Sample Category Title

Daily Pivots: (S1) 1.2935; (P) 1.2972; (R1) 1.3000; More....

With 1.3045 minor support intact, further decline is still expected in USD/CAD. Sustained trading below 1.2968 cluster support, 61.8% retracement of 1.2460 to 1.3793 at 1.2969 will pave the way to retesting 1.2460 low. On the upside, above 1.3045 will indicate short term bottoming, possibly on bullish convergence condition in 4 hour MACD. In such case, stronger rebound would be seen back to 1.3164/3346 resistance zone first, before staying another decline.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The second leg should have finished at 1.3793. Break of 1.2460 will tend such correction to 50% retracement of 0.9406 to 1.4869 at 1.2048. At this point, we'd look for strong support from there to contain downside and bring rebound. However, firm break there will target 100% projection of 1.4689 to 1.2460 from 1.3793 at 1.1564.

Daily Pivots: (S1) 0.7665; (P) 0.7689; (R1) 0.7710; More...

Intraday bias in AUD/USD remains neutral for consolidation below 0.7711 temporary top. Further rally is expected as long as 0.7534 support holds. Above 0.7711 will target 0.7748 resistance and above. At this point, there is no clear sign of range breakout yet. Hence, we'd be cautious on topping again as it approaches medium term fibonacci level at 0.7849. On the downside, break of 0.7534 will indicate near term reversal and turn bias back to the downside for 0.7370 support.

In the bigger picture, we're still treating price actions from 0.6826 low as a corrective pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8096) and above.

Daily Pivots: (S1) 1.1394; (P) 1.1419 (R1) 1.1447; More.....

Intraday bias in EUR/USD remains neutral for consolidation below 1.1444 temporary top. Downside of retreat should be contained by 1.1291 support to bring another rise. Break of 1.1444 will extend the rally from 1.0339 low to 1.1615 resistance next.

In the bigger picture, the firm break of 1.1298 resistance further affirm medium term reversal. That is an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Further rise would be seen to 55 month EMA (now at 1.1776). Sustained break there will pave the way to 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 next. This will now remain the favored case as long as 1.1118 support holds.

Daily Pivots: (S1) 1.2970; (P) 1.3000; (R1) 1.3056; More...

Intraday bias in GBP/USD remains neutral for consolidation below 1.3029 temporary top. Downside of retreat should be contained above 1.2849 support to bring rise resumption. Break of 1.3029 should then send GBP/USD through 1.3047 to 61.8% projection of 1.2108 to 1.3047 from 1.2588 at 1.3168 next.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern that is still in progress. While further upside is now in favor, overall outlook remains bearish as long as 1.3444 key resistance holds. Larger down trend from 1.7190 is expected to resume later after the correction completes. And break of 1.2588 will indicate that such down trend is resuming.

Daily Pivots: (S1) 0.9558; (P) 0.9578; (R1) 0.9604; More.....

Intraday bias in USD/CHF remains neutral for consolidation above 0.9551 temporary low. Upside of recovery should be limited below 0.9770 resistance and bring resumption. Below 0.9551 will extend the decline from 1.0342 to 0.94443 key support level. At this point, we'd expect strong support from there to bring rebound.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.

A note on lower timeframe confirming price action...

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails ... essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

We typically search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 1-3 pips beyond confirming structures.

EUR/USD

Weekly gain/loss: + 225 pips

Weekly closing price: 1.1417

Over the last week, the EUR/USD bulls went on the offensive and aggressively closed within the walls of a major weekly supply zone drawn from 1.1533-1.1278. Considering that this area has been in motion since May 2015, and held price lower on several occasions since then, we feel the bears will not give up without a fight here!

Branching down to the daily candles, we can see that Friday's session turned red, consequently breaking a three-day bullish phase. With that being said though, the pair was unable to close below support at 1.1415. Should the bulls reignite momentum from here, the next area of interest can be seen at 1.1464: a major Quasimodo resistance level.

A quick recap of Friday's movement on the H4 timeframe reveals that the 1.14 handle, once again, provided support to this market. This number is closely supported by a demand coming in at 1.1372-1.1390, which we consider to be the original ‘decision point' that enabled price to initially break above 1.14. Also in view is the mid-level resistance at 1.1450. 34 pips above this number sits a strong-looking supply area (see back to the 4th May 2016) at 1.1529-1.1484 (seen higher on the chart), which along with the daily Quasimodo resistance level mentioned above at 1.1464, is the last remaining areas of higher-timeframe structures within the aforementioned weekly supply.

Our suggestions: While the bulls did have an incredibly strong week, we cannot ignore the fact that price remains trading within a major weekly supply. Additionally, it's also closely positioned to a major daily Quasimodo resistance as well as the H4 showing a strong-looking supply located nearby (see above for values).

Therefore, our team will be watching for price to strike the 1.1484/1.1464 region today/this week (underside of H4 supply/daily Quasimodo resistance) for a possible short trade. It might also be worth noting that stops set above 1.1450 (buy stops), alongside breakout buyers' orders, will likely provide liquidity for bigger players to sell! Just to be on the safe side though, we are recommending that a trade should only be qualified as viable should the H4 candles print a reasonably sized bearish candle, preferably in the shape of a full-bodied candle.

Data points to consider: US ISM manufacturing PMI at 3pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.1484/1.1464 ([waiting for a reasonably sized H4 bear candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle's wick).

GBP/USD

Weekly gain/loss: + 308 pips

Weekly closing price: 1.3026

The GBP/USD had an absolutely smashing week, netting over 300 pips! This resulted in a near-full-bodied weekly bullish candle being created, which closed within the confines of a weekly supply zone printed at 1.3120-1.2957. In the event that the bulls continue to remain dominant, the next area in the firing range is a weekly Quasimodo resistance level at 1.3371.

From the daily timeframe, apart from Monday's session, the bulls printed back-to-back bullish candles throughout the week. This concluded with the unit closing trade within the walls of a supply zone marked at 1.3058-1.2979, which is essentially a partner supply to the aforementioned weekly supply. Beyond this barrier, the next base in view will likely be the supply area visible at 1.3278-1.3179 (seen higher on the chart).

H4 support at 1.2971, once again, held steady on Friday, following a selloff from highs of 1.3029. What's also notable from a technical perspective is that this occurred around the large psychological number 1.30. With the H4 candles seen closing strongly back above 1.30 on Friday, is there a chance that the bulls may continue to lift this market north today/this week? Well, in our opinion, there's little H4 structure to the left of current price that appears troubling until we reach the H4 mid-level resistance at 1.3050, followed by a Quasimodo resistance level at 1.3091 (seen higher on the chart).

Our suggestions: While a long is tempting above the 1.30 boundary given that it is a closely watched number, it is not a position that we'd label high probability considering the higher-timeframe technical landscape we're in at the moment.

In fact, shorts would probably be the better bet. Here's why:

Weekly supply at 1.3120-1.2957.

Daily supply at 1.3058-1.2979.

Mid-level H4 resistance at 1.3050/H4 Quasimodo resistance at 1.3091/1.31 psychological number.

For us, the best trade would be a short from the above noted H4 Quasimodo resistance level. Not only do we have the option of then placing stops ABOVE the said weekly supply, but we, alongside the bigger players, can use these stops taken from above the noted daily supply as liquidity i.e. looking to take advantage of a possible fakeout. Remember, stops above supplies are buy orders, and are thus liquidity for sellers!

Data points to consider: UK manufacturing PMI at 9.30am, BoE Gov. Carney speaks at 1pm. US ISM manufacturing PMI at 3pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.3091 (stop loss: 1.3122).

AUD/USD:  

Weekly gain/loss: + 114 pips

Weekly closing price: 0.7682

After breaking above 0.7610-0.7543 and retesting this area as a weekly support, this revived demand for the Aussie dollar last week and ended with price testing a weekly trendline resistance extended from the high 0.7835. In view of this line being positioned just beneath a weekly supply at 0.7849-0.7752, we believe there's a chance the pair may see the unit punch higher before turning south.

Zooming in and looking at the daily timeframe, we can see that the candles swallowed the 0.7679-0.7640 area on Thursday and retested it as support on Friday. The retest, however, was not convincing and concluded forming a rather aggressive selling wick. This was, we believe, due to two things:

Weekly price connecting with the said weekly trendline resistance!

Daily price coming within an inch of testing a daily Quasimodo resistance level at 0.7719.

A brief look at recent dealings on the H4 timeframe shows price whipsawed through the 0.77 handle and touched gloves with a 161.8% ext. at 0.7708 taken from the low at 0.7519. This, as you can see, sent the pair back down to support at 0.7676 going into Friday's close.

Our suggestions: Through the lens of a technical trader, this is a somewhat difficult market to trade at the moment. Although the weekly timeframe suggests that selling could be the way forward, both the H4 and daily charts suggest otherwise! Therefore, we believe neither a long nor short is attractive right now.

Data points to consider: Chinese Caixin manufacturing PMI at 2.45am. US ISM manufacturing PMI at 3pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

USD/JPY 

Weekly gain/loss: + 108 pips

Weekly closing price: 112.37

With weekly price recently finding a floor of support around the 110.30 mark, a potential AB=CD correction (see pink arrows) that completes within supply pegged at 115.50-113.85 could take shape this week. What's also notable from a technical perspective is that this supply zone has already managed to cap upside beautifully in early May, so there's a good chance of history repeating itself here.

Despite weekly price showing signs of heading higher this week, daily action continues to hang on by a thread around the upper edge of a daily resistance area penciled in at 111.35-112.37. This zone has been active since late January, so it is certainly not a base one should ignore. Providing that this area remains in position, the next downside target from here can be seen at 109.11: a Quasimodo support level. A break to the upside, nevertheless, has the trendline resistance taken from the high 115.50 to target.

Moving over to the H4 timeframe, the picture shows a possible AB=CD bullish formation in the works. The competition point for this pattern (the green area) is comprised of both May/April's opening levels at 111.29/111.41, the AB=CD 127.2% ext. at 111.93 and a 61.8% Fib support at 111.52. What's also interesting here is that this buy zone is positioned just beneath a H4 channel support line extended from the low 110.64, so this could encourage a possible fakeout below the ascending line.

Our suggestions: While a buy from the green H4 area is tempting, we have to take into account that there's no higher-timeframe support converging with this zone. Therefore, despite the confluence, it is still a risky trade. One way of overcoming this is to wait for a H4 bull candle to form, preferably in the shape of a full-bodied candle, as this will help pin down buyer intent.

Data points to consider: US ISM manufacturing PMI at 3pm GMT+1.

Levels to watch/live orders:

• Buys: 111.29/111.52 ([waiting for a reasonably sized H4 bull candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle's tail).
• Sells: Flat (stop loss: N/A).

USD/CAD

Weekly gain/loss: – 303 pips

Weekly closing price: 1.2962

The USD/CAD suffered a nasty decline in value last week, losing over 300 pips in the process! Consequent to this, weekly price is now trading beneath the 1.3006-1.3115 area, which was a respected area of support. Worryingly for the bulls on the weekly timeframe is that the the next area of interest is a weekly support level coming in at 1.2538. By the same token, the daily timeframe also shows room to move down to at least the demand base drawn from 1.2822-1.2883.

Recent trading on the H4 timeframe shows us that the large psychological number 1.30 was taken out and then later retested as a resistance on Friday. There are two things we like here:

Not only is there room seen for the pair to trade lower on the higher timeframes, but there is also space for a move lower on the H4 timeframe down to demand penciled in at 1.2910-1.2923.

Friday's closing candle is, in our humble opinion, a signal to suggest that the bears will now look to take things lower.

Our suggestions: With the above two points in mind, our team has taken a small short position at 1.2970 with a stop-loss order positioned above 1.30 at 1.3005 (a 35-pip stop). The initial target is the aforementioned H4 demand. So, this gives a 47-pip target – nearly 1.5 times our risk.

Data points to consider: US ISM manufacturing PMI at 3pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (Stop loss: N/A).
• Sells: 1.2970 ([live] stop loss: 1.3005).

USD/CHF

Weekly gain/loss: – 108 pips

Weekly closing price: 0.9583

The USD/CHF fell sharply last week, consequently running through the weekly support level at 0.9639 and shaking hands with weekly support at 0.9581. Providing that this level holds steady, we believe that 0.9639 will likely be retested as resistance.

The story on the daily chart shows that price has begun showing signs of buyer intent from an AB=CD 127.2% ext. at 0.9561, which is positioned just ahead of a support level pegged at 0.9546. Similar to the weekly timeframe, should the current daily level hold firm then the next area on the hit list will likely be the said weekly resistance level.

For those who read previous reports you may recall that our desk highlighted the green H4 area at 0.9546/0.9581 (comprised of weekly and daily supports – see above) as a possible buy zone. At the time of writing, our desk remains long this market from 0.9567 with a stop positioned below the daily support (0.9546) at 0.9544. The entry trigger came in the shape of near-full-bodied bullish candle late on Thursday.

Our suggestions: Ultimately, we're looking for price to take out the 0.96 number, which should then free the path north up to the weekly resistance level at 0.9639 – an ideal take-profit level!

Apart from our current trade one could look to long on a close above 0.96. However, this would entail one finding a small enough stop-loss order to accommodate reasonable risk/reward up to 0.9639.

Data points to consider: US ISM manufacturing PMI at 3pm GMT+1.

Levels to watch/live orders:

• Buys: 0.9567 ([live] stop loss: 0.9544).
• Sells: Flat (stop loss: N/A).

DOW 30:  

Weekly gain/loss: – 14 points

Weekly closing price: 21372

US equity prices are effectively unchanged this week, which led to a clear-cut weekly indecision candle forming. From the weekly timeframe, it is clear to see that this market's underlying trend is strong. However, should the index pullback, the support level drawn from 21022 is likely the area where we'll see the bulls make an appearance.

Daily demand at 21192-21254 was brought into view last week. Despite this area having its entire range challenged, it managed to remain strong.

In Friday's report, we mentioned that our desk took a long trade at 21323, following the large H4 bull candle that formed off the H4 support level marked at 21268. What attracted us to this point was that the H4 level converged with a H4 61.8% Fib support level at 21275 taken from the low 21108 as well as a H4 127.2% Fib ext. point 21237 drawn from the high 21541 and also because of the aforementioned daily demand currently in play.

Our suggestions: Ultimately, we are watching for H4 price to challenge the trendline resistance extended from the high 21541. This is an ideal place to think about reducing risk to breakeven and maybe taking some of the position off the table.

Data points to consider: US ISM manufacturing PMI at 3pm GMT+1.

Levels to watch/live orders:

• Buys: 21323 ([live] stop loss: 21188).
• Sells: Flat (stop loss: N/A).

GOLD:  

Weekly gain/loss: – $15

Weekly closing price: 1241.3

In last week's weekly report, we highlighted the prominent weekly buying tail that took shape. Our reasoning behind this candle formation not qualifying as an eligible buy signal was due to where it formed: it had absolutely no support! As we can all see, in this instance we were correct and the bears continued to pummel the metal lower last week, consequently bringing the unit down to within striking distance of a weekly demand base coming in at 1194.8-1229.1.

From the daily scale, bullion is seen trading from a resistance area coming in at 1247.7-1258.8. Should the bears remain in the driving seat then the next area on the radar for our team would be the channel support extended from the low 1180.4, which happens to intersect with the said weekly demand.

April's opening level at 1248.0 managed to hold firm as resistance last week on the H4 chart, which looks as though this will send the metal down to H4 support at 1235.0, followed closely by H4 demand at 1229.1-1231.6 (this area is positioned on top of the aforementioned weekly demand zone).

Our suggestions: Basically, given the above points our team is now watching the current H4 demand for a potential long opportunity this week. The stops beneath the said H4 support level will likely provide the big boys a reasonable amount of liquidity to buy into, and also let's not forget how well connected the H4 demand zone is to both the weekly demand area and the daily channel support line (see above). However, seeing as this H4 demand base is rather small in size, a fakeout is likely to occur. We feel the best way to deal with this is simply wait for a H4 bullish candle to form, preferably a full or near-full-bodied candle, before pulling the trigger.

Levels to watch/live orders:

• Buys: 1229.1-1231.6 ([waiting for a reasonably sized H4 bull candle – preferably a full-bodied candle – to form before pulling the trigger is advised if you want to help avoid a potential fakeout] stop loss: ideally beyond the candle's tail).
• Sells: Flat (stop loss: N/A).

Global Markets:

• Asian stock markets: Nikkei up 0.20 %, Shanghai Composite gained 0.05 %, Hang Seng fell 0.05 %, ASX 200 declined 0.35 %
• Commodities: Gold at $1238 (-0.30 %), Silver at $16.58 (+0.05 %), WTI Oil at $46.20 (+0.35 %), Brent Oil at $48.85 (+0.15 %)
• Rates: US 10-year yield at 2.33, UK 10-year yield at 1.26, German 10-year yield at 0.47

News & Data

• China Caixin Manufacturing PMI 50.4 vs 49.5 expected
• Australia Building Approvals -5.6 % vs -1.3 % expected
• Japan Tankan Large Manufacturers Index 17.0 vs 15.0 expected
• Japan Large Non-Manufacturers Index 23.0 vs 23.0 expected
• Japan Tankan All Big Industry CAPEX 8.0 % vs 7.4 % expected
• Japan Manufacturing PMI 52.4 vs 52.0 expected
• South Korea Manufacturing PMI 50.1 vs 49.2 previous

CFTC Positioning Data:

• EUR long 59K vs 45K long last week
• GBP short 39K vs 38K short last week
• JPY short 61K vs 50K short last week
• CHF short 5K vs 3K short last week
• CAD short 49K vs 82K short
• AUD long 20k vs long 15k last week
• NZD long 25K vs 21K long last week

Markets Update:

The US Dollar recovered slightly overnight. EUR/USD started the new trading week around 1.1425 and declined to 1.1405. EUR/USD is oversold in the short-term, but is likely to run into decent demand on larger retracements. Support is seen at 1.1370 and again at 1.1320.

GBP/USD opened at 1.2995, roughly 30 pips lower from Friday's close. During the Asian session, it retraced its initial losses, but eventually fell back to 1.2995. Meanwhile, the Yen weakened despite solid Japanese economic data overnight. USD/JPY started the day around 112.05 – down 40 pips from Friday's close – but rallied to a high of almost 112.60 later in the session. Rising stock markets supported the pair. Resistance is next seen at 113.00.

AUD/USD traded in a tight range overnight (0.7667-95), and so did NZD/USD (0.7315-45). USD/CAD is heavily oversold near-term, and recovered somewhat in Asia. The pair bounced from 1.2960 and rose to 1.2990. Resistance is seen at 1.3030 and ahead of 1.31. While the downtrend remains strong, the charts suggest the pair could recover further in the near-term.

Upcoming Events:

• 08:15 BST – Swiss Retail Sales
• 08:45 BST – Italian Manufacturing PMI
• 08:50 BST – French Manufacturing PMI
• 08:55 BST – German Manufacturing PMI
• 09:00 BST – Euro Zone Manufacturing PMI
• 09:30 BST – UK Manufacturing PMI
• 10:00 BST – Euro Zone Unemployment Rate
• 13:00 BST – Bank of England Governor Carney speaks
• 14:45 BST – US Manufacturing PMI
• 15:00 BST – US ISM Manufacturing PMI

The Week Ahead:

Tuesday, July 4th

• 02:30 BST – Australian Retail Sales
• 09:30 BST – UK Construction PMI
• 13:30 BST – ECB Member Praet speaks

Wednesday, July 5th

• 02:45 BST – Chinese Caixin Services PMI
• 08:45 BST – Italian Services PMI
• 08:50 BST – French Services PMI
• 08:55 BST – German Services PMI
• 09:00 BST – Euro Zone Services PMI
• 09:30 BST – UK Services PMI
• 10:00 BST – Euro Zone Retail Sales
• 15:00 BST – US Factory Orders
• 19:00 BST – FOMC Meeting Minutes

Thursday, July 6th

• 02:30 BST – Australian Trade Balance
• 08:15 BST – Swiss CPI
• 08:45 BST – FOMC Member Williams speaks
• 12:30 BST – ECB Meeting Minutes
• 13:15 BST – US ADP Nonfarm Employment Change
• 13:30 BST – US Initial Jobless Claims
• 13:30 BST – US Trade Balance
• 13:30 BST – Canadian Trade Balance
• 14:45 BST – US Services PMI
• 15:00 BST – US ISM Non-Manufacturing PMI
• 16:00 BST – US Crude Oil Inventories

Friday, July 7th

• 00:30 BST – FOMC Member Fischer speaks
• 06:45 BST – Swiss Unemployment Rate
• 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) 111.85; (P) 112.23; (R1) 112.73; More...

Intraday bias in USD/JPY remains neutral as it's consolidating below 112.91 temporary top. On the upside, Sustained break of the medium term channel resistance will argue that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. However, break of 110.94 will argue that rebound from 108.81 has completed and will turn bias back to the downside for this support instead.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85.

The forex markets open the week rather steadily. Dollar recovers as it's digesting last week's steep selloff. The greenback will look into the key events including ISM indices, NFP and FOMC minutes for reasons to rebound. On the other hand, there are important economic data from UK and Canada, as well as ECB accounts that could trigger further rises in respective currency. Meanwhile, additional focus will also be on whether the selloff in global equities last week would extend. It isn't too bad at the timing of writing as Nikkei is trading up 0.28%, above 20000 handle. An eye will also be on oil price while WTI is consolidating above 46 handle, looking for strength to extend the rebound in the last two weeks.

Japan large manufacturers sentiment hits 3 year high

Japan Tankan large manufacturers index jumped to 17 in Q2, up fro 12, and beat expectation of 15. That's the highest reading in three years. Large manufacturers outlook improved to 15, up from 11, above expectation of 14. Non-manufacturing index rose to 23, up from 20, and met consensus. Non-manufacturing outlook rose to 18, up from 16, but missed expectation of 21. The survey was generally consistent with recent upgrade of economic assessment by BoJ. But still, the positive developments in the economy is not being translated into price pressure yet. And BoJ is far from stimulus exit.

Rebound in China manufacturing may be temporary

The Caixin China PMI manufacturing rose to 50.4 in June, up from 49.6 and beat expectation of 49.8. That's back in expansion territory and was the highest level in three months. However, a CEBM Group economist noted in the accompany statement for the release that "based on the inventory trends and confidence around future output, the June reading was more like a temporary rebound, with an economic downtrend likely to be confirmed later."

Elsewhere, Australia TD Securities inflation rose 0.1% mom in June. Building approvals dropped -5.6% mom in May.

PMI data as the focus on the day

As for today, PMI data will be the main focus. UK will release PMI manufacturing in European session. Eurozone will release unemployment rate and PMI manufacturing final. Swiss will release retail sales and SVME PMI. Later in US session, US will release ISM manufacturing and construction spending.

Fed minutes and non-farm payroll keys for the week

For the week ahead, US events will be the major focuses. Dollar was the second weakest major currency last month as many of global central banks turned hawkish. There are a lot of doubts on whether Fed will deliver another rate hike in September. So far, comments from FOMC officials are divided. And the markets will be eager to look deeper into the discussion regarding the rate hike in June, from the FOMC minutes. In addition, ISM manufacturing and non-manufacturing indices, and more importantly, the non-farm payroll report will be important in shaping up the chance for the September decision.

Elsewhere, ECB monetary policy meeting accounts will also be watched for indication on how ready are policymakers on stimulus exit. UK data including PMIs and productions will be watched as BoE will start debating rate hikes in the coming months. Canadian employment data will also be important in shaping the chance for a July hike by BoC. RBA rate decision on Tuesday will likely be a non-event.

Here are some highlights for the week ahead:

• Tuesday: Australia retail sales, RBA; UK construction PMI, BRC shop price; Eurozone PPI
• Wednesday: Eurozone PMI services final, retail sales; UK PMI services; US factory orders, FOMC minutes
• Thursday: Australia trade balance; German factory orders, ECB meeting accounts; Swiss CPI; US ADP employment, trade balance, ISM services, jobless claims; Canada building permits, trade balance
• Friday: Japan labor cash earnings; Swiss unemployment, foreign currency reserves; German industrial production; UK productions, trade balance; Canada employment, Ivey PMI; US non-farm payrolls

USD/JPY Daily Outlook

Daily Pivots: (S1) 111.85; (P) 112.23; (R1) 112.73; More...

Intraday bias in USD/JPY remains neutral as it's consolidating below 112.91 temporary top. On the upside, Sustained break of the medium term channel resistance will argue that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. However, break of 110.94 will argue that rebound from 108.81 has completed and will turn bias back to the downside for this support instead.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85.

Economic Indicators Update

GMT	Ccy	Events	Actual	Forecast	Previous	Revised
23:50	JPY	Tankan Large Manufacturers Index Q2	17	15	12
23:50	JPY	Tankan Large Manufacturers Outlook Q2	15	14	11
23:50	JPY	Tankan Non-Manufacturing Index Q2	23	23	20
23:50	JPY	Tankan Non-Manufacturing Outlook Q2	18	21	16
23:50	JPY	Tankan Small Mfg Index Q2	7	7	5
23:50	JPY	Tankan Small Mfg Outlook Q2	6	4	0
23:50	JPY	Tankan Small Non-Mfg Index Q2	7	6	4
23:50	JPY	Tankan Small Non-Mfg Outlook Q2	2	3	-1
23:50	JPY	Tankan Large All Industry Capex Q2		7.20%	0.60%
0:30	JPY	Manufacturing PMI Jun F	52.4	52	52
1:00	AUD	TD Securities Inflation M/M Jun	0.10%		0.00%
1:30	AUD	Building Approvals M/M May	-5.60%	-1.30%	4.40%
1:45	CNY	Caixin PMI Manufacturing Jun	50.4	49.8	49.6
5:00	JPY	Consumer Confidence Jun		43.9	43.6
7:15	CHF	Retail Sales (Real) Y/Y May		-0.80%	-1.20%
7:30	CHF	SVME PMI Jun		56.3	55.6
7:45	EUR	Italy Manufacturing PMI Jun		55.3	55.1
7:50	EUR	France Manufacturing PMI Jun F		55	55
7:55	EUR	Germany Manufacturing PMI Jun F		59.3	59.3
8:00	EUR	Eurozone Manufacturing PMI Jun F		57.3	57.3
8:30	GBP	PMI Manufacturing Jun		56.3	56.7
9:00	EUR	Eurozone Unemployment Rate May		9.30%	9.30%
14:00	USD	ISM Manufacturing Jun		55	54.9
14:00	USD	ISM Prices Paid Jun		58.5	60.5
14:00	USD	Construction Spending M/M May		0.20%	-1.40%

 

STOCKS

Stock indices are all mixed. Dow and Dax are in a downward corrective phase and may continue so just now while the Shanghai looks sideways. Nikkei looks bullish and Nifty could test lower levels this week.

Dow (21349.63, +0.29%) tried to recover slightly from the sharp fall seen on 29th June from levels near 21487 to 21197 in a single session. Momentum could be slow and movements narrow in the near term. The sideways phase may continue for some more sessions. We could possibly see a fall towards 21000 before it starts to move up again.

Dax (12325.12, 0.73%) is trading below our expected 12400 on the downside and while the index moves lower we may expect a test of 12000 in the near term. the downward correction may continue for the next 2-3 sessions at least.

Shanghai (3182.82, -0.30%) seems to be ranged just now within 3170-3195 region and could spend a couple of more sessions in the same region. Thereafter, there is some scope of testing 3160 on the downside before again trying to rise towards 3200 or higher.

Nikkei (20060.21, +0.13%) looks bullish while above immediate support near 19950 and has a potential to rise towards 20500 in the near term.

While Nifty (9520.90, +0.18%) is trying to come up towards 9600 but while the resistance zone of 9580-9600 holds, it could be difficult for the index to rise sharply just now. In that case, the index could possible test lower levels of 9400-9380 in the coming sessions before bouncing back towards 9580-9600.

COMMODITIES

In the smaller time frame, Gold (1237) is oversold and needs a pause before attempting lower levels. We have been talking about 1230 for the last few days as a strong support. Now a break below 1230 is required before the lower levels of 1193 can be seen.A pause in the range of 1230-1260 can provide the necessary bearish momentum in Gold.

In Silver (16.58), the daily close took place close to the immediate support of 16.45. A failure to rise above 16.70 levels may trigger a sharp fall towards 16.20 regions.

Copper (2.68) moved higher in line with our expectation and trading within a range of 2.66-80. The scrip is overbought thus upside could be limited but in the medium term 2.55-57 are going to be a strong support and we will remain bullish while it is trading above those levels.

There is 40% probability that Brent (47.92) and WTI (46.25) could rise a bit more towards 50 and 48 regions respectively but this recent bounce hasn’t affected their midterm bearishness much. We think the immediate resistances of 50 (Brent) and 48 (WTI) are expected to hold as the they are in overbought territory and may see range trade between 46-50 in Brent and 44-48 in WTI. But a failure to hold above 46 and 44 may push them towards 43 and 40 levels respectively.

FOREX

Dollar Index (95.73) has managed to stay above the support of 95.50-40 in the last 2 sessions but it has to rise above 96.00-50 to trigger even a little bit of short covering,. The trend remains firmly down but keep an eye on Euro (1.1415). If Euro fails to rise above 1.1450-70 this week, Dollar may see a corrective bounce to 96.40-80.

Dollar Yen (112.41) is searching for direction after the defeat of the ruling party in the Tokyo election. 113.00 may be retested as long as the support of 111.70 holds but failure to extend the rise above 113.00 can drag it down once again.

Pound (1.3004) is trading very close to the 10-month high of 1.3047 and a successful break above it may push it towards 1.3200. Immediate support comes around 1.2930-00.

Aussie (0.7673) is struggling after meeting our initial target/resistance of 0.7700. The probability of the resistance band of 0.7700-0.7800 holding for the next few sessions are considerably higher and while the resistance holds, the currency may test the support near 0.7630.

Dollar-Rupee (64.58) is expected to trade in the modified range of 64.40-80 for the next few sessions.

INTEREST RATES

The German-Us 2YR (-1.98%) has already come off sharply from near term resistance near -1.91% while the German-Us 10Yr (-1.84%) is trading just below resistance at -1.80% and could come off from there in the coming sessions. If the resistance holds, we could see a fall in the yield spreads which could pull down the Euro a bit towards 1.14-1.1350 possibly.

German-Japan 10YR (0.38%) has also come up to test the sideways horizontal resistance which could push it back towards 0.15% in the near term. This could possible indicate an upcoming correction in Euro.

The US yields continue to rise and could possibly pause in the next couple of sessions to see a slight dip before continuing to rise further. The 10Yr (2.30%) may test 2.40% in the near term.