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Global Markets:

• Asian stock markets: Nikkei up 0.40 %, Shanghai Composite fell 0.40 %, Hang Seng rose 0.05 %, ASX 200 rallied 1.70 %
• Commodities: Gold at $1223 (+0.30 %), Silver at $16.03 (-0.35 %), WTI Oil at $46.80 (-0.55 %), Brent Oil at $49.40 (-0.60 %)
• Rates: US 10-year yield at 0.48, UK 10-year yield at 1.26, German 10-year yield at 0.48

News & Data

• Australia Retail Sales 0.6 % vs 0.2 % expected
• Australia ANZ Roy Morgan Weekly Consumer Confidence Index Jul 114.5 (prev 111.8)
• South Korea CPI (M/M) Jun: -0.20% (prev 0.10%; est -0.10%)
• Japan Monetary Base 17.0 % vs 19.2 % expected
• New Zealand NZIER Business Confidence 18 % vs 17 % previous
• Asian shares track U.S., European gains, dollar hovers near seven-week high – RTRS
• Oil rises more than 2 percent as U.S. crude output slows – RTRS

Markets Update:

The US Dollar consolidated regained some strength after solid US economic data releases. EUR/USD fell to 1.1355 in Asia. After the break below 1.1370, the next major support level is now seen at 1.1320. The outlook remains positive, and buying interest is likely to remain high on larger dips.

GBP/USD was rejected at 1.3020 resistance on Monday and retraced to 1.2930. Key support is seen at 1.2920. A break below would signal that the pair is likely to retest 1.2850 support soon.

USD/JPY rallied yesterday amid broad USD strength and rising stock markets. The pair reached 113.40 overnight and there is little resistance until 114.40 now. Support is noted at 113 and 112.60.

The Australian Dollar rose after better than expected Retail Sales data. However, the pair quickly retraced the rally and settled around 0.7660/70 for the rest of the trading session.

WTI is back above $47 and the outlook for Oil has turned positive. This could keep USD/CAD under pressure. Following the break below 1.2970 support, the next major support level now lies at 1.28.

Upcoming Events:

• 09:30 BST – UK Construction PMI
• 13:30 BST – ECB Member Praet speaks

For the 24 hours to 23:00 GMT, the AUD declined 0.3% against the USD and closed at 0.7661.

LME Copper prices declined 0.2% or $13.5/MT to $5894.0/MT. Aluminium prices rose 0.5% or $9.0/MT to $1917.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7665, with the AUD trading a tad higher against the USD from yesterday’s close.

Earlier today, the Reserve Bank of Australia (RBA), at its latest monetary policy meeting, opted to leave the key interest rate steady at 1.5%, meeting market expectations.

The pair is expected to find support at 0.7644, and a fall through could take it to the next support level of 0.7624. The pair is expected to find its first resistance at 0.7686, and a rise through could take it to the next resistance level of 0.7708.

Moving ahead, market participants will await the release of Australia’s AiG performance of services index for June, scheduled to release overnight.

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

For the 24 hours to 23:00 GMT, the EUR declined 0.45% against the USD and closed at 1.1368.

On the data front, the Euro-zone's final Markit manufacturing PMI was revised higher to a level of 57.4 in June, expanding at its fastest pace in more than six years and compared to a level of 57.3 recorded in the flash estimate. In the prior month, the PMI had registered a level of 57.0. Additionally, the region's unemployment rate remained steady at 9.3% in May, at par with market expectations and maintaining its lowest level since March 2009.

Separately, activity in Germany's manufacturing sector unexpectedly advanced to a level of 59.6 in June, accelerating at its fastest pace in more than six years, while the preliminary print had indicated a fall to a level of 59.3. In the previous month, the PMI had registered a reading of 59.5.

The greenback strengthened against its key peers, after data showed that the US ISM manufacturing activity index jumped more-than-expected to a level of 57.8 in June, surging to its highest level in three years, thus indicating that the sector is on course for stronger growth in the second half of the year. Market participants expected the PMI to rise to a level of 55.2, after recording a reading of 54.9 in the prior month.

Meanwhile, the nation's construction spending remained flat on a monthly basis in May, compared to a revised drop of 0.7% in the prior month, while investors were expecting construction spending to advance 0.3%. On the contrary, the nation's final Markit manufacturing PMI fell more than initially estimated in June, after it declined to a level of 52.0, compared to a drop to a level of 52.1 registered in the flash estimate. In the prior month, the PMI had recorded a level of 52.7.

In the Asian session, at GMT0300, the pair is trading at 1.1366, with the EUR trading slightly lower against the USD from yesterday's close.

The pair is expected to find support at 1.1341, and a fall through could take it to the next support level of 1.1316. The pair is expected to find its first resistance at 1.1405, and a rise through could take it to the next resistance level of 1.1444.

Going ahead, investors will look forward to the Euro-zone's producer price index for May, slated to release in a few hours.

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 0.48% against the USD and closed at 1.2943, after UK's manufacturing sector showed a poor performance in June.

Data showed that Britain's Markit manufacturing PMI unexpectedly eased to a level of 54.3 in June, marking its slowest pace of expansion in three months, adding further evidence of a slowing economy that is expected to face renewed downside pressure in the wake of political uncertainties. The PMI had registered a revised reading of 56.3 in the prior month, while investors had envisaged it to remain steady.

In the Asian session, at GMT0300, the pair is trading at 1.2937, with the GBP trading marginally lower against the USD from yesterday's close.

The pair is expected to find support at 1.2905, and a fall through could take it to the next support level of 1.2873. 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 1.3055.

Looking forward, Britain's Markit construction PMI for June, scheduled to release in a few hours, will be on investors' radar.

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 0.89% against the JPY and closed at 113.37.

In economic news, Japan's consumer confidence index unexpectedly dropped to a level of 43.3 in June, defying market consensus for the index to advance to a level of 43.9 and compared to a reading of 43.6 in the previous month.

In the Asian session, at GMT0300, the pair is trading at 113.25, with the USD trading 0.11% lower against the JPY from yesterday's close.

Overnight data showed that the nation's monetary base climbed less-than-anticipated by 17.0% YoY in June, compared to a gain of 19.4% in the previous month.

The pair is expected to find support at 112.57, and a fall through could take it to the next support level of 111.89. The pair is expected to find its first resistance at 113.70, and a rise through could take it to the next resistance level of 114.15.

Looking ahead, investors will keep a close watch on Japan's final Nikkei services PMI for June, due to release overnight.

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 0.46% against the CHF and closed at 0.9635.

On the data front, Switzerland's real retail sales slid 0.3% on an annual basis in May, after recording a revised drop of 0.9% in the previous month. On the other hand, the nation's SVME manufacturing PMI rose more-than-anticipated to a level of 60.1 in June, compared to market expectations of a rise to a level of 56.3.

In the prior month, the PMI had registered a reading of 55.6. In the Asian session, at GMT0300, the pair is trading at 0.9635, with the USD trading flat against the CHF from yesterday's close.

The pair is expected to find support at 0.9600, and a fall through could take it to the next support level of 0.9566. The pair is expected to find its first resistance at 0.9656, and a rise through could take it to the next resistance level of 0.9678.

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 0.23% against the CAD and closed at 1.3005.

In the Asian session, at GMT0300, the pair is trading at 1.2993, with the USD trading 0.09% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.2967, and a fall through could take it to the next support level of 1.2942. The pair is expected to find its first resistance at 1.3016, and a rise through could take it to the next resistance level of 1.3040.

Ahead in the day, traders would focus on Canada's Markit manufacturing PMI for June, to gauge strength in the nation's manufacturing sector.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

The broad-based pick-up in the global economy is continuing. Labour markets have tightened further in many countries and forecasts for global growth have been revised up since last year. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. The rise in commodity prices over the past year has boosted Australia's national income.

Headline inflation rates, having moved higher over the past year, have declined recently in response to lower oil prices. Wage growth remains subdued in most countries, as does core inflation. Further increases in US interest rates are expected and there is no longer an expectation of additional monetary easing in other major economies. Financial markets have been functioning effectively and volatility has been low.

As expected, GDP growth slowed in the March quarter, partly reflecting temporary factors. The Australian economy is expected to strengthen gradually, with the transition to lower levels of mining investment following the mining investment boom almost complete. Business conditions have improved and capacity utilisation has increased. Business investment has picked up in those parts of the country not directly affected by the decline in mining investment. At the same time, consumption growth remains subdued, reflecting slow growth in real wages and high levels of household debt.

Indicators of the labour market remain mixed. Employment growth has been stronger over recent months. The various forward-looking indicators point to continued growth in employment over the period ahead. Wage growth remains low, however, and this is likely to continue for a while yet. Inflation is expected to increase gradually as the economy strengthens.

The outlook continues to be supported by the low level of interest rates. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.

Conditions in the housing market vary considerably around the country. Housing prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease. In some other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. Growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of household indebtedness. Lenders have also announced increases in mortgage rates for investor and interest-only loans.

Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Short term EURJPY Elliott Wave view suggests the decline to 122.35 on 6/15 low ended Intermediate wave (X). Rally from there is unfolding as an impulse Elliott Wave structure with extension. This 5 wave move could be Minor wave A of an Elliott wave zigzag structure structure, where Minute wave ((i)) ended at 124.46 and Minute wave ((ii)) ended at 123.62. Minute wave ((iii)) ended at 127.84, Minute wave ((iv)) at 126.46 and Minute wave ((v)) of A is in progress towards 129.16 – 129.7.

Near term, while pair stays above 127.41, expect further upside towards the mentioned target. Afterwards, pair should pull back in larger degree 7 or 11 swings to correct cycle from 6/15 low before the rally resumes again. We don’t like selling the Index and expect buyers to appear after 7 or 11 swings pull back for extension higher. This view remains valid as far as pivot at 6/15 low 122.35 remains intact.

EURJPY 1 Hour Elliott Wave Chart

EURUSD

The EURUSD was corrected lower yesterday bottomed at 1.1355. The bias is neutral in nearest term probably with a little bearish bias testing 1.1285 area but overall I remain bullish and any downside pullback should be seen as a good opportunity to buy. Immediate resistance is seen around 1.1425. A clear break and daily close above that area could end the bearish correction phase testing 1.1500 – 1.1530 region. On the downside, a clear break and daily close back below 1.1285 would expose 1.1180 region but key support remains at 1.1080.

GBPUSD

The GBPUSD had a bearish momentum yesterday bottomed at 1.2932. It’s clear to me that price respects 1.3050 key resistance which need to be clearly broken to the upside to activate my bullish mode. The bias is bearish in nearest term testing 1.2900 – 1.2875 area. Immediate resistance is seen around 1.3000. A clear break above that area could trigger further bullish pressure retesting 1.3050 key resistance. On the downside, a clear break and daily close back below 1.2875 would expose 1.2815/00 region.

USDJPY

The USDJPY continued its bullish momentum yesterday topped at 113.47. The bias is bullish in nearest term testing 114.30 region. Immediate support is seen around 112.60. A clear break below that area could lead price to neutral zone in nearest term testing 112.00 region but overall I remain bullish and any downside pullback should be seen as a good opportunity to buy. On the upside, a clear break and daily close above 114.30 would expose 115.50 region this week.

USDCHF

The USDCHF was corrected higher yesterday topped at 0.9642. The bias is bullish in nearest term testing 0.9675. A clear break above that area could trigger further bullish pressure testing 0.9765. Immediate support is seen around 0.9600. A clear break below that area could lead price to neutral zone in nearest term testing 0.9550 – 0.9450 key support area which remains a good place to buy with a tight stop loss below 0.9450 as a clear break below that area would expose 0.9250 region.