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The Canadian dollar is weakening versus the US dollar on Thursday. The loonie had a dream start to the week when the one-two punch of hawkish comments from Bank of Canada (BoC) Deputy Governor Carolyn Wilkins on Monday and a day later Governor Stephen Poloz repeated similar comments during a radio interview in Winnipeg. The positive assessment from both BoC officials on the state of the economy helped the currency appreciate against the USD but the CAD rally ended on Wednesday when the U.S. Federal Reserve hiked rates as expected and delivered its own hawkish rhetoric supercharging the greenback.

Oil prices offered no support to the Canadian dollar with prices once again dropping following a weekly inventory report in the US showing a buildup, this time of gasoline stocks. Last week there was a massive unexpected buildup of crude, and now although the report from the Energy Information Administration (EIA) showed crude inventories contracted they did it by less than expected. So with higher than expected drawdown in crude and a buildup in gasoline stocks oil has lost 2.5 percent in the last five days.

Economic data in Canada were scarce with manufacturing sales growing by more than anticipated with a 1.1 percent gain in April. Oil and coal sales lead the rebound with an 8.9 percent rise. Housing has been gaining priority as an economic indicator with Canadian house resales dropping in May by 6.2 percent. Toronto housing alone plunged 25.3 percent as there are less inventory while prices climbed 17.9 percent nationally. With the slowdown in the number of houses sold there is a forecast prices will stabilize after speculators are driven off the market. Low rates will continue to make that goal difficult to achieve, but this is where the words of the central bank officials with a promise to reduce stimulus could end up with higher rates sooner than later.

The USD/CAD gained 0.099 percent in the last 24 hours. The currency is trading at 1.3272 after the decision by the U.S. Federal Reserve to hike the US benchmark rate by 25 basis points to a 100–125 range. The press conference by Chair Yellen made it clear that the Fed is maintaining its 3 go 4 rate hikes a year and is not worried about slowing inflation, cataloguing it as a temporary issue.

The CAD had gained earlier in the week as the BoC officials had given a hawkish view on the economy and hinted at a possible rate hike sooner than originally expected. With two rate cuts in 2015 to minimize the impact of dropping oil prices the BoC had stood on the sidelines awaiting the effects of fiscal stimulus that was introduced in 2016. Canadian economic indicators have been mixed but still tell a positive trend with the biggest concern being the high levels of household debt. Poloz has openly addressed that hiking too much too soon could have terrible consequences for Canadian debtors, but the fact that they are considering a hike at all did boost the loonie earlier in the week.

Market events to watch this week:

Thursday, June 15
3:30 am CHF Libor Rate
3:30 am CHF SNB Monetary Policy Assessment
3:30 am CHF SNB Press Conference
4:30 am GBP Retail Sales m/m
7:00 am GBP MPC Official Bank Rate Votes
GBP Monetary Policy Summary
GBP Official Bank Rate
8:30 am USD Unemployment Claims
Tentative JPY Monetary Policy Statement

Friday, June 16
Tentative JPY BOJ Policy Rate
2:30 am JPY BOJ Press Conference
8:30 am CAD Core Retail Sales m/m
8:30 am USD Building Permits

Japanese yen drops ahead of the BOJ Decision

The Bank of Japan (BOJ) will release its monetary policy statement around midnight EDT of Thursday, June 15. BOJ Governor Haruhiko Kuroda will host a press conference on Friday, June 16 at 2:30 am EDT. The Japanese central bank is not expected to change its current monetary policy despite the economy showing signs of life. The BOJ will maintain its negative interest rate and massive quantitative and qualitative easing programs unchanged. Earlier in the week the U.S. Federal Reserve has hiked rates as anticipated by 25 basis points and is looking to add another hike in 2017, while the Bank of England (BoE) kept rates at record low but minutes showed there were three votes for a hike.

The rate hike by the Fed and the words by Chair Janet Yellen have boosted the dollar across the board. The USD/JPY is trading at 110.76, a gain of 1.4 percent in the last 24 hours. The yen has also fallen against the pound; with the GBP/JPY rising 1.036 after the more hawkish statement form the BoE. In April the BOJ upgraded its assessment of the economy to a “moderate expansion” but low inflation persists despite all the efforts from the central bank. As many monetary policy makers before them they might employ rhetoric about a strong economy, yet not quite reducing the stimulus as it is still needed. Given the change in economic fundamentals the Bank of Japan could be left further behind by other G7 central banks.

The USD/JPY gained 1.70 percent on Thursday. The currency pair is trading at 110.93 continuing a dollar rally that was started by the U.S. Federal Reserve raised the benchmark US interest rate by 25 basis points as expected. The Fed also outlined the plans to gradually reduce its massive balance sheet later this year. The American central bank Chair was not concerned with inflation remaining weak and attributed current levels to temporary effects such as cellphone bills and drug prices.

The monetary policy divergence between the Fed and the BOJ will keep growing as the American central bank has already signalled it will continue to raise its rates and reduce the balance sheet it amassed as part of its QE program. The Japanese central bank is in no position to follow that lead. The improving economy is a factor, but so is the sluggish inflation that has failed to reach the 2 percent goal set by Prime Minister Shinzo Abe.

The GBP/JPY gained 1.397 in the last 24 horus. The currency pair is trading at 141.51 after the Bank of England (BoE) held rates but released the minutes of its monetary policy meeting where 3 out of 8 members voted for a rate hike. Rising inflation and the concerns of a bad Brexit deal will keep the BoE vigilant. The snap election resulted in a hung parliament which will put more pressure on Conservatives to push for a hard Brexit that the central bank has already warned could do great damage to the economy. In that sense a Conservative costly victory is good for the pound as it could extend the timeline and soften the leverage of the Uk negotiators.

Market events to watch this week:

Thursday, June 15
3:30 am CHF Libor Rate
3:30 am CHF SNB Monetary Policy Assessment
3:30 am CHF SNB Press Conference
4:30 am GBP Retail Sales m/m
7:00 am GBP MPC Official Bank Rate Votes
GBP Monetary Policy Summary
GBP Official Bank Rate
8:30 am USD Unemployment Claims
Tentative JPY Monetary Policy Statement

Friday, June 16
Tentative JPY BOJ Policy Rate
2:30 am JPY BOJ Press Conference
8:30 am CAD Core Retail Sales m/m
8:30 am USD Building Permits

The Bank of England became the third central bank this week to send a surprisingly hawkish message. The pound edged out the dollar as the top performer while the yen lagged. The BOJ decision is up next.

The MPC held rates unchanged as anticipated but the vote was a surprising 5-3 instead of the widely expected 7-1, with Saunders and McCafferty joining Forbes in calling for a rate hike. There was also some effectively pro-pound jawboning in the statement as it said continued weakness in the currency would push CPI further above 3%.

Cable traders were caught off guard and the pair jumped to 1.2795 from 1.2700. One caveat is that this was Forbes' last meeting so all else equal there will only be two dissenters next month, thereby, helping to cap GBP strength. The market was hoping for more clarity from Carney at the Mansion House speech but it was cancelled due to the London fire tragedy. The text may be released on Friday but no time has yet been specified.

Aside from the GBP move, the US dollar remained the performer as the FOMC momentum continued. USD/JPY was especially buoyant as it climbed more than a cent to 110.98 in New York trade. The gains were barely slowed by soft US reports on the import price index, NAHB housing market index and industrial production. Better news for the dollar was once again confined to soft data surveys as the Philly and Empire Fed beat.

In the bigger picture, the BOC, Fed and BOE all delivered hawkish surprises this week -- a trend that can't be ignored. It speaks to the confidence that central banks have that growth is really coming this time. Markets were burned by the reflation trade at the start of the year but the old saying that 'you can't fight the Fed' still rings true.

A final twist this week would be if another central bank adds to the chorus. The BOJ gets the chance with today's decision on interest rates. A hike is out of the question but even a subtle shift to something less dovish would be a surprise.

As we noted earlier this week, numbers from Japan have been solid. Exports have picked up and industry has some momentum. Kuroda has signaled in the past that he will be very patient but Poloz sounded the same way until this week.

If there is a shift, the bottom will fall out of yen crosses and it would send a broader hawkish signal that would seriously threaten equities and risk assets.There is no set time for the decision but it's usually around 0300 GMT.

Gold has dipped in the Thursday session. In North American trade, XAU/USD is down 0.40%, with spot gold trading at $1254.00 per ounce. On the release front, unemployment claims dipped to 237 thousand, marking a 3-week low. The Empire State Manufacturing Index rebounded with a strong gain of 19.8, crushing the estimate of 5.2 points. The Philly Fed Manufacturing Index dropped sharply to 27.6, but still beat the estimate of 25.5 points.

The markets had priced in a rate hike at almost 100%, and the Federal Reserve did not disappoint. After weeks of broad hints that a rate hike was coming, the Federal Reserve made a move at the June meeting, marking its second rate hike in 2017. The Fed increased rates by 25 basis points, to a target range of 1.00 percent to 1.25 percent. Fed policymakers sounded upbeat in the rate statement, which that was more hawkish than expected. The statement portrayed an optimistic picture, noting that the economy was growing and the labor market remained strong. Concerns over low inflation were brushed aside, as the statement noted that although inflation remains below the Fed's target of 2.0%, it expected that target to be reached in the "medium term". The Fed projected one more rate hike in 2017, and analysts were quick to circle December meeting as the most likely date. However, the markets don't appear to share the Fed's optimism as far as another rate hike this year. The odds for a September increase are at 18%, compared to 23% a week ago, according to the CME Group. As for a December increase, the odds stand at just 38%.

Although the rate hike was practically a non-event, the Fed still managed to surprise the markets. Earlier in the year, the Fed mentioned its goal of reducing its $4.2 billion balance sheet (comprised of Treasury bonds and mortgage-backed securities). Fed Chair Janet Yellen revisited this issue at her follow-up press conference on Wednesday. Yellen was short on specifics, saying that the goal was to begin the normalization "relatively soon". The Fed balance sheet ballooned after the financial crisis in 2008, as the Fed implemented a massive quantitative easing program as part of its accommodative monetary policy, together with interest rates of zero. The gradual reduction in the purchase of these assets is significant for the markets, as signifies a vote of confidence in the strength of the US economy.

USD/CHF - 0.9750

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9719

Kijun-Sen level                    : 0.9689

Ichimoku cloud top                 : 0.9683

Ichimoku cloud bottom              : 0.9682

Original strategy :

Buy at 0.9710, Target: 0.9810, Stop: 0.9675

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9705, Target: 0.9805, Stop: 0.9670

Position : -

Target :  -

Stop : -

Although the greenback slipped to 0.9641, lack of follow through selling and the subsequent rally on dollar’s broad-based strength suggest low has been formed at 0.9613 last week and mild upside bias is seen for the erratic rise from there to extend gain towards resistance at 0.9808, however, reckon previous resistance at 0.9825 would hold from here due to near term overbought condition, bring retreat later.

In view of this, we re looking to buy dollar on pullback as 0.9705-10 should limit downside. Below 0.9680 would defer and risk weakness towards said support at 0.9641 but only break there would abort and revive bearishness, this would also suggest the rebound from 0.9613 has ended instead, bring retest of this level later.

GBP/USD - 1.2759

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2742

Kijun-Sen level                    : 1.2771

Ichimoku cloud top              : 1.2724

Ichimoku cloud bottom        : 1.2704

Original strategy :

Sold at 1.2790, Target: 1.2690, Stop: 1.2825

Position : -  Short at 1.2790

Target :  - 1.2690

Stop : - 1.2825

New strategy  :

Hold short entered at 1.2790, Target: 1.2690, Stop: 1.2800

Position : - Short at 1.2790

Target :  - 1.2690

Stop : - 1.2800

As the British pound ran into resistance at 1.2818 yesterday and has retreated on dollar’s broad-based strength after Fed rate hike, suggesting the rebound d from 1.2635 has ended there and consolidation with mild downside bias remains for weakness to 1.2680-90, however, break there is needed to retain bearishness and bring further fall to 1.2650, then towards said support at 1.2635.

In view of this, we are holding on to our short position entered at 1.2790. Only above said resistance at 1.2818 would defer and risk a strong rebound to 1.2845-50 (61.8% Fibonacci retracement of 1.2978-1.2635) but upside should be limited to 1.2870-80. 

EUR/USD - 1.1150

Most recent candlesticks pattern   : N/A

Trend                      : Up

Tenkan-Sen level              : 1.1173

Kijun-Sen level                  : 1.1214

Ichimoku cloud top             : 1.1237

Ichimoku cloud bottom      : 1.1232

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 : -

Although the single currency surged to as high as 1.1296, lack of follow through buying on break of previous resistance at 1.1285 and the subsequent reversal signal top has been formed there, current breach of indicated support at 1.1166 adds credence to this view and bearishness remains for further fall to 1.1125-30, however, near term oversold condition should limit downside to previous support at 1.1109.

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.

The British pound has ticked higher in the Thursday session. In North American trade, GBP/USD is trading at 1.2760. On the release front, the BoE maintained rates at 0.25%, but surprised the markets as three MPC members voted in favor of a rate hike. Retail Sales declined 1.2%, missing the forecast of -0.9%. Over in the US, unemployment claims dipped to 237 thousand, marking a 3-week low. On the manufacturing front, the news was mixed. The Empire State Manufacturing Index rebounded with a strong gain of 19.8, crushing the estimate of 5.2 points. The Philly Fed Manufacturing Index dropped sharply to 27.6, but still beat the estimate of 25.5 points.

British inflation levels continue to rise, and this has hurt the purchasing power of UK consumers. This was evident in the May retail sales report, which sagged badly, dropping from +2.3 percent to -1.2 percent. The weak reading was worse than expected, as the forecast stood at -0.9 percent. With inflation up and the pound and wages down, the UK consumer is understandably in a surly mood about lower living standards, and this sentiment may have played a key role in last week's election, which saw Prime Minister May humiliated, as she lost her majority in parliament. There are hopeful signs that the political turmoil which has rocked the country could end soon, with reports that May's Conservatives and the DUP, a small Irish party, have reached an agreement in principal, which would enable May to continue to govern. May's minority government may prove to be unstable, and she will go into the Brexit negotiations with a much weaker hand than prior to the election. This new set of circumstances may force a chastened May to be more flexible, and agree to a "soft Brexit", which would see the UK remain in a single market, in return for allowing free movement from the continent into Britain.

After preparing the markets with plenty of broad hints, the Federal Reserve pressed the rate trigger at its June meeting, marking its second rate hike in 2017 . The Fed increased rates by 25 basis points, to a target range of 1.00 percent to 1.25 percent. Janet Yellen & Co. appear sanguine about the US economy, and this optimism was reflected in a rate statement that was more hawkish than expected. The statement portrayed an optimistic picture, noting that the economy was growing and the labor market remained strong. Policymakers appear unfazed over stubbornly low inflation, as the statement noted that although inflation remains below the Fed's target of 2.0%, it expected that target to be reached in the "medium term". The Fed projected one more rate hike in 2017, and the markets are circling the December meeting as the most likely date. However, the markets don't seem to share the Fed's optimism as far as another rate hike this year. The odds for a September increase are at 18%, compared to 23% a week ago, according to the CME Group. As for a December increase, the odds stand at just 38%. One surprising development was that Fed Chair Janet Yellen outlined a plan to reduce its $4.2 trillion balance sheet (comprised of Treasury bonds and mortgage-backed securities). Yellen was short on specifics, saying that the goal was to begin the normalization "relatively soon". The balance sheet ballooned after the financial crisis in 2008, as the Fed implemented a massive quantitative easing program as part of its accommodative monetary policy, together with interest rates of zero. The gradual reduction in the purchase of these assets signifies an important vote of confidence in the strength of the US economy.

FTSE100

FTSE100 index fell on Thursday, being down over 1% so far, driven by weaker than expected UK retail sales and hawkish BoE.

The price remained at the back foot in past two days after recovery attempts were rejected at 7555, but showed indecision that was shaped in Wednesday's long-legged Doji.

Fresh acceleration lower on Thursday generated stronger bearish signal, which could result in extended correction of bull-phase from 7032 (19 Apr low) to 7587 (02 June low).

Today's action completed two bearish patterns that now strongly support negative scenario.

Completion of Failure Swing pattern on daily chart after support at 7410 (09 June low) was taken out, as well as formation of asymmetric H&S pattern on daily chart on break below the neckline at 7421, generated bearish signal.

Dips were so far contained by next pivotal support at 7375 (Fibo 38.2% of 7032/7587), with firm break here needed to confirm reversal and open next supports at 7341 (55SMA) and 7294 (100SMA).

Consolidation above 7375 handle could be expected before bears resume, as near-term studies are oversold.

Daily Tenkan-sen in steep descend offers solid resistance at 7463, with additional bearish pressure coming from 10/20SMA bear cross which formed at 7494.

Res: 7421; 7463; 7494; 7543
Sup: 7375; 7341; 7310; 7294

USD/JPY - 110.60

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 110.13

Kijun-Sen level                  : 109.80

Ichimoku cloud top             : 109.77

Ichimoku cloud bottom      : 109.77

Original strategy  :

Buy at 109.90, Target: 110.90, Stop: 109.55

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 109.90, Target: 110.90, Stop: 109.55

Position :  -

Target :  -

Stop : -

The greenback has rallied again after staging a strong rebound yesterday and resistance at 110.35 was penetrated, suggesting recent decline has indeed ended at 108.82 and upside bias is seen for further gain towards resistance at 110.81, however, break there is needed to retain bullishness and extend the rise from 108.82 low for retracement of recent downtrend to 111.00 and possibly towards 111.25-30.

In view of this, we are looking to buy dollar on pullback as 109.85-90 should limit downside. Only below 109.45-50 would suggest an intra-day top is formed instead, risk weakness to 109.20-25 but price should stay well above said yesterday’s low at 108.82, bring another rebound later.