Sample Category Title

Daily Pivots: (S1) 1.0868; (P) 1.0882; (R1) 1.0901; More...

EUR/CHF's recovery from 1.0830 continues today but it's staying below 1.0908 resistance. Intraday bias remains neutral for the moment. On the upside, break of 1.0908 will indicate that the correction from 1.0986 has completed. In such case, intraday bias is turned back to the upside for retesting 1.0986/0999 resistance zone. In case of another fall, downside should be contained by 1.0791/0872 support zone to bring rebound.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Such correction could have completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance will target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0791 support holds.

Daily Pivots: (S1) 142.53; (P) 143.36; (R1) 144.78; More....

GBP/JPY's rally and break of 142.75 resistance indicates completion of fall from 148.09. Intraday bias is turned back to the upside for 148.09/42 resistance zone. Decisive break there will resume whole rebound from 122.36. On the downside, below 141.95 minor support will turn intraday bias back to the downside for 138.65 support instead.

In the bigger picture, while the fall from 148.09 is deeper than expected, we're not bearish in the cross yet. Price action from 148.42 is possibly developing into a sideway pattern with fall from 148.09 as the third leg. Deeper decline could be seen but we're looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Rise from 122.36 is still mildly in favor to resume at a later stage. Decisive break of 38.2% retracement of 196.85 to 122.36 at 150.43 will pave the way to 61.8% retracement at 167.78.

Daily Pivots: (S1) 125.58; (P) 126.52; (R1) 128.32; More...

EUR/JPY soared sharply to as high as 127.47 so far and remains firm. The break of 126.09 key resistance carries larger bullish implications. Intraday bias remains on the upside and current rally would target 61.8% projection of 114.84 to 125.80 from 122.39 at 129.16 first. That's also close to medium term projection level at 129.89. On the downside, below 126.47 minor support will turn bias neutral and bring retreat first, before staging another rally.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 should target 100% projection of 109.03 to 124.08 from 114.84 at 129.89 first. Break there will pave the way to 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will now remain bullish as long as 122.39 support holds.

Euro soared overnight as propelled by comments from ECB President Mario Draghi, taking out key resistance levels against Dollar and Yen. The common currency remains firm in Asian session. On the other hand, Dollar and Yen are trading among the weakest ones. The greenback is additional pressured, together with US stocks, as delay in healthcare vote in Senate again raised questions on US President Donald Trump's ability to push through economic agenda. Draghi's comment also pushed German bond yields higher, which was then followed in US bond markets. Yen suffered deeply with the rebound in bond yields. Meanwhile, Canadian Dollar is helped by the rebound in oil prices, partly thanks to the decline in Dollar. WTI crude oil is back above 44 even though there is no clear momentum to regain 45 handle yet. Gold is back above 1250, also as a reaction to Dollar selloff.

Stocks tumbled as Senate postponed healthcare vote

US Senate Republicans postponed the vote on the healthcare bill that overhauls Obamacare. Senate Majority Leader Mitch McConnell is pushing to vote ahead of July 4 and pledged to "press on". US President Donald Trump warned that it's crucial to reach an agreement because Obamacare was "melting down". However, there is so far still no consensus among Republicans on the form of the bill and thus, not enough votes are secured. And the markets perceive the development as another sign that Trump continues to lose political support. And it would continue to be hard for him to push through economic policies and tax reforms. That's seen as a key reason for the selloff in US stocks.

DOW closed down -98.89 pts, or -0.46%, at 21310.66. S&P 500 lost -19.69 pts, or -0.81%, to 2419.38. NASDAQ dropped -100.53 pts, or -1.61%, to close at 6146.62. NASDAQ's rebound in the past two weeks failed below 6341.70 high. Yesterday's sharp fall suggests that the correction from 6341.70 is now extending with another falling leg. Focus is back on 55 day EMA (now at 6114.40), which is close to medium term channel support. A firm break there will open up the case for deeper fall to 38.2% retracement of 5034.31 to 6341.70 at 5842.31. That could drag down other major indices and be a negative factor for Dollar.

Diverging views from Fed officials, market shrugged

Fed chair Janet Yellen maintained that "it will be appropriate to the attainment of our goals to raise interest rates very gradually to levels that are likely to remain quite low, although there is uncertainty about this, to remain low by historical standards for a long time." Philadelphia Fed President Patrick Harker said that he's "sticking to my outlook that we're on the right path". And, "in the case of inflation, I've seen the factors exerting downward pressure as temporary." He still see "another rate hike as appropriate for 2017". Minneapolis Fed President Neel Kashkari questioned "what's the rush" for another rate hike in his speech. Kashkari is a known dove who dissented both of Fed's hikes this year. And he said that "we're not seeing wages climb very fast, and we're not seeing inflation. That tells me the economy is not on the verge of overheating." Overall, the markets had little reactions to the Fedspeaks.

Optimistic Draghi propelled Euro higher

ECB President Mario Draghi's comment pushed Euro sharply higher overnight. German bond yield was also lifted with 10 year yield jumping to 1 month high at 0.35%. 2 year yield hit -0.56%, highest in a year. The key takeaways from Draghi are that firstly, he isn't concerned with recent slowdown in Eurozone inflation. He noted that the slowdowns "are on the whole temporary and should not cause inflation to deviate from its trend over the medium term, so long as monetary policy continues to maintain the solid anchoring of inflation expectations." Secondly, he is optimistic on growth as "all the signs now point to a strengthening and broadening recovery in the euro area". And, "political winds are becoming tailwinds." He noted there is "newfound confidence in the reform process, and newfound support for European cohesion, which could help unleash pent-up demand and investment."

And most importantly, Draghi opened up the ways to stop of even reverser the massive quantitative easing program. He said that "as the economy continues to recover, a constant policy stance will become more accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments - not in order to tighten the policy stance, but to keep it broadly unchanged." That is, Draghi is hinting that monetary policy in 2018 will be less accommodative. And he's paving the way to tweaking policies ahead. It's affirming the view that ECB will announce scaling back of asset purchase, at least, in September.

France and Germany to drive an impetus in EU

Frans Timmermans, deputy head of the EU's executive European Commission, expressed his optimism on EU's development and said that integration is a "foregone conclusion". He acknowledged that "over the last years, rightly or wrongly, the impression was created that Germany is too dominant." But now, France is taking "steps in a more assertive way" and that's good for Europe, France and especially Germany. He noted there will be an "impetus" driven by France and Germany ahead and other member states are getting organized.

Hammond and Davis at odds on Brexit transition

In UK, it's reported that Chancellor of Exchequer Philip Hammond and Brexit Minister David Davis are at odds over the Brexit deal. Hammond warned in a speech that negotiations would be jeopardized if parties allowed "petty politics to interfere with economic logic". And he reiterated the warnings about a "cliff edge" of tariffs". He urged the government to work out a transitional arrangement that "allows the complex supply chains and business relationships that crisscross our continent to continue to deliver value". On the other hand, Davis said that UK would be straight out of the customs union and any transition period will likely end in 2022. He commented that Hammond's time lines were "not quite consistent with one another".

On the data front

German import price, Eurozone M3 and Swiss UBS consumption indicator will be released in European session. US will release trade balance, wholesales inventories and pending home sales.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 125.58; (P) 126.52; (R1) 128.32; More...

EUR/JPY soared sharply to as high as 127.47 so far and remains firm. The break of 126.09 key resistance carries larger bullish implications. Intraday bias remains on the upside and current rally would target 61.8% projection of 114.84 to 125.80 from 122.39 at 129.16 first. That's also close to medium term projection level at 129.89. On the downside, below 126.47 minor support will turn bias neutral and bring retreat first, before staging another rally.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 should target 100% projection of 109.03 to 124.08 from 114.84 at 129.89 first. Break there will pave the way to 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will now remain bullish as long as 122.39 support holds.

Economic Indicators Update

STOCKS

Dow (21310.66, -0.46%) has come off from important long term resistance near 21500 and while that holds, we could possibly see a fall towards 21100 before bouncing back afresh.

Dax (12671.02, -0.78%) is trapped within the near term resistance and support levels of 13000 and 12600. In case the falling momentum continues, we could possibly see a dip below 12600 in the near term; else a rise back towards 13000 is possible.

Shanghai (3176.73, -0.45%) has come off slightly as expected and could continue to fall towards 3160-3150 levels while the resistance near 3200 holds.

Nikkei (20166.21, -0.29%) looks bullish just now and has the potential to move up towards 20500 while supports near 20000 and 20200 hold. Although the movements in the last few sessions have been very narrow, this could act as a good base building to rise up sharply in the near term.

Nifty (9511.40, -0.66%) could have possibly ended the immediate correction and could bounce back towards 9550 today. A break below 9480, if seen could turn the index more bearish towards 9400-9390 levels. But preference is for an immediate bounce from 9480 back towards 9600.

COMMODITIES

While Dollar Index (96.06)had failed to hold it’s gain above 97 levels, Bullion has strengthened again against Dollar yesterday. Gold (1252) and Silver (16.74) are trading well above their crucial support at 1233 and 16.50 respectively. A break below 1245 is necessary for gold to turn bearish towards 1231 for the near term else a bounce back could take it higher towards 1262. Silver is trading within the range of 16.50-17.05 and a close above 17.05 could open up 17.50 levels as well.

Copper (2.65) moved higher in line with our expectation and trading within a range of 2.60-65. Only above 2.65 higher resistances of 2.69 and 2.80 can come into consideration. 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.

Both Brent (46.87) and WTI (44.09) closed higher in line with our expectation. Market is waiting for today’s U.S weekly crude inventory data (8:00 pm IST) with an expectation of a shortage (-2.1 MB) in inventory and prices could move according to the outcome. If the anticipation of -2.1 M Barrel of shortage will match the actual outcome then that could be beneficial for both Brent and WTI. Otherwise a surplus or a less than expected shortage could bring further bearish possibilities into consideration. The immediate trading range for Brent and WTI are 46-48 and 43-46 respectively.

FOREX

Dollar Index (96.06) moved lower contrary to our expectation and now trading within the range of 96-97 regions.We think it could consolidate for a while at current levels due to short term oversold condition.We will remain bearish on dollar index while it is trading below 97 levels.

Finally Euro (1.1349) had breached the crucial resistance of 1.1210-30 and closed at day's high. Immediate trading range could be 1.1207-1.1426 and the bulls need to trade above 1.1207 levels to keep the bullish momentum intact. We might see range trading for next few days as Eur/Usd is overbought in near term time frame.

Dollar-Yen (112.09) may test 112.50 over today and tomorrow followed by a dip towards 111.50. Note 112.50 is a decent resistance and could possibly hold the price lower.

Pound (1.2816) is trading at the upside limit of the 1.2540-1.2820 region mentioned yesterday. A rise towards 1.29 is possible if it breaks above 1.2820; else a fall to 1.27 is possible in the near term.

Aussie (0.7588) has been testing immediate upside resistance zone of 0.7625-0.7635 since mid-June but has nt been able to break on the upside yet. While below 0.7625, the currency pair could move down to 0.7550 or remain stable. Only on a break above 0.7635, shall we focus on higher levels.

Dollar-Rupee (64.52) was almost stable yesterday and we may expect the 64.40-64.70 region to hold for some more sessions.

INTEREST RATES

The German-US 2Yr (-1.92%) is headed towards -1.90% along with the sharp rise in Euro yesterday. Immediate trend looks bullish. We could possibly see a test of -1.90% before falling off from there.

The US yields are trading higher but is likely to remain sideways for the rest of the week. The 5Yr, 10YR and the 30Yr are trading at 1.81%, 2.20% and 2.75% respectively.

The US 10-5Yr (0.39%) has bounced from channel support and could move up towards 0.40% and higher in the coming sessions.

Caught Flat Footed

An emphatically hawkish Mario Draghi suggests the ECB policy is on track while all but declaring victory over the Eurozone inflation conundrum.Apparently, the ECB has taken a giant leap towards ending the European Central Bank’s ultra-loose monetary policy, sending the euro and German yields higher as investors piled into the Euro as the ECB hints that the end of crisis-era stimulus measures is upon us.The markets vigorously repriced Eurozone assets sending EURUSD rocketing higher led by EURJPY which traded at the highest point in over a year.

The voracity of the move suggest traders were caught flat-footed given the ensuing scrum for topside EUR exposure.And while we should expect some profit taking, the next logical destination for EUR JPY is likely a test 128 as the market continues repricing EUR assets.

Competing for headline space, Dr Yellen did not rock the boat, but the dollar looks increasingly vulnerable and could topple at the slightest wobble in US economic data. Dollar Bulls could l be in for a reality check when PCE comes into focus at week’s end more so if the soft inflation narrative plays on.

European Central Bank President Draghi was certainly optimistic on inflation overnight!

Draghi's tone has given the market hope that he will taper the central bank's monetary stimulus and this in turn has sent the Euro forex pairs higher across the board.

With EUR/USD encountering resistance in the form of previous heavy chop (I don't really know how else to describe it. Take a look yourself), I have instead turned my focus to EUR/JPY and the double top level that we spoke about on the blog a couple of weeks ago.

EUR/JPY Daily:

BOOM! Yep, no resistance level is stopping that freight train from rolling straight through.

I'll let you zoom into the intraday charts on your own MT4 platform, but see how after the big bullish push, price has just traced sideways rather than pulling back? This is extremely bullish price action and if Draghi doesn't backtrack, then any short term pullbacks could be seen as juicy buy signals.

The Canadian dollar rose on Tuesday after oil prices rebounded from yesterday’s losses and the USD was lower on growth concerns. Central banks have taken the market reigns back from politicians as political risk has subsided following elections in France and the United Kingdom. The Trump administration will find it difficult to push its healthcare reform and has now pushed the vote back to after the Fourth of July. Rhetoric has been the monetary policy tool that has been used by all central banks with the Fed the only major body to go beyond words by raising rates by 25 basis points in June. The Bank of Canada (BoC) was a surprise addition with comments from Deputy Governor Carolyn Wilkins and Governor Stephen Poloz endorsing the growth of the Canadian economy and suggesting a reduction in stimulus would be forthcoming. The CAD has been trading above 1.32 since early March and is now below that level as US growth concerns rise.

European Central Bank (ECB) President Mario Draghi was confident that the current policies will bring back growth to the Euro zone. The bullish comments were part of annual central bank forum and pushed the EUR/USD to above 1.13 after the International Monetary Fund (IMF) downgraded US Growth in 2017 down to 2.1 percent. The disappointing durable goods data released on Monday continues to signal a disappointing second quarter and could put the Fed on hold despite the words from Fed speakers this week. The US central bank has said that their economic forecasts do not depend on the upcoming policies form the Administration and remain convinced that weak inflation is a temporary temporary issue.

Oil prices rose ahead of US weekly inventories on Wednesday. West Texas Intermediate surged almost 2 percent and was trading at $44. Organization of the Petroleum Exporting Countries (OPEC) delegates said that they do not intend to rush into further cuts at this time. Members of the organization will meet with Russia in July where other strategies to stabilize prices might be discussed.

The USD/CAD lost 0.489 percent on Tuesday. The currency is trading at 1.3176 after political turmoil in the US once again is putting pressure on the greenback. Consumer confidence remains high reached a 16 year high in June, but once again the paradox between the survey and actual retail sales continues. Yesterday’s durable goods orders release was a blow to manufacturing forecasts and could signal a worse than expected second quarter GDP. The IMF downgrade of US growth is also weighing the dollar down. The CAD is rising on oil prices and a soft dollar ahead of the weekly crude inventories tomorrow.

The Bank of Canada (BoC) is not expected to change its monetary policy in July despite the hawkish comments from BoC policy makers, but a rate hike later this year is definitely on the table. The timing will not be totally decided by Governor Poloz as the economy and the rate moves by the U.S. Federal Reserve will finalize the decision from the BoC with the October central bank meeting a possibility with December and January also in the running. Comments from Poloz as part of the ECB Forum in Portugal could offer a continuation of the hawkish rhetoric that was first expressed in Winnipeg in a radio interview.

Oil rose 1.905 percent in the last 24 hours. West Texas Intermediate is trading at $44.08 ahead of the API and weekly US trading inventories with drawdowns in the 2 million barrel range expected. A meeting in Russia next month with OPEC delegate will also bring more insight into what major producers could do beyond their current production cut agreement to boost prices. Rising production in the US, Canada, Brazil and even OPEC members Libya, Iran and Nigeria have kept the market well supplied despite the cuts.

Market events to watch this week:

Wednesday, June 28
10:30 am USD Crude Oil Inventories

Thursday, June 29
8:30 am USD Final GDP q/q
8:30 am USD Unemployment Claims

Friday, June 30
4:30 am GBP Current Account
8:30 am CAD GDP m/m

USD/CHF - 0.9643

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9685

Kijun-Sen level                    : 0.9685

Ichimoku cloud top                 : 0.9710

Ichimoku cloud bottom              : 0.9710

Original strategy :

Sell at 0.9680, Target: 0.9580, Stop: 0.9715

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9680, Target: 0.9580, Stop: 0.9715

Position : -

Target :  -

Stop : -

The greenback met renewed selling interest at 0.9738 and has dropped sharply on dollar’s broad-based weakness vs European currencies, suggesting the decline from 0.9771 top is still in progress and bearishness remains for further weakness towards recent low at 0.9613, however, break there is needed to provide confirmation that downtrend has resumed for further fall to 0.9575-80 and later towards 0.9550.

In view of this, we are looking to sell dollar on recovery as previous support at 0.9676 should turn into resistance and limit dollar’s upside, bring another decline. Above another previous support at 0.9692 would defer and risk a stronger rebound to 0.9715-20 but only break of resistance at 0.9738-43 would signal low is formed. 

GBP/USD - 1.2775

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2751

Kijun-Sen level                    : 1.2747

Ichimoku cloud top              : 1.2733

Ichimoku cloud bottom        : 1.2707

Original strategy :

Buy at 1.2710, Target: 1.2810, Stop: 1.2675

Position : - 

Target :  -

Stop : -

New strategy  :

Buy at 1.2710, Target: 1.2810, Stop: 1.2675

Position : -

Target :  -

Stop : -

As cable has risen again after finding renewed buying interest at 1.2706, suggesting the erratic rise from 1.2589 low is still in progress and upside bias is seen for further gain to 1.2780-85 (50% Fibonacci retracement of 1.2978-1.2589), then towards resistance at 1.2818, however, break of latter level is needed to retain bullishness and extend the aforesaid rise to 1.2830 (approx. 61.8% Fibonacci retracement). 

In view of this, would not chase this move here and would be prudent to buy cable on pullback as said support at 1.2706 should limit downside. Below 1.2680 would defer and suggest an intra-day top is formed instead, risk weakness to 1.2660 but support at 1.2640 should remain intact.