Sample Category Title

GBP/USD - 1.2736

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2750

Kijun-Sen level                    : 1.2733

Ichimoku cloud top              : 1.2699

Ichimoku cloud bottom        : 1.2661

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has continued moving higher after last week’s strong rebound from 1.2589, suggesting near term upside risk remains for this move to bring retracement of recent decline to 1.2780-85 (50% Fibonacci retracement of 1.2978-1.2589), however, reckon upside would be limited to 1.2800 and price should falter below resistance at 1.2818, bring another selloff later.

In view of this, would not chase this move here and would be prudent to stand aside for now. Below 1.2705-10 would suggest an intra-day top is formed, bring weakness towards 1.2675-80 but break of latter level is needed to signal the rebound from 1.2589 has ended, bring retest of this level later.

The main economic releases during today's European session pertained to durable goods orders out of the US and the Ifo business sentiment survey out of Germany. Beyond these, gold experienced a considerable decline and sterling received a boost after UK Prime Minister struck a deal with Northern Ireland's Democratic Unionist Party which would support her minority government.

In US economic releases, durable goods orders fell by 1.1% in May. This negatively compares to the 0.6% drop expected and exceeds April's decline by 0.9%. The data point to a loss in momentum in the manufacturing sector during the middle of the second quarter of the year.

In terms of reaction in the forex markets to the durable goods numbers, the dollar experienced sizable losses relative to majors including the yen and the euro as the data hit the markets. Dollar/yen fell to as low as 111.35. The pair traded at 111.66 previously. Euro/dollar rose to its highest on the day, at 1.1219, shortly after the figures were released. This also marks an eleven-day high for the pair which traded at 1.1188 before the data became public.

The dollar index, a broader gauge of the US currency's strength, was down one-tenth of a percent in afternoon European trading hours. Earlier in the day, San Francisco Fed President (a non-voting FOMC member), John Williams delivered a hawkish speech during which he said "If we delay (hiking) too long, the economy will eventually overheat, causing inflation or some other problem." His talk failed to significantly lift the greenback as investors remain sceptical. The CME Group's 30-day Fed Fund futures prices are currently placing the odds of another rate hike at less than 50% during the Fed's December meeting. Dollar/yen was last up on the day, trading at 111.42. In the meantime, euro/dollar was up, above the 1.12 handle. Federal Reserve Chair Janet Yellen will be speaking tomorrow in London.

During morning European trading hours, the Ifo institute's survey gauging business sentiment in Germany, Europe's largest economy, was released. The institute's business climate index for the month of June beat expectations, rising to the all-time high of 115.1 from May's 114.6. Forecasts were for a reading of 114.5. The sub-indices measuring current business conditions and expectations for the future were also released above projections and their respective figures from the previous month. The German economy seems to be maintaining positive momentum, being helped by private consumption and dodging potential threats to growth for the time being such as Brexit developments and upcoming federal elections in September. The Ifo institute chief Clemens Fuest stated that "Sentiment among German businesses is jubilant". Despite the upbeat figures, euro/dollar edged lower, though not by much, upon immediate release of the data.

Sterling firmed up, hitting a one-week high of $1.2759 in early European session, amid the news that Theresa May was about to seal a deal with the Democratic Unionist Party, which would give her a better grip of the government. Such a deal materialized a couple of hours later. Pound/dollar eased later in the day but was last still marginally up on the day, trading at 1.2741. Relative to the euro, sterling was slightly lower in afternoon European trading, with euro/pound eyeing the 0.88 handle.

Taking a look at gold, the precious metal steeply declined as a result of a large sell order hitting the markets today. In particular, the commodity fell to the more than one-month low of $1235.84 an ounce. Reports made reference to an accidental sale with the seller trying to quickly make up for the mistake by placing long positions immediately after. The precious metal made up for a significant part of the loss but was still last trading more than 1.0% down on the day, at $1244.25 an ounce.

Looking ahead, European Central Bank President Mario Draghi is scheduled to give a speech at 17:30 GMT.

EUR/USD - 1.1201

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1196

Kijun-Sen level                  : 1.1196

Ichimoku cloud top             : 1.1180

Ichimoku cloud bottom      : 1.1170

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The single currency has risen again after brief pullback to 1.1172, retaining our view that near term upside risk remains for the rebound from 1.1119 (last week’s low) to extend gain to 1.1228-30 (61.8% Fibonacci retracement of 1.1296-1.1119), however, reckon upside would e limited to 1.1260-70 and price should falter well below resistance at 1.1296, bring retreat later.

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below said intra-day support at 1.1172 would bring weakness towards 1.1139 support but break there is needed to revive bearishness and signal top is formed, bring retest of 1.1119.

USD/JPY - 111.40

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 111.36

Kijun-Sen level                  : 111.32

Ichimoku cloud top             : 111.35

Ichimoku cloud bottom      : 111.26

Original strategy  :

Buy at 110.65, Target: 111.65, Stop: 110.30

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 110.65, Target: 111.65, Stop: 110.30

Position :  -

Target :  -

Stop : -

Although the greenback rebounded after finding support at 110.95 last week and gain towards resistance at 111.79 (last week’s high) cannot be ruled out, break there is needed to signal recent upmove has resumed and extend headway to 111.90-95 (50% projection of 108.82-111.42-110.65), however, upside should be limited to resistance at 112.13 and 112.25 (61.8% Fibonacci retracement of 114.37-108.82 and 61.8% projection) should hold. If said resistance at 111.79 continues to hold, then further consolidation would take place and another retreat to 110.95 cannot be ruled out, however, previous support at 110.65 would limit downside and bring another rise later.

In view of this, would not chase this rise here and we are looking to buy dollar on pullback as 110.65 support should limit downside. Below 110.30-35 (50% Fibonacci retracement of 108.82-111.79 and previous resistance turned support) would abort and signal a temporary top has been formed instead, risk weakness towards 109.95-00 (61.8% Fibonacci retracement).

EURGBP can be trading in a triangle of a higher degree, with current intra-day movement representing sub-wave d. Once leg d finds resistance, a new three wave movement may develop within the following wave e. That said more gains may follow on the pair, once the whole correction find support and fully unfolds.

EURGBP, 1H

EUR/GBP - 0.8803

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term up

Original strategy  :

Buy at 0.8660, Target: 0.8860, Stop: 0.8620

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.8660, Target: 0.8860, Stop: 0.8620

Position : -

Target :  -

Stop : -

 
The single currency has remained confined within recent established range and further sideways trading below recent high at 0.8866 would be seen and another corrective fall to 0.8740-50 cannot be ruled out, however, downside should be limited to support at 0.8652, bring another rise later. Above indicated resistance at 0.8846 would signal the retreat from 0.8866 has ended, bring retest of this level but break there is needed to confirm recent erratic upmove from 0.8304 low has resumed and extend further gain to 0.8880, then 0.8900, having said that, as broad outlook remains consolidative, reckon current c leg of larger degree wave b should be limited to 0.8950 and price should falter well below 0.9000 psychological level.

In view of this, we are looking to buy euro on subsequent pullback but one should exit on such rise. Below 0.8650 would defer and risk test of 0.8620, a break below there would signal top is formed instead, bring further fall to 0.8620, then 0.8600 which is likely to hold from here.

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3229

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term down

 
Original strategy       :

Sold at 1.3295, Target: 1.3130, Stop: 1.3355

Position: - Short at 1.3295

Target:  - 1.3130

Stop: - 1.3355

 
New strategy             :

Hold short entered at 1.3295, Target: 1.3130, Stop: 1.3310

Position: - Short at 1.3295

Target:  - 1.3130

Stop:- 1.3310

The greenback met renewed selling interest at 1.3308 and has slipped again, retaining our bearishness and test of support at 13191 would be seen, however, break there is needed to signal the rebound from 1.3165 low has ended at  1.3348 last week, bring retest of this support later. Looking ahead, a break below there is needed to confirm recent decline from 1.3794 top has resumed and extend fall to 1.3100-10 and later towards previous support at 1.3078.

In view of this, we are holding on to our short position entered at 1.3295. Above 1.3308 resistance would prolong consolidation and risk another bounce to 1.3348. Only break of said resistance at 1.3348 would defer and risk a stronger rebound to previous support at 1.3387 (now resistance), however, still reckon upside would be limited to 1.3420-25 and price should falter well below resistance at 1.3471, bring another decline later.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

New orders for manufactured goods decreased 1.1 percent in May following a 0.9 percent decrease in April. Recent softness in orders suggests that the early year surge is fading and that the factory sector will slow.

Orders and Inventories

New orders fell 1.1 percent in May, a larger contraction than the consensus forecast. Excluding defense, new orders decreased 0.6 percent. Transportation, also down two consecutive quarters, drove the decrease, falling 3.4 percent.

Inventories increased 0.2 percent in May, and are now up 10 of the last 11 months, suggesting that manufacturers are having trouble adjusting to the weaker pace of orders.

Core Capital Goods Orders and Shipments

Nondefense capital goods orders ex-aircraft, a key benchmark for future business spending, decreased 0.2 percent. The gap between the survey data, like the ISM regional surveys, and the relatively weak numbers for core capital spending, remains wide.

Following two consecutive monthly decreases, shipments increased 0.8 percent. However, they are unlikely to gain much traction moving forward given the weak order detail in May.

• European stock markets gain nearly 1%, with Italy (+1.4%) outperforming following the deal to save two regional banks. US stock markets open with gains of about 0.5%, the Nasdaq again slightly outperforming.
• Theresa May has struck a "confidence and supply" deal with the Democratic Unionist party, which should ensure the Conservatives to have a majority on key parliamentary votes in exchange for extra funding for Northern Ireland. The government has committed an extra £1bn in funding to the province.
• New orders for key US-made capital goods unexpectedly fell in May and shipments also declined, suggesting a loss of momentum in the manufacturing sector halfway through the second quarter. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.2% (vs +0.4% M/M expected).
• German business sentiment hit a record high in June, with the Ifo business climate index rising to 115.1 from 114.6. Consensus was for 114.5. The gauge of current economic conditions improved to 124.1 from a revised 123.3, and the expectations measure rose to 106.8 from 106.5.
• US banking regulators have room to ease some of the sweeping restrictions put in place after the financial crisis of 2007-2009, but the core rules for the biggest firms need to stay, Federal Reserve Governor Powell said. He didn't touch on monetary policy. NY Fed governor Dudley said that easier financial conditions support Fed tightening.

Rates

Bull flattening German/US yield curves

Global core bond markets gained some ground in the first session of the fresh trading week. The upleg in the German Bund and US Note future wasn't sync though. The Bund shot higher around European noon without real driver. End-of-month/end-of-quarter extension buying was perhaps already at play. Earlier on the day, investors ignored the strongest German Ifo-reading on record. The upleg of the US Note future was clearly attributable to disappointing May durable goods orders. A significant gauge for business investment in US GDP declined by 0.2% on a monthly basis (vs. +0.4% M/M expected). Equity strength, upcoming supply and slightly higher oil prices failed to exercise negative pressure on core bonds. The US Treasury starts its end-of-month refinancing operation tonight with a $26B 2-yr Note auction. Currently, the WI trades around 1.35%.

At the time of writing, the US yield curve bull flattens with yields 0.4 bps (2-yr) to 2.6 bps (30-yr) lower. The German yield curve shifts in similar fashion with yields 0.1 bp (2-yr) to 2.3 bps (30-yr) lower. On intra-EMU bond markets, 10-yr yield spread changes versus Germany range between -2 bps (Italy) and +1 bp. Italian assets welcome the government's plans to bail-out two regional lenders positively. The government provided €5B up-front, but costs could rise up to €17B via €12B guarantees. Greek bonds hardly profit from Moody's rating upgrade (to Caa2). Moody's tilted the rating one notch higher after the €8.5B aid tranche deal reached with European creditors.

Currencies

Intraday USD rebound undone by poor US orders data

The swings in the dollar were a bit wilder than at the end of last week. This morning, the US currency profited from positive risk sentiment and favourable development of interest rate differentials. However, the dollar faced an intraday setback as the US durable orders disappointed again. USD/JPY trades in the 111.40 area. EUR./USD changes hands just north of 1.12. Despite some intraday volatility, the established ranges remain perfectly intact.

Asian equities traded with moderate gains this morning as the Tech rally continued. A gradual rebound of the oil price was also slightly supportive. The direct impact of equities on USD trading was again small. USD/JPY opened soft, but reversed the initial dip and returned to the 111.30 area. EUR/USD traded little changed in the 1.1190 area.

European equities took a strong start to the new trading week and remained well bid throughout the morning session. The deal in the Italian banking sector maybe explains the move. The risk-on rally supported a gradual intraday rebound of USD/JPY. The pair rebounded to the 111.70 area. However, a test of the 111.79/112.13 resistance didn't occur. EUR/USD initially didn't show a clear trend, but finally dropped below the 1.12 mark as interest rate differentials between the US and Germany widened (temporary). The pair touched an intraday low in the 1.1172 area at the onset of the USD trading session.

US eco data again changed fortunes for the dollar. US durable orders (-1.1% M/M) and the Chicago Fed national activity index both missed consensus. USD/JPY reversed this morning's gains as interest rate support for the dollar narrowed again. The pair trades currently around 111.40. The dollar also declined against the euro. EUR/USD rebounded north of 1.12 and trades currently at 1.1210. In the end, today's USD swings were again modest. Even so, the dollar clearly remains vulnerable to negative news from the US even as the Fed indicates that it wants to continue policy normalisation.

UK government deal no big help for sterling

At least one part of the political puzzle in the UK was solved today. The conservative party reached a deal with the DUP of Northern Ireland to support the minority government of PM May. The deal applies for the life of the current parliament (till 2022).Amongst others, it contains £1bln extra funding for northern Ireland. The deal was announced around noon CET. Sterling (re)gained a few ticks after the announcement, but in the end the reaction was very muted. EUR/GBP dropped temporary to the 0.8775 area. Earlier today, the BBA loans for Home purchases were reported at 40 347, close to expectations. Early in US dealings, EUR/USD outperformed cable after the publication of disappointing US data. EUR/GBP trades again in the 0.88 area. Cable trades at 1.2740, also little changed in a daily perspective.

It's been another slow start to trading on Monday, with markets largely picking up where they left off on Friday in the absence of any major news flow over the weekend.

Deal For Veneto Banks Lifts Sentiment in Europe

The one notable piece of news over the weekend came from Italy where an agreement was reached that will avoid winding down two Italian banks, the good assets of which will be transferred to Intesa Sanpaolo. The resolution seems to have appeased both the European Commission and the Italian government, both of which have been at loggerheads as to how to deal with the failing banks, as well as investors with financials across the board being boosted by the announcement.

GBP Pops Higher as DUP Agrees to Support Minority Conservative Government

Reports this morning of an agreement between the Conservatives and Northern Ireland's DUP have seen the pound pop higher, albeit only marginally given that the deal has been widely anticipated and doesn't offer the kind of stability that a majority or even full coalition would. The deal will see Northern Ireland receive an extra £1 billion over the next two years in exchange for the DUPs support for May's minority government. With the deal now agreed, the next question is whether May will remain in charge throughout that period.

Gold Under Pressure as $1,240 is Tested

The improved sentiment in the market is weighing on safe haven assets, particularly Gold which is down more than 1% on the day. Gold recovered back towards $1,260 towards the end of last week but has been sold heavily this morning, hitting its lowest level since the middle of May at one point. A sustained break below $1,240 could trigger a move back towards $1,220, which has been a very notable level on numerous occasions this year.

Oil Higher But Still Looks Weak

Oil is trading higher for a third consecutive session on Monday as it continues to pare losses suffered over the last month which came after producers announced an extension to their output cut. While this may give some cause for optimism, I'm seeing little to convince me that this is anything other than a dead cat bounce, with both Brent and WTI this morning already running into resistance at the first time of asking.

The first test comes from the prior lows which could offer early insight into whether there's anything in these gains and in both cases, we appear to be falling short. A failure here is quite a bearish signal and could point to further downside in the gains ahead. That said, a break above $43.50 in WTI and $46.60 in Brent may suggest we're seeing a broader correction, something that at this stage is looking unlikely.

While it may have been a slow start to trading, we will get durable goods numbers from the US ahead of the open on Wall Street. ECB President Mario Draghi will also appear later on as he delivers opening remarks at a forum on central banking in Portugal.