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Daily Pivots: (S1) 111.24; (P) 111.51; (R1) 111.72; More...

USD/JPY lost momentum after hitting 111.78 and intraday bias is turned neutral first. Further rise is expected long as 110.63 minor support holds. Above 111.78 will target near term channel resistance (now at 113.02). Sustained break there will suggest 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 110.63 will turn bias back to the downside for 108.81 instead.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Daily Pivots: (S1) 1.1113; (P) 1.1138 (R1) 1.1159; More....

EUR/USD's fall from 1.1295 extended lower but it's still staying above 1.1109 support. Intraday bias remains neutral with focus on 1.1298 key resistance. Decisive break there will carry larger bullish implication and target 1.1615 resistance next. On the downside, break of 1.1109 support will indicate short term topping and rejection from 1.1298. In such case, intraday bias will be turned to the downside for 1.0838 support.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD staying far above 55 week EMA (now at 1.0932). Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

Daily Pivots: (S1) 1.2565; (P) 1.2661; (R1) 1.2721; More...

GBP/USD's decline and break of 1.2633 support indicates resumption of fall from 1.3047. Intraday bias is back on the downside for deeper decline. As noted before, we're still favoring the bearish case that consolidation pattern from 1.1946 has completed at 1.3047 already. Sustained break of 1.2614 resistance turned support should confirm our bearish view and target a test on 1.1946 low next. However, break of 1.2813 resistance will dampen our view and turn bias back to the upside for 1.3047 and above.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. Price actions from 1.1946 medium term low are seen as a consolidation pattern, which could have completed after hitting 55 week EMA. Break of 1.1946 low will target 61.8% projection of 1.5016 to 1.1946 from 1.3047 at 1.1150 next. In case the consolidation from 1.1946 extends, outlook will stay remain bearish as long as 1.3444 resistance holds.

Dollar trades broadly higher this week so far, but strength is limited by weakness in treasury yields and risk aversion. WTI crude oil dropped as low as 42.75 yesterday before recovering mildly to 43.5. DOW and S&P 500 retreated after hitting records highs on Monday and closed lower by -0.29% and -0.67% respectively. Nikkei followed and is trading down -0.48% at the time of writing. Notable weakness is seen in 30 year yield while extends this year's decline and lost -0.053 to close at 2.735. 10 year yield also closed lower by -0.037 but stays above last week's low at 2.103 so far. In other markets, Gold remains weak and struggles to regain 1250 after dipping to 1242.4.

Known dove Chicago Fed President Charles Evans said that the decisions on monetary policies is "much more challenging from here on out". He pointed to latest weak inflation data and said they "make me a little nervous". Evans said that Fed can "go until December and make a judgement that maybe three is the right number or maybe two is the right number". That is, the comments made it further clearer that Evans prefers Fed to pause hiking interest rates for now and don't move in September. Currently, fed fund futures are only pricing in 13.1% chance of another hike in September, comparing to 28.8% pricing last week.

30 year yield lost hold of 38.2% retracement of 2.102 to 3.201 at 2.781 overnight and closed down at 3.735. Note that the TYX was rejected from key clear resistance at 3.255 twice. And the depth of decline now suggests that TYX is heading back to 61.8% retracement at 2.52 and possibly below. 10 year yield is kept well below 2.229 resistance and is vulnerable for another fall to 2.0 handle. While dollar index breached 97.77 resistance, the development warrants no trend reversal yet. Overall, while Dollar has stabilized, more is needed to prove that its trend is reversing.

Sterling pressured further by political uncertianties

Sterling continues to trade as the weakest major currency for the week. The selloff was triggered by comments from BoE Governor Mark Carney that it's not the time for rate hike yet despite some calls for it in the MPC. The Pound was also also pressured by domestic political uncertainties. Prime Minister Theresa is forming a coalition with North Ireland's Democratic Unionist Party after her Conservatives lost majority in the House of Commons. However, it's reported that DUP believed conservatives cannot take the partnership for granted. And so far, no deal was reached between the parties after 10 days of talks. Meanwhile, more than 50 Labour politicians signed a joint statement to "stop the Tories in their tracks" over hard Brexit.

ECB Cœuré favors moving Euro clearing back

ECB executive board member Benoît Cœuré argued that it's better for Euro clearing to move from London to EU after Brexit. Cœuré said in an interview that "we need to ensure that we can preserve a framework that ensures the safety and stability of the financial system when the UK is no longer a member of the EU." And, "in this regard, we think the European Commission proposals to amend [the rules] are a step in the right direction." On the other hand, BoE Governor Mark Carney said that moving the EUR 900b a day clearing from London is in "no one's economic interest". Carney argue that would "reduce the benefits of central clearing" and "any development which prevented EU27 firms from continuing to clear trades in the UK would split liquidity between a less liquid onshore market for EU firms and a more liquid offshore market for everyone else."

BoJ minutes: Members comfortable with fluctation in bond purcahses

The minutes of BoJ's April meeting showed that policy makers were comfortable with the fluctuation in JGB purchases. The minutes noted that "members reaffirmed their view that debt purchases will fluctuate within a range depending on market conditions and agreed this poses no problems to the BOJ's guidance for market operations." This came into question as BoJ recently slowed down the bong purchases. And with the current pace, the total annual increase could be projected as JPY 60T, instead of JPY 80T as the central noted in its communications. Nonetheless, it's been clear that BoJ changed its approach last year to the so called Yield Curve Control framework. That is, the central bank is targeting to keep long term yield at zero, instead of a figure of asset purchase.

On the data front

Australia Westpac leading index rose 0.0% mom in May. Japan all industry index rose 2.1% mom in April. UK will release public sector borrowing in European session. US will release existing home sales later in the day.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2565; (P) 1.2661; (R1) 1.2721; More...

GBP/USD's decline and break of 1.2633 support indicates resumption of fall from 1.3047. Intraday bias is back on the downside for deeper decline. As noted before, we're still favoring the bearish case that consolidation pattern from 1.1946 has completed at 1.3047 already. Sustained break of 1.2614 resistance turned support should confirm our bearish view and target a test on 1.1946 low next. However, break of 1.2813 resistance will dampen our view and turn bias back to the upside for 1.3047 and above.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. Price actions from 1.1946 medium term low are seen as a consolidation pattern, which could have completed after hitting 55 week EMA. Break of 1.1946 low will target 61.8% projection of 1.5016 to 1.1946 from 1.3047 at 1.1150 next. In case the consolidation from 1.1946 extends, outlook will stay remain bearish as long as 1.3444 resistance holds.

Economic Indicators Update

Currency pair EUR/USD

The EUR/USD broke below the long-term support trend line (dotted blue) but it will need to break below 1.11 before a potential wave 3 becomes likely. At this point a break, pullback and continuation seems the most probable via a wave 1 and 2 (brown).

The EUR/USD is showing divergence between the bottoms which could cause a wave 2 (brown) retracement. Price invalidates wave 2 (brown) if price manages to break above the 100% Fibonacci level. A break below support (green) could indicate a continuation of the bearish trend.

Currency pair USD/JPY

The USD/JPY continued with the bullish momentum (orange 3) within wave C (brown) yesterday. Price is now building a potential pullback within wave 4 (orange) which could find support (green) at the previous bottom and tops.

The USD/JPY could also see potential support from the Fibonacci levels of wave 4 (orange).

Currency pair GBP/USD

The GBP/USD bearish breakout below support (dotted blue) has been short lived so far. A continuation below 1.26 could see a further bearish extension towards the Fib targets of wave 3 (blue).

The GBP/USD is in a potential wave 4 (grey) which is invalidated if price manages to break above the bottom of wave 1 (grey) indicated by the resistance trend line (red). A break below support (green) could see the continuation of wave 3 (orange).

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

Kicking this morning's report off from the weekly timeframe, we can see that the sellers continue to reflect a strong bearish stance from the underside of a major supply at 1.1533-1.1278. Looking down to the daily chart, price recently crossed below support at 1.1142. Assuming that this barrier holds as resistance, the next downside target in view is the trendline support etched from the high 1.1616, followed closely by support at 1.0850.

Across on the H4 chart, the mid-level support at 1.1150 was recently taken out along with the trendline support drawn from the low 1.1109. Should the small yellow area (represents the daily resistance and the two said H4 resistances) hold firm, then it's likely that the single currency will test the 1.11 handle sometime today.

Our suggestions: In Tuesday's report, we mentioned that before shorts are considered, the 1.11 handle will need to be consumed. While we still believe this to be the more conservative route, our desk would also consider shorts from 1.1150/1.1142 (the yellow zone on the H4 chart) today, as long as there is some form of lower-timeframe confirming action present (see the top of this report).

Ultimately the first take-profit target would be 1.11. A break below here, and we could see the unit stretch down as far as the 1.10 region.

Data points to consider: No high-impacting events on the docket today.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.1150/1.1142 ([waiting for a lower-timeframe confirming signal to form is advised] stop loss: dependent on where one confirms the area).

GBP/USD

In response to Gov. Carney's speech yesterday, the GBP aggressively weakened and took out the 1.27 handle along with it. Following this, downside momentum continued to be seen and it was not until the US open did we see any sign of bullish intent.

Leaving the 1.26 handle unchallenged, the bulls managed to clock a high of 1.2636 by the closing bell. This move was also likely helped by the daily AB=CD (black arrows) 161.8% ext. completion point seen at 1.2602 drawn from the high 1.3047, and the 61.8% daily Fib support at 1.2625 taken from the low 1.2365.

Despite the above, weekly price shows room to extend down to a trendline support taken from the high 1.2774, which happens to intersect with daily demand seen below the two above said daily Fib levels at 1.2499-1.2543.

Our suggestions: Neither a long nor short seems attractive at the moment. On the one hand, weekly flow indicates lower prices may be on the cards, and on the other hand, the daily chart is trading from two closely converging Fib levels. Therefore, no matter which direction you take, you'll be trading against higher-timeframe flow! With that being the case, our team has decided to remain on the sidelines for the time being until we have more of a defined direction in this market.

Data points to consider: MPC member Haldane speaks at 12pm GMT+1.

Levels to watch/live orders:

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

AUD/USD

The AUD/USD, as you can see on the H4 chart, remains consolidating between April's opening level at 0.7632 and the support area coming in at 0.7571-0.7557. Of particular interest is April's opening level being sited just 8 pips below the lower edge of a daily supply at 0.7679-0.7640. Furthermore, a pip below the current H4 support area is a daily support area positioned at 0.7556-0.7523.

On the weekly timeframe, however, we can see that the unit marginally closed above supply at 0.7610-0.7543. As we mentioned in Monday's report, it may be worth waiting for this week's candle to close before presuming that the said weekly supply is consumed, since it could just as well be a fakeout.

Our suggestions: Right now, we're not only capped by the current H4 consolidation, we're also confined by the neighboring daily demand and supply mentioned above! To that end, we still stand by Tuesday's suggestion: an ideal scenario would be for H4 price to chalk up a bearish selling wick that whipsaws through 0.7632, connects with the daily supply and then closes back below 0.7632. This would, in our humble opinion, be enough evidence to validate a sell, with an initial target objective set at the said H4 support area.

Data points to consider: No high-impacting events on the docket today.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Look for H4 price to chalk up a bearish selling wick that whipsaws through 0.7632 and connects with daily supply (stop loss: ideally beyond the candle's wick).

USD/JPY

During the course of yesterday's sessions, the USD/JPY pair topped at 111.78 and pulled back to May/April's opening levels at 111.29/111.41.Although these two levels appear to be holding steady, there may be trouble lurking ahead. Over on the daily timeframe, see how price chalked up a selling wick around the underside of supply at 111.35-112.37. In addition to this, we still feel that weekly bears remain in a relatively strong position after pushing aggressively lower from supply registered at 115.50-113.85. We know there's a lot of ground to cover here, but this move could possibly result in further downside taking shape in the form of a weekly AB=CD correction (see black arrows) that terminates within a weekly support area marked at 105.19-107.54 (stretches all the way back to early 2014).

Our suggestions: Buying from 111.29/111.41 is a risky move, as far as we're concerned, since you'd be going up against potential weekly and daily sellers. Shorting this market below 111.29/111.41 is also difficult. Yes, we would have higher-timeframe flow on our side, but we'd be selling into the 111 handle, followed closely by June's opening level at 110.83.

Data points to consider: No high-impacting events on the docket today.

Levels to watch/live orders:

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

USD/CAD

Monday's call to buy from 1.32 worked out beautifully, as expected. The move from this number recently lifted H4 price above resistance at 1.3263 and now looks poised to attack the 1.33 handle, shadowed closely by March/April's opening levels at 1.3312/1.3310. However, we do feel the bulls will likely struggle here since we're also dealing with daily resistance at 1.3272 and a daily trendline resistance etched from the low 1.2968. On a more positive note, nevertheless, weekly action is seen trading from within the walls of demand formed at 1.3223-1.3395, which could help the buyers penetrate the said daily levels.

Our suggestions: Despite weekly bulls standing in a relatively favorable position, entering long when we know that both the daily and H4 charts show resistance structures ahead is not something our desk would feel comfortable with. By the same token, selling is just as risky, in our opinion, as you'd be shorting into weekly demand! Therefore, unless you are still long from 1.32, we would advise remaining flat today.

Data points to consider: Crude oil inventories at 3.30pm GMT+1.

Levels to watch/live orders:

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

USD/CHF

On Tuesday, the pair spent the day clinging to the green H4 area at 0.9774/0.9750. This zone is comprised of a H4 resistance level at 0.9774, a H4 AB=CD 127.2% ext. at 0.9760 taken from the low 0.9613, a H4 trendline resistance etched from the low 0.9691 and a H4 mid-level resistance drawn from 0.9750.

As we mentioned in our previous report, although the confluence surrounding the green zone is attractive, we have our eyeballs on the H4 supply seen overhead at 0.9825-0.9801. Apart from converging with a H4 AB=CD 161.8% ext. at 0.98 taken from the low 0.9613 and the round number 0.98, this area is also positioned around the upper edge of daily supply marked at 0.9825-0.9786.

Our suggestions: Should price strike the H4 supply area mentioned above at 0.9825-0.9801 today/this week, we would, dependent on the time of day, look to sell from here at market, with stops sited at 0.9827, targeting 0.9750 as an initial take-profit zone.

Data points to consider: No high-impacting events on the docket today.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 0.98 (stop loss: 0.9827).

DOW 30

US equities pulled back from a fresh record high of 21541 yesterday, bringing H4 price to a low of 21465.Should the index continue to be sold, the next port of call will likely be the H4 demand base coming in at 21306-21363. For those who follow our analysis on a regular basis, you may recall that our desk is currently long from 21164. 50% of that position was quickly liquidated at 21234, with the remaining 50% left in the market to run since we intend on trailing this trend long term. The stop-loss order is currently positioned below the said H4 demand at 21298, as we believe this to be the safest area for the time being.

Our suggestions: Personally, we are looking for price to continue rallying before it reaches the aforementioned H4 demand. Should price challenge 21306-21363 this week, however, and is reinforced by a full or near-full-bodied bullish candle, we may look to add to our current position (as per the black arrows) and trail accordingly.

Data points to consider: No high-impacting events on the docket today.

Levels to watch/live orders:

• Buys: 21164 ([live] stop loss: 21298). 21306-21363 ([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).

GOLD

Early on in yesterday's US segment, the yellow metal retested April's opening level at 1248.0 as resistance. In Tuesday's report, we stated that should this level be tested and accompanied by a reasonably sized H4 bearish candle (preferable a full-bodied candle), then it'd be an ideal zone to sell from. H4 price did print a bearish candle from this line, but also slightly corrected before the candle closed, so we passed on the setup.

To our way of seeing things, it appears as though the H4 candles are going to retest April's level once again. Given that this line is bolstered by a daily resistance area formed at 1247.7-1258.8, and weekly price shows room to extend down to demand pegged at 1194.8-1229.1, this line still deserves attention.

Our suggestions: As such, a second retest of April's opening level at 1248.0 would, if it's accompanied by a reasonably sized H4 bearish candle (preferable a full-bodied candle), be an ideal zone to sell from, targeting the H4 support level at1235.0, followed closely by the top edge of weekly demand at 1229.1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1248.0 region ([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).

Short term DAX Elliott Wave view suggests the rally from 5/18 is unfolding as a double three Elliott Wave structure. Minute wave ((w)) ended at 12879.5 and Minute wave ((x)) pullback ended at 12617. Internal of Minute wave ((x)) subdivided as an expanded flat Elliott Wave structure where Minutte wave (a) ended at 12633.5, Minutte wave (b) ended at 12922.5 and Minutte wave (c) of ((x)) ended at 12617. DAX has broken above Minutte wave (b) on 6/14, adding conviction that the next leg higher has started. Up from 12617, the rally is unfolding as a zigzag Elliott Wave structure where Minutte wave (a) ended at 12948.5 and Minutte wave (b) is proposed complete at 12772.5. Near term, while pullbacks stay above 12772.5, and more importantly above 12617, expect Index to extend higher. We do not like selling the proposed pullback.

DAX 1 Hour Elliott Wave Chart

Global Markets:

• Asian stock markets: Nikkei down 0.45 %, Shanghai Composite gained 0.15 %, Hang Seng declined 0.60 %, ASX 200 lost 1.35 %
• Commodities: Gold at $1248 (+0.35 %), Silver at $16.50 (+0.50 %), WTI Oil at $43.45 (-0.15 %), Brent Oil at $45.90 (-0.25 %)
• Rates: US 10-year yield at 2.16, UK 10-year yield at 1.00, German 10-year yield at 0.26

News & Data

• Australia MI Leading Index 0.0 % vs -0.1 % previous
• PBoC Fixes USDCNY Reference Rate At 6.8193 (prev fix 6.8096 prev close 6.8295)
• Oil slump spooks investors; China stocks underwhelmed by MSCI – RTRS
• Oil holds near multi-month lows as glut fears persist – RTRS

Markets Update:

The US Dollar extended gains overnight. The decline in stock markets and oil prices triggered a risk-off sentiment in markets, which provided additional support for the USD. Risk currencies such as the Australian and New Zealand came under pressure overnight. AUD/USD fell from 0.7590 to 0.7560. Key support is seen at 0.7520. Should the pair break below it, a correction towards 0.74 seems likely.

The focus today will be on the RBNZ rate decision. No changes are expected, but traders are looking forward to the central bank's statement and whether it will maintain its slightly hawkish tone. The strong NZD could be a concern for the RBNZ though. NZD/USD rallied from 0.6820 to 0.73 in the past two months. Meanwhile, AUD/NZD fell from 1.09 to 1.04. This puts New Zealand's export industry under pressure.

The Pound fell sharply after dovish comments from Bank of England Governor Carney. He said that “now is not the right time” for a rate hike. GBP suffers now from lower rate expectations, as well as the political uncertainty in the UK. The short-term outlook remains negative and move towards 1.25 likely.

Upcoming Events:

• 15:00 BST – US Existing Home Sales
• 15:30 BST – US Crude Oil Inventories
• 22:00 BST – RBNZ Rate Decision

Selling this EUR/AUD resistance zone gave day traders a short term bounce, but the bearish momentum was short lived and price subsequently rallied hard through the level.

Just from reading the online trading community's thoughts, I can see plenty of chatter around about buying these pullbacks and if this is your view, then this daily support level is key. It's certainly crunch time for the bulls.

EUR/AUD Daily:

I've only included a single, hard line but as you can see when you look back to the left side of that chart, there is plenty of long wicks and chop here and there. That is just the price action nature of a forex cross such as EUR/AUD and highlights the risk management mentality that you have to have to trade these types of pairs successfully.

With this in mind, when a day trader zooms into an intraday chart, they still have to come up with a strict risk management plan which should involve the short term levels that have most recently been tested. These levels can't be zones like the higher time frame because we need a hard number to take entries or set stops around.

Oil gushed lower again overnight with both Brent and WTI taking out their early May panic liquidation lows and falling around 2 percent in the session.

This was despite OPEC/Non-OPEC's compliance being announced at 106 percent and the American Petroleum Institute's crude inventory draw coming in higher than expected at 2.72 million barrels. The inability of oil to stage even a modest dead cat bounce after these two data points must be a concern to producers although it may be that stop loss selling through the May lows overwhelmed both.

From a technical perspective, the picture continues to look ugly with the short end of the oil curve being overwhelmed by increased production from exempt Nigeria and Libya along with OPEC's perpetual migraine, U.S. shale. Producers will be looking with some trepidation now at the official U.S. EIA Crude Inventory Report where the street is forecasting a 2 million barrel drawdown in crude and a gain of 0.1 million in gasoline inventories. A positive increase on either almost certainly seeing an uncapped leak of crude prices lower.

Brent spot trades at 45.85 this morning with resistance at 46.60 and 47.65. Support lies in the 45.10/45.30 region with a break of this area implying the slick could spread to the November lows of 43.00.

WTI spot trades at 43.25 this morning with resistance at 44.00 and 45.00. Interim support lies at the overnight low of 42.70 with the November low at 42.00 clearly in traders crosshairs.