9700 yesterday, testing our initial target. 9700 is an important level just now and if it breaks, we could see a sharp 100points rally towards 9800 soon. Else there could be some scope of consolidation within 9600-9700 region.

COMMODITIES

In the smaller time frame, Gold (1219) is oversold and needs a pause before attempting sub 1190 levels. It is hovering around 1120 levels which is a near term area of support and a pause in the range of 12320-1245 can provide the necessary bearish momentum.

Silver (15.74) is trading below its support of 15.80. The scrip is oversold too thus weekend profit taking could pull the price towards 16.20 levels. Markets are now awaiting U.S. non-farm payrolls for June, due on today at 6:00 pm IST, for more insight into Fed policy and the future path of U.S Dollar.

No directional movement had been seen in Copper (2.66) also as it is trading within the range of 2.66-2.78.If 2.66 holds then we might see 2.82 within few days of time otherwise it might come back towards 2.55 levels. We will remain bullish on copper while it is trading above 2.55 levels.

A shortage in U.S crude inventory by more than 6 million barrels could not generate enough buying momentum to keep the prices of Brent (47.46) and WTI (44.92) above their respective resistances. Prices had fallen as OPEC June exports were up 450k bpd from May, and up 1.9 million barrel a day from a year ago due to the supply from Libya and Nigeria, which are not bound by the OPEC/NOPEC production cut agreements. If the key resistances of 48 (Brent) 46.50 (WTI) will hold for the week then gradual selling for the target of 44.70 and 42 can ’t be ruled as seller will take every bounce as a further opportunity for selling.

FOREX

The currency markets are preparing for the shift to a more hawkish stance of the central banks from the decade long accommodative stance, pushing the yields higher everywhere and strengthening majors against Dollar. US NFP data tonight remains the main focus now.

It was stated repeatedly earlier in the week that most of the majors have been in a normal correction and further break of major supports are required before the downtrend can be confirmed. The correction of Euro (1.1415) has probably ended as it bounced back near to the year high of 1.1445 and Dollar Index (95.92) slipped below 96.00. If the US NFP data comes weak tonight, Dollar may test the major support of 95.50-40 while Euro may rise further to the long term resistance area near 1.15-1.16.

Dollar Yen (113.69) is rallying towards our targets of 114.30-115.00 as expected with the immediate support coming higher at 113.00-112.75.

Pound (1.2970) responded well to the requirement of an immediate rally but still requires a break above the major resistance area of 1.3030-50 to negate downside risks and confirm further rise towards 1.3200.

Aussie (0.7585) remains weak despite the global Dollar weakness and may test the lower support levels of 0.7530-15.

Dollar Rupee (64.78) closed flat despite the activity in the global forex and may end the week in the range of 64.60-90 without much movement.

INTEREST RATES

The US yields have risen sharply, the 30YR (2.92%) breaking above the immediate resistance. The 5YR (1.94%) and the 10Yr (2.37%) are also trading higher and looks bullish for the next few sessions.

The US 10-5Yr differential (0.43%) has risen sharply and could test resistance near 0.4375% in the next few sessions from where a rejection towards 0.4125% is possible.

The German-US 10Yr (-1.81%) has risen above important resistance and while that holds, the yield spread could move up in the near term. In that case, it could be an indication of further strength in Euro.

The US-Japan 10Yr (2.28%) has been rising sharply in the last few sessions and while it continues to rise, we may see a weaker Yen going forward. The yield spread could rise towards 2.33% in the coming sessions.

The German-Japan 10Yr yield spread (0.47%) has broken a long 1-year sideways channel and moved up sharply. The spread could move up further in the near term and take up EUR/JPY to much higher levels in the near term. A rise in EUR/JPY (129.84) towards 132 and higher is possible soon.

Another stellar volume day in the Forex world with clear and distinct market drivers leading the way. After 24 hours to digest the FOMC minutes smart money suggest one more rate hike in 2017 but the tail risk given the markets disparate US economic view is a softer outlook as the market continues to lean against the Federal Reserve Hawkish convictions given the downcast inflation outlook.

As for the Greenback, the key to any sustainable USD recovery is down to the yield curve and more precisely a faster and steeper tightening cycle.

The first Friday of the month brings in the granddaddy of all economic indicators, US Non-Farm payrolls. The markets will look past the headline print and focus on the wage growth component given the Feds” It’s all about inflation mandate.“
The ECB minutes were viewed minimally hawkish, but the EUR resurgence was driven off the back of fixed income moves with the market seeing the Feds to hike just one more time in 2017 while l the ECB looks to taper and perhaps even more aggressively than the current view.With that in mind, German bund yields broke 0.50% for the first time since January 2016

Although US payrolls will be the primary focus, the G-20 summit should not be ignored given the US Presidents Trumps controvertible view of the brave new world. Expect the president’s tone to be bombastically pugnacious toward the developments in North Korea which move from the spotlight to under the microscope.

There is such an unpalatable level of uncertainty that suggests investor appetite for risk remains low.