Sample Category Title

USD/CHF - 0.9572

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9578

Kijun-Sen level                    : 0.9574

Ichimoku cloud top                 : 0.9617

Ichimoku cloud bottom              : 0.9593

Original strategy :

Sell at 0.9645, Target: 0.9545, Stop: 0.9680

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9645, Target: 0.9545, Stop: 0.9680

Position : -

Target :  -

Stop : -

As the greenback has recovered after marginal fall to 0.9552, suggesting minor consolidation would be seen and recovery to 0.9600-10 is likely, however, reckon resistance at 0.9647 would limit upside and bring another decline later, below said support would signal recent decline from 0.9771 top is still in progress, hence further weakness to 0.9545-49 (2 times extension of 0.9771-0.9676 measuring from 0.9738) would follow but reckon downside would be limited to 0.9525-30 (50% projection of 1.10100-0.9613 measuring from 0.9771) and 0.9500 should hold, price should stay above 0.9470 (61.8% projection), bring rebound later. 

In view of this, would not chase this fall here and we are looking to sell dollar on recovery as resistance at 0.9647 should limit upside. Only above previous support at 0.9676 (now resistance) would defer and suggest a temporary low is formed, risk test of another previous support at 0.9692. 

GBP/USD - 1.2978

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2983

Kijun-Sen level                    : 1.2988

Ichimoku cloud top              : 1.2946

Ichimoku cloud bottom        : 1.2871

Original strategy :

Buy at 1.2920, Target: 1.3020, Stop: 1.2885

Position : - 

Target :  -

Stop : -

New strategy  :

Buy at 1.2920, Target: 1.3020, Stop: 1.2885

Position : -

Target :  -

Stop : -

As cable has continued trading with a firm undertone after this week’s rally, adding credence to our bullish view that recent upmove is still in progress and may extend further gain towards recent high 1.3048, however, loss of near term upward momentum should prevent sharp move beyond 1.3075-80 today and reckon 1.4100 would hold on first testing, risk from there has increased for a retreat to take place later. 

In view of this, we are looking to buy cable again on pullback as support at 1.2916 should limit downside and bring another rally. Below 1.2890-95 would defer and risk test of previous resistance at 1.2861, break there would suggest a temporary top is formed instead, risk weakness to 1.2830-35 but support at 1.2794 should remain intact.

• Watch for a RBI Hawkish Cut - Peter Rosenstreich
• Oil Outlook Remains Clouded - Arnaud Masset
• Trump Target Of 3% Growth Looks Less Unattainable - Yann Quelenn
• Time For A Recovery In Oil Prices?

Economics - Watch For A RBI Hawkish Cut

This month we have seen a bunch on central banks unexpectedly shift towards an unexpectedly hawkish strategy. Yet despite this U-turn we suspect rates rises will be slow with reduction in balance sheet over interest rates to be the primary tool for tightening. A current exception judging from market expectations is the Reserve Bank of India. Next week's RBI rate decision is likely to bring a 25bp policy rate cut. However, given the uncertainty around determining if the slowdown has been generating by cyclical issues or government interventions should probably delay any central bank action. It remains difficult to determine if India current weakness in growth and inflation is only the result of demonetization or application of the goods and services tax (GST). Currently inflation in India remains soft, due to a mix of transitory and structural factors, driving politicians to overlook potential of midterm higher inflation prices, for short-term growth gains. CPI inflation has dropped quickly, to 2.2% in May from 5.0% in 2016. RBI cut is likely to be a one off before shifting back to a tightening stance as we suspect inflation will pick up in 2H.

Leading economic indicators are signaling that economic activity is improving; led by consumer demand. The consumer already boosted by GDP growth above 6.0% is also support by loose credit conditions and improving external demand. Disruptions cause by demonetizations are still filtering through the system effecting consumer spending and slowing inflation, distorting recent readings. Yet strong rural wage growth and state government pay increases will kick in and drive growth and inflation higher. We could envision growth heading toward 7.5% by the years end.

In broader terms, the external environment remains supportive for EM currencies. Despite some talk of central bank "normalization", global interest rates remain subdued forcing investors to search for yields.

In addition incoming data such as China PMI show that trade demand remains solid supporting our EM story. We remain bullish on the INR heading into the RBI rate decision.

Economics - Oil Outlook Remains Clouded

Crude oil prices struggled to recover from the sharp sell-off that has sent a barrel of West Texas Intermediate to $42.05 a couple of weeks ago, down almost 20% from its peak of May 25th. However, since June 21, the WTI was able to recover marginally thanks to a weaker US dollar and reassessment of the fundamentals by investors. From a technical standpoint, the WTI's sell-off has been stopped by the key support at around $42 (multi lows) and is currently retracing toward the $46.00-50 resistance area (Fibo 38.2% on April-June sell-off and previous highs).

Overall, it seems that investors are negatively skewed about the oil outlook as even the recent political turmoil in the Middle East - several countries cut their diplomatic ties with Qatar, a major oil and gas producer in the region - was unable to stop the debasement in crude oil prices. In addition, the sustained contraction in US crude inventories seems to have no effect either. Despite a marginal increase last week (+118k barrels), US stockpiles (excluding strategy reserves) have been decreasing continuously since the end of March this year, sliding from 535mio barrels to 509mio as of June 23rd.

Market participants have lost faith in OPEC's ability to drive prices as several of its members (mostly Iraq) failed to comply with the deal and did not cut production sufficiently. In addition, Iran declared it had increased the capacity of its main oil terminal, which tends to indicate that the world's fifth largest oil producer is willing to inch up production. Finally, according to the EIA, the US had more than doubled its exports of crude oil and petroleum products over the last six years as exports restrictions were lifted. Furthermore, the US shale industry continues to optimise production and cut costs.

On the medium to long-term we remain cautious on the oil outlook as the fundamentals do not support upside gains. However, in the shortterm, crude oil prices have room to recover somewhat, thanks to a weak dollar and the end of the panic selling. We expect crude oil to return gradually toward the $50 threshold as fears ease.

Economics - Trump Target Of 3% Growth Looks Less Unattainable

Last Monday, no less than four Fed members have provided their views on monetary policy including Janet Yellen whose speech was in London on global economic issues.

Financial markets tried to grab some hints regarding the Fed's path towards normalisation of monetary policy. Markets currently estimate the likelihood of a third rate hike this year below 50%.

We believe the Fed will be very focused on economic data rather than geopolitical development and we consider that recent economic data is not fully supporting a continued normalisation of the economy.

Fed members looked concerned by the level of equities. San Francisco Fed President John Williams declared that the stock market is "running on fumes" while Janet Yellen said that current stock valuation levels are "rich". Both declarations have been made at separate moments and it is clear the Fed underpinned stocks overvaluation.

Earlier last week, non-defense capital goods recorded their highest decline since last December at -0.2% m/m below consensus 0.1 m/m. US Manufacturing PMI came in below expectations at 52.1 vs 52.7 expected. We recall that a level above 50 indicates expansion and we are slowly approaching towards this threshold.

The US GDP came in surprisingly higher than markets estimates despite data for the second quarter is significantly weaker than what has been released during the first quarter. Nonetheless, we believe there are still clear downside risks on the greenback at the moment. Therefore, the EURUSD pair may continue to bounce higher in the short-term.

We also consider that there is other supporting evidence that shows concerns regarding the US growth future. US auto sales have constantly weakened from 18.29 million sales in December 2016 towards 16.58 vehicles sales in May 2017, and this trend illustrates a negative sentiment on the North American economy from consumers. We believe that fundamentals are still soft and we consider the US recovery to be overestimated at the moment.

One explanation is that despite labour data being positive, wage growth remains subdued and this is certainly preventing consumers buying new cars or at least it is making them postpone their purchases. It is definitely not a great sign for the US economy in our view.

On top of that, the IMF in a report has slashed its GDP forecast for yearend by removing the effect of President Trump's fiscal stimulus. Indeed, it looks more and more uncertain that this fiscal plan will ever be implemented at this point. The IMF forecast for US GDP is now 2.1% from 2.3% in April. As a result the Trump target of 3% growth looks less and less unattainable.

As we stated above, there is room for further weakness for the greenback. The Eurodollar pair, which has strengthened out of Draghi's comments, should continue heading higher on markets pricing back in US economic difficulties.

Themes Trading - Time For A Recovery In Oil Prices?

Cuts in crude oil production and growing demand indicate that crude prices should continue to grind higher in 2017. In an unexpected move, OPEC silenced skeptics by orchestrating the first production cut in eight years between OPEC and non-OPEC countries. The agreement sent crude prices soaring. After four years of depressed crude prices as a result of a global supply glut, the group's three largest producers - Saudi Arabia, Iraq and Iran - overcame significant disagreement to move to reduce global oil inventories. The agreement was unprecedented, with Russia and Mexico also joining in to cut output.

While this historic agreement will only begin to address the supply equilibrium, the steady improvement in demand will be the primary driver of higher oil prices in 2017. Steady oil consumption remains constant even during weak economic conditions as the world's consumers demand 95 million barrels of oil a day, up from 86 million in 2008. However, global demand continues to recover, with growth in the USA, Europe and China. Despite efforts for cleaner energy, oil remains the world's primary fuel, driving globalization.

As oil market dynamics continued to tighten, certain companies are better positioned to take advantage of improving oil prices. This Oil Recovery theme is designed to exploit rising prices by selecting companies mostly active in the upstream segment, which would benefit the most from a barrel above $60. To enhance risk diversification, the portfolio is structured using an equally-weighted risk contribution approach. In summary, this means the allocation is calculated in such a way that each stock contributes on an equal basis to the portfolio's total risk.

EUR/USD - 1.1412

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1411

Kijun-Sen level                  : 1.1419

Ichimoku cloud top             : 1.1388

Ichimoku cloud bottom      : 1.1341

Original strategy  :

Buy at 1.1350, Target: 1.1450, Stop: 1.1315

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1350, Target: 1.1450, Stop: 1.1315

Position : -

Target :  -

Stop : -

As the single currency has maintained a firm undertone after recent rally, adding credence to our bullish view that recent rise is still in progress and may extend further gain to 1.1455-60 (61.8% projection of 1.1119-1.1389 measuring from 1.1292), then 1.1480, however, overbought condition should prevent sharp move beyond 1.1500, risk from there has increased for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy euro on pullback as 1.1350-55 should limit upside. Below 1.1315-20 would defer but only break of indicated support at 1.1292 would signal a temporary top is formed, bring correction to 1.1255-60 later.

USD/JPY - 112.33

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 112.09

Kijun-Sen level                  : 112.33

Ichimoku cloud top             : 112.45

Ichimoku cloud bottom      : 112.22

Original strategy  :

Sell at 112.40, Target: 111.40, Stop: 112.75

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 112.60, Target: 111.60, Stop: 112.95

Position :  -

Target :  -

Stop : -

Although the greenback rose to as high as 112.93 yesterday, the subsequent sharp retreat signals top has been formed there and consolidation with downside bias is seen for weakness to 111.46 support, a firm break below there would add credence to this view, brig further fall towards 111.15-20 but support at 110.95 should remain intact, bring rebound later.

In view of this, we are looking to sell dollar on recovery as 112.60-65 should limit upside and bring another decline. Above said resistance at 112.93 is needed to abort and confirm recent upmove has resumed for headway to 113.15-20.

Today's European session was a rather busy one in terms of data releases. Final UK figures on first quarter economic growth confirmed economic activity slowing down in the nation, while inflation figures out of the eurozone surprised to the upside but failed to boost the euro. Out of the US, consumer spending and the reading for the core PCE index were among the releases attracting attention.

US consumer spending recorded a slight increase in May, rising by 0.1% month-on-month, in line with expectations but falling short of the previous month's 0.4%. Consumption makes up for close to 70% of the US economy. In other US data, the May core PCE price index rose by 0.1% on a monthly basis. Analyst forecasts and April's respective figure also stood at 0.1%. The number for April was the result of a downward revision from 0.2%. The dollar edged higher relative to the yen upon data release, eventually reaching a daily high of 112.24. The pair was last flat at 112.17.

Later in the day, the final reading of the University of Michigan consumer sentiment index for the month of June was released at 95.1. This was above the 94.5 expected but at its lowest since November of last year. Dollar/yen fell on the news.

Looking at the dollar index, which gauges the greenback against the currencies of six major US trading partners, it was last up on the margin after hitting a fresh nine-month low of 95.47 earlier in the day. The measure, which is down 4.8% over the quarter, is on track for its worst quarter in seven years.

In other news, the final figures for first quarter UK GDP were released today. Those showed the economy expanding by a meager 0.2% quarter-on-quarter. This was in line with projections and below the previous quarter's 0.7%. On an annual basis, the economy expanded by 2.0% as expected and slightly above the previous quarter's respective number at 1.9%. It is worrisome that UK consumers' purchasing power is continuing to receive a blow as a result of the weakening sterling since last year's Brexit referendum. Their spending power has contracted the most since the 1970s. If this is combined with the loss in confidence due to political uncertainty, the outlook looks even bleaker. Pound/dollar was on a declining path even before the data hit the markets but extended its fall after the numbers became public. The pair reached a low of 1.2958 during the European session while it last traded 0.2% down on the day.

In terms of data out of the eurozone, the June flash inflation numbers showed the inflation rate at 1.3% year-on-year, exceeding forecasts of 1.2% but slightly below May's 1.4%. Core inflation, which excludes volatile food and energy items, stood at 1.2%, up from May's 1.0% which also coincided with analysts' projections. Headline inflation close to but below 2.0% is the European Central Bank's target for inflation. Euro/dollar did not move much upon data release. The pair last traded above the 1.14 handle, 0.2% down on the day after advancing for three consecutive days.

Turning to Canada, the country saw the release of GDP data for April. Month-on-month, the Canadian economy grew by 0.2%, coinciding with expectations but below March's 0.5%. This marks the sixth straight month of growth for the country and points to a strong start during the second quarter of the year given widespread sector growth. Versus the dollar, the loonie gained upon data release. Today it was lifted by higher oil prices as well, as Canada is a major oil exporter. Dollar/loonie looks set for its fifth straight day of declines after hitting a near ten-month low of 1.2946 earlier in the day.

Diverting from forex markets for a peek at commodities, gold was last close to being flat on the day, trading at $1244.45 an ounce. WTI and Brent crude were up 0.8% and 0.5% on the day, trading at $45.28 and 47.66 a barrel respectively.

Market Movers ahead

• The most important event in the Nordics is the Riksbank's announcement on Tuesday at 09:30 CET. Although we expect the Riksbank to stay on hold, we expect it remove the small rate cut probability in the updated rate path.
• In Denmark, the FX reserves data for June is due out on Tuesday, which we expect to show that Danmarks Nationalbank did not intervene.
• In Norway, it will be interesting to see whether house prices continued to fall in June given that they fell the most since the financial crisis in May.
• In the US, several important releases are due out. Most important are the jobs report for June, ISM manufacturing, the FOMC meeting minutes and FOMC speeches.
• In the euro area, the unemployment rate for May is due out on Monday.

Global macro and market themes

• Central banks are beginning to discuss 'when to leave the party'.
• Interestingly, both Mark Carney and Mario Draghi argue that a constant monetary policy is becoming more accommodative as the economy continues to recover.
• There is a risk that central banks are too optimistic, as inflation expectations remain low.
• Mario Draghi let the stimulus exit genie out of the bottle and we expect EUR/USD to move higher in 12M.

Full Report in PDF

Spot Gold stay in red on Friday and retested support at $1239 (Thursday's low/weekly cloud top), remaining under pressure after better than expected US Q1 GDP data on Thursday reinforced expectations for further US rate hike this year. However, hawkish comments from other central banks (ECB/BoE/RBA) so far limited dollar's advance and kept gold price above key support at $1236 (26 June low/200SMA). Technical studies are bearishly aligned and maintain downside pressure as the price remains under daily cloud and keeps near-term bias with bears. Spot Gold is on track for strong bearish weekly close which adds on existing pressure for renewed attack at $1236 pivot and bearish extension towards next strong support at $1230 (Fibo 38.2% of $1122/$1296 ascend).

Res: 1246; 1249; 1254; 1256
Sup: 1239; 1236; 1230; 1227

EURAUD is making a bigger degree three wave pullback, as part of blue wave 4. This means more weakness can follow on the pair and ideally search for a base around the Fibonacci ratio of 50.0 or 61.8. Later a new five wave rally into blue wave 5 can follow.

EURAUD, 1H

• European equities trade uneventful and are currently near opening levels flat today.
• Euro-area inflation slowed in June to 1.3% which is above the expected 1.2% but less than the 1.4% in May. The core inflation, which excludes volatile components like energy and food, increased to 1.1% from 0.9% in May.
• ECB Executive Board member Sabine Lautenschlaeger said that "monetary policy should already be making preparations for a return to a normal stance" and that the ECB "should adapt its communication accordingly". She warned for the risk of asset price bubbles that can result from unusually loose monetary policy.
• In its post-bailout review of Portugal, the IMF sounded an upbeat note. It praised progress in addressing risks and stabilising the banking sector. It also stressed the upturn in growth makes this year's fiscal deficit target of 1.5 % of GDP "well within reach" after "strong efforts to contain spending" saw the deficit drop to an historic low last year.
• The core PCE deflator, the Fed's preferred inflation barometer, fell for the third month in a row in May to 1.4% Y/Y, down from 1.5% Y/Y in April and matching expectations. The headline index fell to 1.4% (1.7% in April and 1.5% consensus). Despite the continued tightening in the labour market, price growth thus remains below target.
• German retail sales rose by some 4.8% Y/Y in May, bouncing back from the (revised) 0.4% decline in April and above forecasts. On the month, sales rose by 0.5% M/M, from 0.2% decline in April and a decent gap ahead of forecasts. However, the rise Y/Y can be attributed to an extra business day because of the Pentecost holiday timing.
• Canada's economy grew for a sixth straight month in April, albeit at a slower pace, further underscoring policymakers' view that conditions are in place for an interest-rate rise as soon as this summer. GDP for April grew 0.2% from the previous month, down from the 0.5% pace recorded in March.

Rates

Lousy attempt to correct higher fails

Core bonds markets stabilized after this week's heavy sell-off, allowing equity and currency (EUR/USD) markets time to recover from the past sessions. An attempt to correct higher was blocked around European noon, pulling core bonds back towards today's opening levels which are close to the sell-off lows. Hawkish comments by ECB Lautenschlager, who argued in favour of policy normalisation and suggested that the ECB spoke with one voice, could have played a role. EMU (CPI) and US (PCE) inflation didn't directly influence dealings. Core EMU inflation rose unexpectedly to 1.1% Y/Y while the US PCE deflator fell to 1.4% Y/Y to 1.7% Y/Y. All in all, most inflation outcome were near consensus though. US investors ignored personal income and spending data as well and are preparing for a long weekend. US markets are closed next Tuesday for the 4th of July holiday, suggesting low activity on Monday as well despite the release of the manufacturing ISM.

At the time of writing, the German yield curve steepens with yield changes ranging between -0.3 bps (2-yr) and +1 bp (30-yr). The US yield curve steepens as well with the 2-yr yield 0.8 bps lower and the 30-yr yield 1.5 bps higher. On intra-EMU bond markets, 10-yr yield spread changes are close to unchanged.

The Italian debt agency tapped the on the run 5-yr BTP (€2.5B 1.2% Apr2022) and launched a new 10-yr BTP (€3.85B 2.05% Aug2027). The combined amount sold approached the upper band of the targeted €6-7B, but the auction bid cover was rather low (1.32). Addtionally, the Treasury sold €2.5B floating rate notes (CCTeu Apr2022).

Currencies

EUR/USD rally pauses ahead of a long US weekend

The strong three-day EUR/USD rally ran into resistance today, but without signals of a dollar counter. Multiple euro area and US eco data couldn't seduce investors to continue the euro buying spree. US markets are closed next Tuesday for the 4th of July holiday and many traders and investors will make it a long weekend. Appetite to take additional positions was missing, also because it's the final the day of the quarter. The picture on the bond and equity markets was similar: quiet technical trading. US and German yields moved slightly higher, but the differentials were negligible. European equities corrected somewhat higher in the morning session, but slid again lower top openings levels in the afternoon session. USD/JPY traded mostly in the red between 111.73 and 112.20, but without a distinct direction. The equity moves were too small to impact the pair which trades currently near opening levels at 112.20.

After an uneventful Asian session, EUR/USD was hit by some modest profit taking, pushing the pair from opening levels around 1.1440 to an intraday low at 1.1390 at European noon. Afterwards, the pair cautiously struggled higher to just above 1.14. A hawkish speech of ECB Lautenschlager may at the margin helped supported the euro, but her views are well-known (minority in the ECB) and thus generally unable to give the euro strong direction. US personal consumption and income printed near expectations and so were the (core) PCE deflators. EUR/USD remained just above the 1.14 level.

No post Carney follow-through gains for sterling

Cable approached key 1.3044 resistance overnight, but a real test didn't occur, sending GBP/USD lower again. UK data made no difference: Outdated Q1 GDP was confirmed at a weak 0.2% M/M, while the April index of services and Q1 business investment were in line with expectations. Cable trades currently at 1.2975 versus opening levels around 1.3007. EUR/GBP went initially lower, mirroring the decline in EUR/USD. However, the pair turned North well ahead of EUR/USD. When EUR/USD turned, sterling erased all remaining losses and trades now unchanged on the day at 0.8797.