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US Session Highlights

(US) JUN EMPIRE MANUFACTURING: 19.8 V 5.0E; new orders: +18.1 v -4.4 prior

(US) JUN PHILADELPHIA FED BUSINESS OUTLOOK: 27.6 V 24.9E

(US) MAY IMPORT PRICE INDEX M/M: -0.3% V -0.1%E; Y/Y: 2.1% V 2.9%

(US) INITIAL JOBLESS CLAIMS: 237K V 241KE; CONTINUING CLAIMS: 1.94M V 1.92ME

(US) JUN NAHB HOUSING MARKET INDEX: 67 V 70E

(US) MAY INDUSTRIAL PRODUCTION M/M: 0.0% V 0.2%E; CAPACITY UTILIZATION: 76.6% V 76.8%E

The recent sell-off in tech stocks continued today, dragging the broader market lower. The morning saw most stock markets open down on the day as concerns about Pres Trump's ongoing investigations and more likely Fed hikes to come sank in. After economic data releases, investors gained more confidence, sending most indices higher, but just lower than yesterday's close.

US markets on close: Dow -0.1%, S&P500 -0.2%, Nasdaq -0.5%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Materials

Biggest gainers: FTR +3.2%; HRB +3.0%; HOG +2.9%

Biggest losers: KR -18.9%; NUE -7.6%; WFM -6.7%

At the close: VIX 10.9 (+0.3pts); Treasuries: 2-yr 1.36% (flat), 10-yr 2.16% (+2bps), 30-yr 2.78% (flat)

US movers afterhours

HOS: Announces new credit facility; +22.8% afterhours

FNSR: Reports Q4 $0.52 v $0.50e, R$358M v $362Me; +7.8% afterhours

BAH: Discloses civil and criminal investigation by Dept of Justice into cost accounting practices - filing; -13.3% afterhours

STLD: Guides Q2 $0.60-0.64 v $0.84e, cites higher costs and lower value-added shipments on plant upgrade and certain quality issues

Politics

(US) Vice President Pence has reportedly hired outside counsel to assist with ongoing Russian investigation - Wash Post

(US) Special counsel Mueller said to probe business dealings of Jared Kushner as part of probe into Russia interference in elections - press

Key economic data

(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Keeps Economic Assessment unchanged

(NZ) NEW ZEALAND MAY BUSINESS MANUFACTURING PMI: 58.5 V 56.9 PRIOR (16-month high)

(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 2.50%; AS EXPECTED

Notes and Observations

Indices mixed as investors digest the widely anticipated FOMC rate hike yesterday, even as some analysts warn about the rising risks of "policy error" at the Fed on expectations of low inflation being transitory.

USD majors in narrow ranges; USD/JPY extending gains to 111.20, a 2-week high. BOJ lefts its policy settings unchanged with -0.1% IOER and 0.0% target for 10-yr JGB yield as part of YCC policy. BOJ maintained its overall economic assessment as "economy has been turning towards a moderate expansion" and raised its Consumption view to one of "increased resilience." No references to tapering plans are made, as speculated by local press earlier this month.

PBOC nearly doubled its reverse repo operations to CNY290B and set Yuan fix at 2-week low as part of policy response to the latest Fed decision.

Speakers and Press

China

(CN) China insurance regulator CIRC: Illegal sales of Hong Kong insurance products led to asset outflows and money laundering - press

(CN) China Iron and Steel Association (CISA): Iron ore prices are rational given the high inventories - press

(CN) China urged to closely monitor Fed's balance sheet plans - Chinese press

Japan

(JP) Japan Gov't Advisory Member Ito: Not surprising that BoJ bond purchases are dropping, central bank will purchase what's needed to keep yield near zero target

Korea

(KR) South Korea Vice Finance Min: June exports are expected to rise; Conditions may be difficult in H2 - press

(KR) South Korea Finance Minister: To use dialogue with China to hopefully ease row over THAAD

Asian Equity Indices/Futures (23:30ET)

Nikkei +0.5%, Hang Seng +0.4%, Shanghai Composite -0.2%, ASX200 +0.3%, Kospi -0.1%

Equity Futures: S&P500 +0.1%; Nasdaq +0.2%, Dax +0.2%, FTSE100 -0.1%

FX ranges/Commodities/Fixed Income (23:30ET)

EUR 1.1140-1.1155; JPY 110.85-111.25; AUD 0.7575-0.7600; NZD 0.7200-0.7215

Aug Gold flat at 1,254/oz; July Crude Oil flat at $44.45/brl; July Copper flat at $2.57/lb

SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 853.7 tonnes; 2nd straight decline

(CN) PBOC to inject combined CNY290B v CNY150B prior in 7-day, 14-day and 28-day reverse repos

(CN) PBOC SETS YUAN MID POINT AT 6.7995 V 6.7852 PRIOR; weakest Yuan fix since June 2nd

(CN) China MoF sells 30-yr bonds, avg yield 3.9763%, bid-to-cover 1.57x

(AU) Australia Finance Ministry (AOFM) sells A$800M in 2.25% 2028 bonds; avg yield 2.4988%; bid-to-cover 3.26x

Asia equities notable movers

Australia

A2 Milk (ATM.NZ) +7.9%; Raises FY17 Rev NZ$545M (prior NZ$525M)

AMP Ltd (AMP) +1.5%; considering sale of life insurance unit - Australia press

BHP (BHP) +0.1%; Mackenzie confirmed to succeed Nasser as Chairman

Japan

Shiseido (4911) +3.3%; Raised at Goldman Sachs

Toshiba (6502) +1.3%; Hynix-led team said to emerge as a favorite to acquire chip unit - Japan press

Hong Kong

Cowell E Holdings Inc (1415) +5.5; Profit Alert: Guides H1 to record a significant improvement y/y

KWG Property Holdings (1813) +0.9%; Reports May pre-sales CNY3.88B

Ngai Shun Holdings (1246) -6.7%; Issues FY16/17 profit warning

EUR/USD - 1.1155

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1148

Kijun-Sen level                  : 1.1177

Ichimoku cloud top             : 1.1241

Ichimoku cloud bottom      : 1.1231

Original strategy  :

Sell at 1.1190, Target: 1.1090, Stop: 1.1225

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1190, Target: 1.1090, Stop: 1.1225

Position : -

Target :  -

Stop : -

This week’s selloff from 1.1296 signals top has been formed there and consolidation with downside bias is seen for this move to bring a strong retracement of recent upmove, hence further fall to previous support at 1.1109 would be seen, however, break there is needed to retain bearishness and extend further weakness to 1.1076 and possibly towards 1.1050 but price should stay above previous resistance at 1.1025. 

In view of this, we are looking to sell euro on recovery as 1.1185-90 should limit upside and bring another decline. Above 1.1225-30 would defer and risk a stronger rebound to 1.1250 but price should falter well below said resistance at 1.1296, bring another decline later.

USD/JPY - 111.16

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 111.06

Kijun-Sen level                  : 110.38

Ichimoku cloud top             : 109.59

Ichimoku cloud bottom      : 109.56

Original strategy  :

Buy at 109.90, Target: 110.90, Stop: 109.55

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 110.40, Target: 111.40, Stop: 110.05

Position :  -

Target :  -

Stop : -

As the greenback has surged again and broke above previous resistance at 110.81 (now support), adding credence to our view that low has been formed at 108.82 and the rise from there shall bring retracement of recent decline from 114.37, hence further gain to 111.40, then 111.60 (50% Fibonacci retracement of 114.37-108.82) would be seen, however, near term overbought condition should limit upside to previous resistance at 111.71 and price should falter well below another resistance at 112.13. 

In view of this, we are looking to buy dollar on pullback but at a higher level. Whilst a return move to 110.81 cannot be ruled out, reckon another previous resistance at 110.35 would contain downside and bring another rise later.

Market movers today

Today is a very quiet day in terms of data releases. We get the rate decision from the Central Bank of Russia, where we expect a cut to 9.00% from 9.25%.

In the US, we get the preliminary consumer confidence print from University of Michigan in June, which economists expect to remain unchanged around 97.1. Also building permits and housing starts data are due today.

Fed's Kapaln is due to speak t onight .

We also get the final HICP inflat ion data for the euro area in May.

The oil market will monitor the release of the weekly US oil rig count tonight for signs of a negat ive supply response to the fall in the oil price.

Selected market news

Bank of Japan (BoJ) kept its policy unchanged at its meet ing this morning. Hence, keeping the key policy unchanged at minus 0.1%, its target for the yield on 10Y JGB unchanged at 0 and asset purchases unchanged at previous levels. BoJ maintains the view that the Japanese economy is turning towards a moderate expansion. It has revised its view on global growth and consumpt ion upwards and signals in general its confidence that the recovery has been gaining moment um. 'Private consumpt ion has increased resilience against a background of steady improvement in the employment and income situation', is the current wording, which is more upbeat than the wording in April when consumpt ion was 'just ' resilient . Now the focus turns to the press conference where the market is likely to be looking for hints about how the cent ral bank eventually plans to exit its st imulus. USD/JPY is trading around 1.11 and little affected by the outcome.

The negative sent iment plaguing financial markets after the hawkish FOMC meet ing on Wednesday eased overnight with Asian stocks up around 0.5% and European and US equity futures posting small gains. Commodity markets are also trading with a slight ly more positive tone, e.g. the price on LME copper is up 0.3% t oday. The USD is holding on to recent gains.

Greece has reached a deal with internat ional creditors on its bailout package paving the way for the count ry to repay EUR7bn in debt that expires next month.

In the UK pieces are starting to fall into place after last week's elect ion. Yesterday, it was reported that a deal between the Conservat ives and the DUP is expected to be finalised and announced next week paving the way for the Conservat ive government to cont inue. Furthermore, UK and EU Brexit negot iators Davis and Barnier announced that talks will start on Monday.

Short term Dow Jones Elliott Wave view suggests the rally from 4/19 low is unfolding as a diagonal Elliott Wave structure where Minor wave 1 ended at 21010 (4/26), Minor wave 2 ended at 20474 (5/18), Minor wave 3 ended at 21270 (6/8), and Minor wave 4 ended at 21081 (6/8). Minor wave 5 is in progress and subdivided into a zigzag Elliott Wave structure. Up from 6/8 low, Minute wave ((a)) is expected to complete at 21360 – 21404. Index should then pullback in Minute wave ((b)) to correct cycle from 6/8 low before the rally resumes. We don’t like selling the proposed pullback. Buyers should appear once Minute wave ((b)) pullback is over in 3, 7, or 11 swing.

Dow Jones 1 Hour Elliott Wave Chart

For the 24 hours to 23:00 GMT, the AUD declined 0.08% against the USD and closed at 0.7586.

LME Copper prices declined 0.8% or $47.5/MT to $5637.0/MT. Aluminium prices declined 1.2% or $22.5/MT to $1864.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7597, with the AUD trading 0.15% higher against the USD from yesterday’s close.

The pair is expected to find support at 0.7569, and a fall through could take it to the next support level of 0.7542. The pair is expected to find its first resistance at 0.7623, and a rise through could take it to the next resistance level of 0.7650.

Going ahead, market participants will await the release of RBA’s June meeting minutes, the sole important release next week.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR declined 0.55% against the USD and closed at 1.1150.

Macroeconomic data showed that the Euro-zone's seasonally adjusted trade surplus narrowed more-than-expected to a level of €19.6 billion in April, compared to a revised surplus of €22.2 billion in the prior month, while market participants had expected the region to register a trade surplus of €22.3 billion.

The greenback gained ground against its key counterparts, following upbeat US jobless claims data that further supported the Federal Reserve's (Fed) notion of a tightening labour market that could pave the way for another interest rate hike this year.

Data revealed that the number of Americans filing for fresh jobless claims dropped more-than-anticipated to a level of 237.0K in the week ended 10 June, compared market expectations of a fall to a level of 241.0K. In the previous week, initial jobless claims had registered a level of 245.0K. Moreover, the nation's New York Empire State manufacturing index jumped more-than-expected to its highest level in nearly three years of 19.8 in June, compared to market consensus of an advance to a level of 4.0, thus indicating that business activity rebounded strongly in the New York state. The index had registered a level of -1.0 in the prior month. Meanwhile, the region's Philadelphia Fed manufacturing index eased less-than-expected to a level of 27.6 in June, following a level of 38.8 in the prior month.

Another set of economic data showed that manufacturing production in the US unexpectedly fell 0.4% on a monthly basis in May, defying market expectations for a rise of 0.1%. In the previous month, manufacturing production had recorded a revised rise of 1.1%. Further, the nation's industrial production remained flat on a monthly basis in May, whereas investors had envisaged for an advance of 0.2%. Industrial production had registered a revised rise of 1.1% in the previous month. Also, the nation's NAHB housing market index surprisingly fell to a level of 67.0 in June, compared to market expectations of a rise to a level of 70.0. The index had recorded a revised level of 69.0 in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.1149, with the EUR trading slightly lower against the USD from yesterday's close.

The pair is expected to find support at 1.1113, and a fall through could take it to the next support level of 1.1076. The pair is expected to find its first resistance at 1.1205, and a rise through could take it to the next resistance level of 1.1260.

Moving ahead, market participants will focus on the Euro-zone's final consumer price index for May, slated to release in a few hours. Moreover, the US flash Michigan consumer sentiment index for June along with housing starts and building permits data for May, set to release later in the day, will garner significant amount of market attention.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP slightly declined against the USD and closed at 1.2754.

Yesterday, the Bank of England (BoE), in a widely-expected move, opted to leave the key interest rate steady at 0.25% and the bond purchase programme remains unchanged at £435 billion, but surprised investors as three board members voted in favour of an immediate interest rate hike, swayed by fears of rising inflation. Minutes of the meeting disclosed that policy makers now expect inflation could overshoot the 2.0% target by more than previously thought. Further, it noted that officials judge the robust British labour market as a sign that rates may need to rise sooner than expected.

On the data front, Britain’s retail sales slid 1.2% on a monthly basis in May, higher than market expectations for a fall of 0.8%, intensifying worries about a slowdown in consumer spending as households remain grappled with rising inflation and meagre wage growth. In the prior month, retail sales had recorded a revised rise of 2.5%.

In the Asian session, at GMT0300, the pair is trading at 1.2772, with the GBP trading 0.14% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2710, and a fall through could take it to the next support level of 1.2649. The pair is expected to find its first resistance at 1.2814, and a rise through could take it to the next resistance level of 1.2857.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 1.37% against the JPY and closed at 110.85.

In the Asian session, at GMT0300, the pair is trading at 111.17, with the USD trading 0.29% higher against the JPY from yesterday’s close.

Earlier today, the Bank of Japan (BoJ), at its latest monetary policy meeting, maintained its key interest rate steady at -0.10% and gave a more brightened outlook on private consumption and overseas growth, signalling its confidence that an export-driven economic recovery was broadening and gaining momentum.

The pair is expected to find support at 110.01, and a fall through could take it to the next support level of 108.85. The pair is expected to find its first resistance at 111.80, and a rise through could take it to the next resistance level of 112.43.

Moving ahead, traders will keep a close watch on a speech by the BoJ Governor, Haruhiko Kuroda, due in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.38% against the CHF and closed at 0.9750.

Yesterday, the Swiss National Bank (SNB) held its key interest rate steady at -0.75%, meeting market expectations, citing strength in the local currency and an absence of price pressures. The SNB President, Thomas Jordan, stated that recent data indicated that the Swiss economy is on the road to recovery.

Further, the SNB also reiterated that the Swiss Franc is still significantly overvalued and that it would remain active in the foreign exchange market as necessary.

Separately, the central bank kept its 2017 inflation forecast steady at 0.3% but trimmed its 2018 outlook to 0.3%, down by 0.1% and its 2019 forecast to 1.0% from 1.1%.

In the Asian session, at GMT0300, the pair is trading at 0.9749, with the USD trading marginally lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9713, and a fall through could take it to the next support level of 0.9677. The pair is expected to find its first resistance at 0.9778, and a rise through could take it to the next resistance level of 0.9807.

Next week, investors will look forward to a speech by the SNB President along with Switzerland’s trade balance figures.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.