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WTI oil price hit two-week high at $45.22 on Thursday, after extension of Wednesday's strong rally cracked important barrier at $45.04 zone (Fibo 61.8% of $46.69/$42.04/falling 20SMA/19 June high). Oil price extends recovery rally from $42.04 low into a sixth day, after unexpected build in US crude inventories was offset by bigger than expected fall in gasoline inventories and report of the biggest weekly decline in domestic oil production since July 2016. Positive sentiment that has been established may drive the price higher on sustained break of $45.00 pivot. Fresh bullish extension would look for $45.59/84 (Fibo 76.4% of $46.69/$42.04/Fibo 38.2% of $51.98/$42.04) and may extend towards key short-term barrier at $46.69 (12 June lower top). Corrective dips should find support at $44.30 (4-hr cloud top), while stronger pullback is expected to hold above 10SMA (currently at $43.77) to keep near-term bullish structure intact).

Res: 45.22, 45.59, 45.84, 46.46
Sup: 44.74, 44.30, 44.00, 43.77

EUR/JPY Bullish breakout.

EUR/JPY continues its increase after the pair surged and broke hourly resistance at 125.82 (16/05/2017 high). Hourly support is given at 122.56 (18/05/2017 low). Major support is given at 114.90 (18/04/2017 low).

In the longer term, the technical structure validates a medium-term succession of lower highs and lower lows. As a result, the resistance at 149.78 (08/12/2014 high) has likely marked the end of the rise that started in July 2012. Strong support at 94.12 (24/07/2012 low) looks nonetheless far away.

EUR/GBP Sideways price action.

EUR/GBP is trading mixed. Support can be found at 0.8652 (08/06/2017 low). Expected to show further consolidation.

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.Sideways price action.

EUR/CHF Strengthening after breaking downtrend channel.

EUR/CHF's short-term bullish pressures are definitely on. The pair is riding higher within downtrend channel. Hourly support is located at a distance at 1.0792 (03/05/2017 low) while the pair is heading towards resistance given at 1.0987 (12/05/2017 high).

In the longer term, the technical structure is mixed. Resistance can be found at 1.1200 (04/02/2015 high). Yet,the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

GBP/USD – 1.2962

Recent wave: Wave V of larger degree wave (III) has ended at 1.1986 and major correction has commenced from there for gain to 1.3000 and 1.3140-50

Trend: Near term down

Original strategy :

Buy at 1.2760, Target: 1.2910, Stop: 1.2700

Position: -
Target:  -
Stop: -

New strategy :

Buy at 1.2870, Target: 1.3020, Stop: 1.2810

Position: -
Target:  -
Stop:-

As sterling has eased after surging briefly above 1.3000 level, suggesting consolidation below intra-day resistance at 1.3007 would be seen and pullback to 1.2900-10 is likely, however, reckon previous resistance at 1.2861 would turn into support and limit cable’s downside, bring another rise later, above said resistance at 1.3007 would extend the rise from 1.2589 low towards recent high at 1.3048 which is likely to hold on first testing. 

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has ended at 1.7192, the subsequent selloff is the larger degree wave (C) which is still unfolding with minor wave (III) of larger degree wave 3 ended at 1.1986, hence wave (IV) correction is in progress which could either be a triangle wave (IV) of a complex formation but upside should be limited to 1.3500 and price should falter well below 1.4000, bring another decline in wave (V) of 3 for weakness to 1.1500, then 1.1200.

On the downside, whilst initial pullback to 1.2900-10is likely, reckon 1.2861 (previous resistance turned support) and bring such a rise. Below support at 1.2794 would abort and signal top is formed instead, risk further fall to 1.2750, then towards 1.2706 support.

GBP/JPY - 145.80

Recent wave: Medium term low formed at 120.50 and (A)-(B)-(C) major correction has commenced with (A) leg ended at 148.45, hence wave (B) is unfolding for retreat to 131.00-10.

Trend: Near term down

Original strategy:

Buy at 142.60, Target: 144.50, Stop: 142.00

Position: -
Target: -
Stop: -

New strategy :

Buy at 144.30, Target: 146.30, Stop: 143.70

Position: -
Target:  -
Stop:-

As sterling has retreated after rising to 146.45, suggesting minor consolidation below this level would be seen and pullback to 145.00-10 is likely, however, reckon previous resistance at 144.20 would turn into support and limit downside, bring another rise later, above said resistance at 146.45 would extend the erratic rise from 138.70 low to 147.10 (previous resistance) but price should falter below recent high at 148.10.

In view of this, would not chase this rise here and we are looking to buy sterling on subsequent pullback as previous resistance at 144.20 should limit downside and bring another rise. Below 143.90-00 would defer but only break of support at 143.30 would signal top is formed instead, bring correction to 142.90-00. 

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.


USD/CHF Weakening.

USD/CHF keeps on pushing lower. Hourly resistance can be found at 0.9771 (09/06/2017 high). Strong resistance is given at 1.0107 (10/04/2017 high). Hourly support is given at 0.9561 (intraday low). Expected to show continued bearish pressures.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USD/CAD Heading towards strong support.

USD/CAD is way into bearish mode. Strong support is given at 1.2969 (31/01/2017 low). Expected to show continued weakness towards.

In the longer term, the pair lies in a bullish channel since a year. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low).

AUD/USD Sideways price action around 0.7600.

AUD/USD #39;s technical structure is bullish since early May. The pair is heading towards strong resistance at 0.7750 (21/03/2017 high).

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

EUR/USD Strong short-term bullish momentum.

EUR/USD is trading higher. The pair is trading above former strong resistance given at 1.1300 (09/11/2017 high). Hourly support can be found at 1.1076 (18/05/2017 low). Stronger support lies at 1.0842 (11/05/2017 low). Expected to show continued short-term strength.

In the longer term, the momentum is clearly negative. We favour a continued bearish bias towards parity. Key resistance holds at 1.1714 (24/08/2015 high) while strong support lies at 1.0341 (03/01/2017 low).

GBP/USD Pushing higher.

GBP/USD's momentum is higher than expected and the pair is now monitoring resistance give at 1.3046 (18/05/2017 high). Hourly support is given at 1.2589 (21/06/2017 low). Hourly resistance at 1.2818 (14/06/2017 high) has been broken. Expected to show further continued buying pressures.

The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY Strengthening.

USD/JPY has finally broken resistance given at 112.13 (24/05/2017 high). Hourly support can be found at 110.65 (16/06/2017 low). Stronger support is located at 108.13 (17/04/2017 low). Expected to show continued pressures.

We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

The Aussie dollar hit three-month high on Thursday in extension of previous day's strong rally, driven by higher commodity prices and ultra-hawkish comments regarding interest rates from former RBA board member on Thursday.

Fresh bullish extension dented former high of 30 Mar at 0.7379 and may extend gains on firm break higher, driven by bullish technical studies and sentiment.

The pair is currently riding on the fifth wave of five-wave cycle from 0.7328 (09 May low) which could travel to 0.7720, according to the wave principles and may extend towards key med-term barriers at 0.7749 (21 Mar peak) and 0.7778(08 Nov 2016 high).

Former high of 14 June at 0.7635, also session low, marks solid support, with ascending daily Tenkan-sen (currently at 0.7608) underpinning the action.

Res: 0.7680, 0.7700, 0.7720, 0.7749
Sup: 0.7651, 0.7635, 0.7608, 0.7588

Notes/Observations

Stronger German regional CPI data add to bets of ECB tapering

Bond yields soar, EUR/USD hits new 1 year highs

Banking names outperform on reflation hopes and positive sympathy from US stress test results

European business and consumer optimism rises to the highest levels since before the financial crisis

Overnight

Asia:

Japan retail sales fall for the first time in 5 months and falls short of estimates

New Zealand June ANZ Business confidence rises to 8 month high

Europe:

German regional inflation data comes in stronger pushing German Yields to new multi month highs. Euro pushes above 1.14 marking new 1 year highs.

Eurozone Economic sentiment indicator reaches 10 year high, whilst German GFK consumer confidence post new 16 year high.

BoE Haldane reiterates hawkish stance, noting that the BoE needs to seriously look at raising rates

Americas:

Fed did not object to the capital plans of all 34 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). Capital One is the only bank that will need to resubmit within six months, although its plan was not entirely rejected.

Brazil President Temer said to name Raquel Dodge as new top prosecutor; Temer's residence subsequently attacked (Temer not inside)

Brendan Carr expected to be nominated to a position at the FCC by President Trump as soon as today

Economic Data

(DE) GERMANY JUN CPI SAXONY M/M: 0.2% V -0.1% PRIOR; Y/Y: 1.7% V 1.6% PRIOR

(DE) GERMANY JUN CPI NORTH RHINE WESTPHALIA M/M: 0.1% V -0.2% PRIOR; Y/Y: +1.6% V 1.6% PRIOR

(DE) GERMANY JULY GFK CONSUMER CONFIDENCE: 10.6 V 10.4E (highest since 2001)

(UK) MAY NET CONSUMER CREDIT: £1.7B V £1.4BE; NET LENDING: £3.5B V £2.6BE

(UK) MAY MORTGAGE APPROVALS: 65.2K V 64.0KE

(UK) May M4 Money Supply M/M: -0.1% v 1.2% prior; Y/Y: 6.7% v 8.2% prior

(DE) Germany Jun CPI Brandenburg M/M: 0.2 v -0.1% prior; Y/Y: 1.5% v 1.4% prior

(DE) Germany Jun CPI Bavaria M/M: 0.1% v -0.1% prior; Y/Y: 1.4% v 1.4% prior

(DE) Germany Jun CPI Baden Wuerttemberg M/M: 0.1% v -0.1% prior; Y/Y: 1.6% v 1.5% prior

(DE) Germany Jun CPI Hesse M/M: 0.1% v 0.0% prior; Y/Y: 1.9% v 1.7% prior

(ES) SPAIN JUN PRELIMINARY CPI M/M: 0.0% V 0.0%E; Y/Y: 1.5% V 1.6%E

(EU) EURO ZONE JUN BUSINESS CLIMATE INDICATOR: 1.15 V 0.94E, FINAL CONSUMER CONFIDENCE -1.3 V -1.3E

(ES) Spain Apr Total Mortgage Lending Y/Y: -11.4% v 23.1% prior; House Mortgage Approvals Y/Y: -8.8% v 20.2% prior

(SE) Sweden May Retail Sales M/M: 0.4% v 0.2%e; Y/Y: 2.4% v 1.9%e

Fixed Income Issuance:

Non seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.1% at 3,534, FTSE +0.6% at 7,431, DAX +0.1% at 12,657, CAC-40 -0.3% at 5,234, IBEX-35 --0.1% at 10,686, FTSE MIB -0.2% at 21,014, SMI -0.4% at 9,035, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European stocks opened higher, but turned around as the session advanced; risk sentiment improved after clarification on ECB's Draghi comments; financials supported following US stress test results; oil continues to support energy stocks; materials higher on the back of better base and precious metals; technology also outperforming; attention turning to tomorrow's NFP release; upcoming US earnings include GreenBrier, Rite Aid and Walgreens

Equities

Consumer discretionary [Hennes & Mauritz HMB.SE -1.0% (earnings), JD Sports JD.UK -9.7% (trading update)]

Healthcare [Paion PA8.DE -6.2% (drug update)]

Financials [Prelios PRS.IT -4.7% (receives offer), Flow Traders FLOW.NL -6.6% (analyst action)]

Industrials [DS Smith SMDS.UK +6.6% (earnings, acquisition), Gesco GSC1.DE 3.4% (prelim Q1), OCI OCI.NL +6.3% (rejects offer), Babckock BAB.UK +1.3% (contract award), John Wood Group WG.UK -2.9% (trading update)]

Technology [Logitech International LOGN.CH -0.4% (dividend hike)]

Speakers

(JP) BoJ's Harada: Monetary policy does not raise risk of a yield spike; Does not see any need to ease at this point, current monetary policy is sufficiently bold

(UK) BOE's Haldane (chief economist): BOE needs to serious look at raising rates, is happy with where they are now

Currencies

EURUSD soars to new one year highs following stronger inflation data out of Germany. Dealers note upside target of 1.1453.

GBPUSD approaches 1.30 continuing momentum following BoE Carney hawkish comments yesterday which saw 100 pip move higher. Dealers not resistance just ahead of 1.30, with a move lower seeing suppoer at 1.2950.

Fixed Income

Bund futures trade at 162.86 down 59 ticks taking out yesterday lows on stronger regional German inflation data, with the Draghi inspired downtrend continuing with downside support seen at 162.39 then 161.90.

Thursday's liquidity report showed Wednesday's excess liquidity rose to €1.634T a rise of €16B from €1.618T prior. Use of the marginal lending facility fell to €100M from €192M prior.

Corporate issuance saw $1.8B come to market in a quiet session with Baidu's $1.5B 2 part offering accounting for the bulk if the issuance. Issuance for the remainder of the week is expected to remain slow as we approach US July 4th Holidays.

Looking Ahead

05:30 (ZA) South Africa May PPI M/M: 0.5%e v 0.3% prior; Y/Y: 4.9%e v 4.6% prior

07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 0.05%

07:00 (BR) Brazil Jun FGV Inflation IGPM M/M: -0.6%e v -0.9% prior; Y/Y: -0.8%e v +1.6% prior

08:00 (DE) Germany Jun Preliminary CPI M/M: +0.1%e v -0.2% prior; Y/Y: 1.5%e v 1.5% prior

08:00 (DE) Germany Jun Preliminary CPI EU Harmonized M/M: 0.0%e v -0.2% prior; Y/Y: 1.3%e v 1.4% prior

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Q1 Final GDP Annualized (3rd reading) Q/Q: 1.2%e v 1.2% prelim; Personal Consumption: 0.6%e v 0.6% prelim

08:30 (US) Q1 Final GDP Price Index: 2.2%e v 2.2% prelim; Core PCE Q/Q: No est v 2.1% prior

08:30 (US) Initial Jobless Claims: No est v 241K prior; Continuing Claims: No est v 1.944M prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (RU) Russia Gold and Forex Reserve w/e Jun 23rd: No est v $406.4B prior

10:30 (US) Weekly EIA Natural Gas Inventories

15:00 (AR) Argentina May Industrial Production Y/Y: No est v -2.3% prior, Construction Activity Y/Y: No est v 10.5% prior

EUR and global equities better bid as risk sentiment improves

The single currency continues to climb higher amid anticipations for tighter monetary policy in the Eurozone and in UK. Investors were absolutely not disrupted by Draghi and Carney‘s apparent communication shambles on monetary policy earlier this week. Indeed, both central bankers made some hawkish comments - or interpreted as such by investors - suggesting the era of ultra-lose monetary policy is coming to an end.

Draghi's optimistic comments about the inflation outlook led investors to believe the ECB was about to start the process of tapering its bond buying program. EUR/USD hit 1.1435 on Thursday morning, the highest level since June 2016. The move was also exacerbated by a broad USD weakness that sent the dollar index to 95.68.

Across the Atlantic, the pound sterling was buoyed amid Mark Carney's comments about a potential tightening in borrowing costs in the event of a sharp pick-up in business investment. GBP/USD surged 1.20% to 1.2970 yesterday and consolidated around this threshold during the Asian session.

On Thursday morning, the US dollar continued to lose ground as investors started to finally understand that President Trump's economic boost will remain at the draft stage. The NOK, AUD and SEK stood amongst the best performer and rose 0.62%, 0.48% and 0.58% respectively. The Japanese yen was the only G10 currency to edge lower amid broad risk-taking mood.

Trump target of 3% growth looks less and less unattainable

Fed members look concerned by the level of equities. San Francisco Fed President John Williams declared recently 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.

Our overview of the US economy is bearish and markets expect today's Q1 GDP to be released at 1.2% q/q. We believe that fundamentals are still soft and we consider the US recovery to be overestimated at the moment.

On top of that, the IMF in a report has slashed its GDP forecast for year-end 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.

Currency-wise, 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.

USDJPY is displaying a strong rally away from 108.80 region where a corrective wave 2 of a higher degree was completed. Current impulsive activity now suggest that a new bullish leg is in play and is already unfolding. Recently we have seen price completed minor wave one and two, which means that current rally away from 110.93 level can be minor wave three with a projection target of 161.8 and the region where the upper channel line meets.

USDJPY, 4H