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Two more central banks are set to announce rate decisions this week following the FOMC announcement yesterday; they are the Bank of England (BoE) and the Bank of Japan (BoJ).

UK retail sales and core retail sales figures for May will be released at 09:30 BST today followed by the Bank of England's rate decision and monetary policy statement at 12:00 BST. The BoE stated in May that the rates will likely remain unchanged until the end of 2019. Be aware that the data release and the BoE's announcement will likely cause volatility for GBP crosses.

The Bank of Japan (BoJ) will announce its rate decision and monetary policy statement at 03:00 BST on Friday June 16th. Markets are keeping a close eye on when the BoJ will begin to gradually remove its QE programme. Although the economy has seen a moderate recovery (as inflation hasn't seen a stable upswing) the BoJ will likely keep rates in negative territory and continue the QE until it sees a sustainable pickup in inflation.

The FOMC announced a rate hike of 25 basis points on Wednesday evening, from 1.0% to 1.25%, which was In line with market expectations.

The FOMC maintained its March forecast as economic growth has continued making progress predicting moderate expansion over the next few years. Notably, the Fed sees one more rate hike by end of the year and three more rate hikes in 2018 to reflect economic growth, it expects to start shrinking its balance sheet this year.

Per CME's FedWatch tool; the probabilities for a rate hike in September and December are 18% and 39.7% respectively. It indicates that markets see the next rate hike more likely to happen in December.

The Fed sees the job market strengthening further with the unemployment rate in 2018 revised downward from the March estimate of 4.7% to 4.6%. The Fed sees near term Inflation staying below 2%, however it is expected to move up and stabilise around 2% over the next few years as the Fed hasn't seen broad undermining of inflation expectations.

The dollar index hit a low of 96.28, last seen on November 9th ahead of the FOMC press conference because of the disappointing retail sales and inflation data. Nevertheless, USD saw a dramatic and substantial reversal as Yellen's overall statement was relatively hawkish, lifting the dollar with a 0.85% rebound.

On Thursday, in early European session, the dollar index bulls broke the resistance level at 97.00.

On Wednesday evening USD/JPY rebounded 0.96% from a 7-and-a-half week low of 108.80, recovering the psychological level at 109.00. Spot gold fell by 1.8% from a 3-day high of $1280.56, hitting a 2-and-a-half-week low of $1257.02. GBP/USD fell around 0.68%, from a 3-day high of 1.2817.

EUR/USD fell around 0.9%, from a 7-month high of 1.1295, on Thursday in early European session, the psychological support level at 1.1200 was broken again.

• Bank Bash Continues While UK Retail Data Disappoints
• Oil Traders Still Feeling Scorched
• Gold Traders Underwhelm
• Hawkish or Dovish? Market Not Satisfied Either Way

Bank Bash Continues While UK Retail Data Disappoints

Central bank bash is not done yet as it is the Bank of England and SNB which are going to gauge investors attention today. In the UK, investors are concerned about the rising inflation, anaemic wage growth and fragile consumer spending, a story which is very much tangled with the concussion of Brexit. When you look at the Sterling, it becomes evidently clear that no action is expected from the BOE. However, investors are going to see if the bank is going to put their views about the current election situation and most importantly, the new picture of Brexit which was previously not part of the equation.

We do anticipate that the bank would remain reticent and avoid any sort of remarks on the ongoing situation. The place where we may see some flare would be from the speech of Philip Hammond, the Chancellor of the Exchequer. He is going to put more focus on jobs and economic growth. Again the impact on the currency from this could be very limited because this would be nothing more than just a speech to calm the nerves- if that. Brexit secretary, David Davis ,is also going to set a new vision for Brexit - a more liberal version under which the EU citizens are expected to have a lot more rights. However, if the EU leaders are going to pay any attention to this, it remains a question well worth keeping under consideration before triggering any button.

The UK retail sales data is going to charm a lot of attention amid investors. The sharp rise in inflation is alarming and this could hamper consumer spending and have a negative influence on the retail data. We do expect the number to be below the market expectations -0.9%.

Oil Traders Still Feeling Scorched

The black gold is suffering losses and traders are keeping a close eye towards the low of the day. A break of 44.46 is going to open the floor towards the support of 42. The crude inventory data released yesterday confirmed that the US shale oil producers are picking up the slack in the production fairly quickly but when the price is in the early 40s, the equation does change for them. Many bargain hunters are also interested in getting back in around early 40s level.

Gold Traders Underwhelm

Janet Yellen, the Fed Chairwomen, has rescued the dollar yesterday with her somewhat hawkish statement. Simply put, the Fed is just fearless and they are not afraid of turning up the heat. Hence there is another rate hike on the table for this year. From the statement, it also appeared that the Fed is confident about the labor market and moderate GDP growth. Given that they have laid out the plan with respect to reducing the size of their balance sheet, this sends a hawkish signal and for gold investors it was a sell sign. Therefore upcoming meetings will attract a lot more attention towards this affair. In terms of levels, we do think the support is at the 1250 mark and if we break that level, the downward trend could pick up more strength. The upside is capped by the resistance of double top pattern which is at 1296.

Hawkish or Dovish? Market Not Satisfied Either Way

A hike in Fed rate has caused much chaos and investors are unconvinced over in Europe. The sell-off is pretty much across the board. Over in the US, traders do not like the idea of the Fed normalising the monetary policy when the economic conditions are still anaemic. The fall in consumer price index earlier this day has led investors to question the Fed on the interest rate hike just now. The probability of next rate hike within 2017 fell from 48% to 28% after the release of less favourable data results this afternoon. FOMC readjusted their expected inflation rate from 1.9% to 1.6%.

The Fed feels confident about the economy but inflation is the part of the equation where they have made changes. Janet Yellen expects the inflation to fall short of the bank's target and this keeps the Treasuries in demand. The part where we are not comfortable with the Fed statement is the consumer spending (which for the Fed appears to be something not to worry about).

The US retail sales number provides a very good idea about how comfortable investors are with respect to their spending. The number released on Wednesday took the steam out of the dollar and confirmed that consumers are anxious. Therefore, we hold the view that the economic weakness is making the outlook a lot more cloudy.

Investors do feel a little a bit confused because the Fed didn't really provide any meaningful information in relation to the new size of the balance sheet which they think will be acceptable. All that we know is that it is going to be below the current level, but above the level before the financial crisis.Also, no date has been provided in relation to when they will start with this project. This is too vague and a confusing statement. In other words, the information provided was boring and it was designed in that way.

Weekly
    •    Last Candlesticks pattern: N/A
    •    ime of formation: N/A
    •    Trend bias: Near term up

Daily
    •    Last Candlesticks pattern: Hammer
    •    Time of formation: 3 Feb 2016
    •    Trend bias: Up

EURGBP – 0.8677

The single currency has surged again after brief pullback to 0.8652, adding credence to our bullish view that recent rise from 0.8304 low is still in progress and upside bias remains for this move to extend further gain to 0.8900, however, near term overbought condition should prevent sharp move beyond 0.8940-50 (50% Fibonacci retracement of 0.9576-0.8304) and reckon psychological resistance at 0.9000 would hold from here, price should falter well below 0.9090 (61.8% Fibonacci retracement), bring retreat later. 

On the downside, whilst initial pullback to the Tenkan-Sen (now at 0.8759) and possibly 0.8700 cannot be ruled out, reckon said support at 0.8652 would contain downside and bring another upmove later to aforesaid upside targets. A daily close below the Kijun-Sen (now at 0.8632) would suggest top is formed instead, bring correction of recent rise to 0.8590-95, then 0.8550 but reckon previous support at 0.8524 would hold from here, bring rebound later. 

Recommendation: Buy again at 0.8680 for 0.8880 with stop below 0.8580.

On the weekly chart, as the single currency has maintained a firm undertone after recent strong rebound, retaining our bullishness for the erratic rise from 0.8304 low to extend gain to 0.8840-50 (50% Fibonacci retracement of 0.9576-0.8304), then 0.8900-10, however, reckon upside would be limited to 0.9000 and 0.9045-50 should hold from here, price should falter well below 0.9090 (61.8% Fibonacci retracement), risk from there has increased for a retreat to take place later this month.

On the downside, although pullback to 0.8700 cannot be ruled out, reckon support at 0.8652 would hold and bring another rise to aforesaid upside targets. A weekly close below the Kijun-Sen (now at 0.8589) would defer and suggest top is possibly formed, risk weakness to 0.8550 but a drop below previous resistance at 0.8531 is needed to add credence to this view, bring further fall to 0.8490-00, then towards support at 0.8457 which is likely to hold from here.

NZDUSD maintains the uptrend that started from the May 11 low of 0.6816 to the June 14 high of 0.7318. The bias turned bullish after prices rose above the 200-day moving average at the key psychological level of 0.7100 in early June.

Technical indicators are supporting a bullish picture, with the positive alignment of the tenkan-sen and kijun-sen lines as well as RSI and MACD in bullish territory.

However, after RSI reached overbought levels above 70, NZDUSD pulled back to the 0.7200 handle. A consolidation phase is expected after such a steep uptrend.

A decline in prices would find support at 0.7170 before approaching the key 0.7100 level. From here, the next big figure at 0.7000 comes into view. Breaking below 0.6950 (an important resistance level in May), would negate the current short-term bullish bias and would open the way for a deeper decline towards 0.6816 (May 11 low).

A bounce in prices from current levels would see a re-test of 0.7318 with scope to resume the uptrend towards 0.7375 (February high). A daily close above 0.7100 is required though, in order to maintain upside momentum.

Looking at the bigger picture, the trend is neutral, as NZDUSD has been trading between 0.6820 and 0.7375 for the past six months since December 2016. The shorter-term view is bullish since April and only a move below 0.7000 would change the current outlook.

The FOMC raised the federal funds rate by 25bps yesterday, as was widely expected. The most noteworthy change in the accompanying statement referred to the Fed's balance sheet. The Committee expects to begin its normalization later this year in a slow and predictable manner. Meanwhile, economic forecasts were left largely unchanged, as was the all-important 'dot plot', which continues to signal one more rate hike this year.

The dollar plummeted hours ahead of the decision, following disappointing CPI and retail sales data for May. This was probably seen as confirming market expectations that the following hike won't be coming within this year. EUR/USD surged, broke above the 1.1240 (R1) barrier and hit our next resistance zone of 1.1300 (R2).

Nonetheless, during her press conference, Chair Yellen communicated the opposite message, causing the greenback to recover its earlier losses. She was upbeat overall, and noted that the FOMC views the recent slowdown in inflation as being transitory, driven by one-off effects. EUR/USD tumbled back below the 1.1240 (R1) zone. Even if the pair continues to slide for a bit more, as long as it continues to trade above the uptrend line taken from the low of the 17th of April, we still consider the short-term path to be positive.

The key takeaway we got was that the Fed expects economic data (particularly inflation) to rebound soon and if so, it will proceed with its hiking plans. However, investors remain skeptical of further near-term hikes. Market pricing suggests more than 50% probability that the Fed will not raise rates again this year. Therefore, moving forward, we expect market focus to be on incoming data and specifically, inflation-related figures. Signs of a rebound in underlying inflation or wages could make the market more confident that we will get another rate increase this year and thereby, help the dollar recover further.

However, we would avoid exploiting any future dollar gains against the euro, which we also expect to perform well given the Euro area's robust recovery and that the ECB has started shifting towards a more upbeat bias. Our favorite proxy for further dollar gains is USD/JPY, having in mind that the Bank of Japan keeps the yields of long-dated JGBs near 0%, while the Fed appears willing to continue its normalizing process.

BoE set to stand pat, may appear slightly cautious

Today, the main event will be the Bank of England policy decision. The forecast is for the MPC to keep policy untouched via a 7-1 vote again, with Forbes expected to be the lone dissenter at her final meeting as an MPC member. Since the latest gathering, CPI data showed that inflation accelerated to +2.9% yoy in May, which is above the Bank's forecast for the entire year, while GDP growth for Q1 was revised lower against BoE's expectations for an upward revision.

Thus, policymakers are faced with a conundrum: high inflation, but slowing growth - which we expect to remain lackluster moving forward amid negative real wage growth. On balance, we think the Bank may place more emphasis on supporting economic growth than curbing inflation, as growth and jobs have been its main priority ever since the Brexit vote. As such, we believe the risks are tilted towards a slightly more dovish tone in the meeting minutes, something that could weigh on the pound somewhat.

GBP/USD traded south in the aftermath of the FOMC decision after it hit resistance at 1.2815 (R1). As long as the pair is trading below the key resistance territory of 1.2850 (R2), there is the prospect for further declines. A dip below 1.2720 (S1) could confirm the case and perhaps set the stage for another test near the 1.2635 (S2).

As for the rest of today's highlights:

In Switzerland, the SNB will announce its rate decision and the forecast is for the Bank to keep its policy unchanged. As usual, we believe that policymakers are likely to repeat the franc is still overvalued and that the Bank will remain active in the FX market as necessary.

As for the economic data, the UK retail sales for May are due out and the forecast is for a decline following a remarkable +2.3% mom surge in April. A decline in retail sales could bring the pound under renewed selling interest, but the currency's intraday direction is likely to be decided by the BoE signals a few hours later.

From the US, we get industrial production for May as well as the Philly Fed business activity index for June. We also get the NAHB housing market index for June and initial jobless claims for the week ended on the 9th of June.

We have only one speaker on the agenda: BoE Governor Mark Carney will speak during the late US session.

EUR/USD

Support: 1.1160 (S1), 1.1110 (S2), 1.1075 (S3)

Resistance: 1.1240 (R1), 1.1300 (R2), 1.1370 (R3)

GBP/USD

Support: 1.2720 (S1), 1.2635 (S2), 1.2515 (S3)

Resistance: 1.2815 (R1), 1.2850 (R2), 1.2910 (R3)

EURUSD touched a new high yesterday ahead of FOMC press conference but then it turned sharply lower from 1.1300 area that we highlighted it as an important resistance a few times in our past updates. An updated count shows an ending diagonal on 4h chart placed in wave C; a powerful reversal pattern that can cause a strong drop for this month, ideally in impulsive fashion.

EURUSD, 4H

Daily Pivots: (S1) 138.91; (P) 139.91; (R1) 140.72; More....

Intraday bias in GBP/JPY remains neutral for consolidation above 138.65 temporary low. Near term outlook stays bearish with 142.75 resistance intact. Fall from 148.09 could still extend lower. In that case, we'd look for bottoming signal around 135.58, which is close to 135.39 fibonacci level, to bring rebound. Break of 142.75, nonetheless, will argue that fall from 148.09 is completed and turn bias back to the upside for this resistance.

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. However, sustained break of 135.58/39 will confirm reversal and target a retest on 122.36 low.

Daily Pivots: (S1) 122.58; (P) 123.10; (R1) 123.45; More...

EUR/JPY dips to as low as 122.39 so far as the correction from 125.80 extends. Deeper fall could still be seen. But we'd expect downside to be contained by 38.2% retracement of 114.84 to 125.80 at 121.61 to bring rise resumption. Above 124.03 minor resistance will turn bias back to the upside for 125.80/126.09 resistance zone. We're staying mildly bullish in the cross. And, break of 126.09 key resistance will extend the whole rebound from 109.03 to 100% projection of 109.03 to 124.08 from 114.84 at 129.89. Nonetheless, firm break of 121.61 will dampen our bullish view and bring deeper fall to 61.8% retracement at 119.02.

In the bigger picture, focus is staying on 126.09 support turned resistance. Decisive break there will confirm completion of the down trend from 149.76. And in such case, rise from 109.20 is at the same degree and should target 141.04 resistance and above. Meanwhile, rejection from 126.09 and break of 114.84 will extend the fall from 149.76 through 109.20 low.

Daily Pivots: (S1) 1.4727; (P) 1.4807; (R1) 1.4860; More...

EUR/AUD's pull back from 1.5226 extended lower and broke 38.2% retracement of 1.3980 to 1.5226 at 1.4750. But at this point, we'd still expect strong support from 1.4669, close to 55 day EMA at 1.4685, to contain downside and bring rebound. Above 1.4894 minor resistance will turn bias back to the upside for retesting 1.5226 high. However, firm break of 1.4669 will argue that rise from 1.3642 is completed and bring deeper pull back.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed at 1.3624 after defending 1.3671 key support. Rise from 1.3642 is now expected to target 61.8% retracement of 1.6587 to 1.3624 at 1.5455. Sustained break there will pave the way to retest 1.6587. In any case, outlook will now stay cautiously bullish as long as 1.4669 support holds. Break of 1.4669 will dampen the bullish view and would at least bring deeper fall back to 55 week EMA (now at 1.4539).

Putting out fires with gasoline will never be a good life decision, but that is what happened overnight with crude oil exploding, to the downside.

For OPEC, an oversupply headache became a migraine overnight as oil slumped by 4 % after the release of the U.S. DOE Crude Inventory numbers. In fact, it wasn't the crude inventory number itself that started the rot, although the drawdown of -1.66 million barrels was less than expected, rather it was the gasoline inventories which came in at +2.1 million bpd against an expected reduction of -1.15 million bpd.

Given we are in U.S. driving season, this was unexpected and suggests that the persistent surplus is being shunted further down the oil value chain. Instead of being stored in huge tanks in Cushing Oklahoma as crude, it is being taken out, refined into gasoline and err, being stored in huge tanks. The gasoline inventories don't normally have such an aggressive effect on crude prices. What is perhaps enlightening, therefore, is the light it shines on market sentiment. It would appear that the support was nervously wobbling before the numbers with the release being the straw that broke the camels back.

The gasoline inventories don't normally have such an aggressive effect on crude prices. What is perhaps enlightening, therefore, is the light it shines on market sentiment. It would appear that the support was nervously wobbling before the numbers with the release being the straw that broke the camels back.

Brent and WTI didn't hang around though, with both contracts heading out of the door and turning South at high speed. Brent and WTI both finished the New York session at their lows, a bearish technical development in itself, and are now eyeing the panic liquidation lows of early May.

Brent spot opened at 46.85 this morning with well-formed resistance now at 48.50. The May low at 46.05 is the first support followed by 45.50.

WTI spot opened at 44.60 with substantial resistance above 46.25. The May low at 43.55 is initial support with a daily close below here possibly targeting the November lows around 42.00.

A break of the latter level on WTI would no doubt send shockwaves through both OPEC/Non-OPEC and U.S. Shale. It would shine the spotlight on Saudi Arabia, much to their reluctance, as the world's only major swing producer capable of making rapid, meaningful cuts to rebalance prices urgently. Its effect on the OPEC/non-OPEC alliance could turn either way. On the one hand, they may be faced with the unpalatable scenario of deepening the production cut agreement and then adhering to it. On the contrary, it may spawn a noncompliance every man for himself situation and undermine the agreement terminally.