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Daily Pivots: (S1) 109.56; (P) 109.99; (R1) 110.37; More...

USD/JPY is staying in consolidation in range of 109.11 /110.80. Intraday bias stays neutral at this point. With 111.70 resistance intact, near term outlook remains mildly bearish and deeper decline is expected. Below 109.11 will resume the fall from 114.36 and target 108.12 low first. Break will extend the whole corrective fall from 118.65 to 61.8% retracement of 98.97 to 118.65 at 106.48. We will look for bottoming sign there. Meanwhile, break of 110.70 will indicate near term reversal and turn bias back to the upside for 114.36 resistance 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.

US Session Highlights

(US) Goldman Economist Chain Store Sales w/e Jun 10th w/w: +1.1%; Y/Y: +0.5%

(US) MAY PPI FINAL DEMAND M/M: 0.0% V 0.0%E; Y/Y: 2.4% V 2.3%E; Ex Food and Energy M/M: 0.3% v 0.1%e; Y/Y: 2.1% v 1.9%e

(CA) Bank of Canada (BoC) Gov Poloz: Reiterates low interest rates have been used to offset shocks

With all eyes clearly on the outcome of the FOMC meeting tomorrow, equity markets gained strength again, as Techs recovered some lost ground from the past two days. Renewed interest in stocks took the S&P, the Dow, and the Russell 2000 to close at new all-time highs. A rate hike seems almost fully discounted; however, the market will be looking for signals from the meeting statement and Yellen's speech post interest rate announcement. All S&P sectors made positive gains for the day; Materials and Energy were the out-performers, gaining 1.2% and 0.7% respectively, Technology gained 0.6%

US markets on close: Dow +0.4%, S&P500 +0.5%, Nasdaq +0.7%

Best Sector in S&P500: Materials

Worst Sector in S&P500: Telecom

Biggest gainers: FTR +8.5%; SWN +5.1%; CHK +.47%

Biggest losers: MYL -2.9%; FOXA -2.4%; YHOO -2.1%

At the close: VIX 10.4 (-1.0pts); Treasuries: 2-yr 1.36% (flat), 10-yr 2.21% (flat), 30-yr 2.86% (-1bps)

US movers afterhours

HRB Reports Q4 $3.76 v $3.51e, Rev $2.33B v $2.32Be; adj EBITDA $904M v $812M y/y; +10.6% afterhours

ALXN Names Paul J. Clancy CFO; effective July 10th (from BIIB); +3.7% afterhours

SQNS File to sell ADS shares through Canaccord; -5.9% afterhours

Politics

(US) White House spokesperson: Pres Trump has the right but no intention to fire Special Councel Mueller - press

Key economic data

(CN) CHINA MAY FIXED ASSETS EX RURAL YTD Y/Y: 8.6% (4-month low) V 8.8%E

(CN) CHINA MAY INDUSTRIAL PRODUCTION Y/Y: 6.5% V 6.4%E; YTD Y/Y: 6.7% V 6.6%E

(CN) CHINA MAY RETAIL SALES Y/Y: 10.7% V 10.7%E; YTD Y/Y: 10.3% V 10.3%E

(AU) AUSTRALIA JUNE WESTPAC CONSUMER CONFIDENCE INDEX: 96.2 V 98.0 PRIOR, M/M: -1.8% V -1.1% PRIOR (3rd straight decline)

(NZ) NEW ZEALAND Q1 CURRENT ACCOUNT BALANCE (NZ$): 0.24B V +1.00BE

Speakers and Press

China

(CN) China National Bureau of Stats (NBS): China economy remains stable in May with improvement

(CN) China May Power Consumption +5.1% y/y – Chinese Press

Japan

(JP) Japan reportedly seeking talks on North Korea with China and South Korea - Japan press

Australia

(AU) JPMorgan expects RBA interest rates to bottom at 1.00%, down from 1.50% current - press

Korea

(KR) South Korea foreign bond inflows rose by a net of KRW2.1T in May (5th straight rise) - FSS

Asian Equity Indices/Futures (00:30ET)

Nikkei flat, Hang Seng -0.3%, Shanghai Composite -0.6%, ASX200 +0.9%, Kospi -0.3%

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

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.1205-1.1220; JPY 109.95-110.15; AUD 0.7530-0.7545; NZD 0.7200-0.7225

Aug Gold +0.2% at 1,272/oz; July Crude Oil -1.0% at $45.99/brl; July Copper flat at $2.60/lb

(US) Weekly API Oil Inventories: Crude: +2.8M v -4.6M prior (first build in 4 weeks)

(CN) PBOC SETS YUAN MID POINT AT 6.7939 V 6.7954 PRIOR

(CN) PBOC to inject combined CNY90B v CNY50B prior in 7-day, 14-day and 28-day reverse repos

(CN) China Finance Ministry sells 2-yr bonds at 3.620%; bid-to-cover 2.64x; Sells 5-yr bonds at 3.565%, bid-to-cover 3.76x

Asia equities notable movers

Australia

Capitol Health (CAJ) +20%; Sells NSW assets to I-MED radiology network for A$81.5M cash; Guides FY17 Radiology EBITDA at top of guided range ~A$21.5M

Melbourne IT (MLB) +2.2%; Affirms FY17 underlying EPS A$0.17-0.19; EBITDA A$37.5-41.5M - investor presentation

Vocus (VOC) +0.8%; Affirms FY17 underlying net ~A$160-165M; EBITDA ~A$365-375M; Rev ~A$1.8B - investor slides

Telstrea (TLS) flat; Confirms to cut 1,400 jobs as part of cost cutting efforts

Japan

Yamato Holdings (9064) +1.8%; said to plan 15% raise on parcel delivery fees - Nikkei

Honda (7267) +0.9%; Reportedly plans to add 2.2K jobs to speed Chinese SUV output - Nikkei

Toshiba (6502) -3.3%; Said to delay the submission of FY16 annual securities report by at least 1-month - Japan press

Hong Kong

NetDragon Websoft Holdings (777) +4.8%; Reports Q1 core segment profit CNY168.8M, +78.9% y/y

Skyworth Digital (751) +0.7%; Reports FY16 net HKD$1.31B, -39.6% y/y

China Sandi Holdings (910) -1.8%; Profit warning: Guides FY17 Net loss v profit HK$160.

Daily Pivots: (S1) 0.7519; (P) 0.7542; (R1) 0.7559; More....

At this point, AUD/USD is still bounded in right range below 0.7566 temporary top and intraday bias remains neutral first. With 0.7456 minor support intact, further rally is in favor. Above 0.7566 will extend the rise from 0.7328 and target 0.7748 resistance. In that case, we'll be cautious on topping again as it approaches medium term fibonacci level at 0.7849. On the downside, below 0.7456 minor support will turn bias back to the downside for 0.7328 short term bottom.

In the bigger picture, we're still treating price actions from 0.6826 low as a corrective pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8091) and above.

Daily Pivots: (S1) 1.3193; (P) 1.3259; (R1) 1.3306; More....

USD/CAD drops further to as low as 1.3211 so far as the decline from 1.3793 extends. Intraday bias remains on the downside with focus on 1.3222 support, which is close to medium term channel support. As noted before, we're holding on to the view that whole choppy rise from 1.2460 has completed at 1.3793. Decisive of 1.3222 will affirm our bearish view and target 1.2968 key support for confirmation. On the upside, above 1.3285 minor resistance will turn bias neutral and bring recovery. But upside should be limited by 1.3387/3537 resistance zone to bring another decline.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and could have completed at 1.3793, ahead of 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. In that case, USD/CAD should decline through 1.2460 support to 50% retracement of 0.9406 to 1.4869 at 1.2048.

US markets regained strength overnight with DOW and S&P 500 closed at record highs as selloff in tech stocks stabilized. DOW gained 92.8 pts, or 0.44% to end the day at 21328.47. S&P 500 rose 10.96 pts, or 0.45% to close at 2440.35. However, no strength was seen in treasury yields as 10 year yield lost -0.006 to close at 2.207, staying well below 2.297 resistance and maintains near term bearish outlook. In the currency markets, Canadian Dollar remains the strongest one as boosted by hawkish twist in BoC officials' rhetorics. Meanwhile, Dollar is trading as the weakest major currency for the week. The development argues that traders could be quite concerned with a dovish FOMC hike today.

Fed to hike but focus on projections and vote

FOMC meeting is the major focus of the day. Fed is widely expected to raise the federal fund rate by 25bps to 1.00-1.25%. Markets are pricing in near 100% chance of that and there is little chance for Fed to give us a surprise there. But traders are very cautious as it's now getting more unsure on whether Fed will hike again in September. The new economic projections to be released today will probably hold the first key to this. The vote split for today's decision will be another hint on how divided the committee is regarding the economic outlook. Fed chair Janet Yellen will likely release more information on Fed's plan to shrink its balance sheet too.

Dollar selling might accelerate if EUR/USD breaks 1.13 firmly

Technically, dollar is staying generally bearish except versus Sterling. EUR/USD is holding above 1.1109 support and is mildly in favor to take out 1.1298 key resistance, which would carry larger bullish implications. USD/JPY is holding below 111.70 resistance, which suggests that fall from 114.36 is still in progress for 108.12 and below, to extend the larger decline from 118.65 (Dec high). USD/CAD breached 1.3222 key support level which now further affirms the case of medium term reversal and puts1.3 handle into focus. Overall, the greenback will be vulnerable if Fed hints at a rate path that is slower than originally planned. And a strong break of 1.13 in EUR/USD could trigger accelerated selloff in the greenback.

PM May said Brexit negotiation to start next week

In UK, Prime Minister Theresa May confirmed that the negotiation with EU on Brexit will formally start on January 19 as originally planned. May announced while she was meeting with French President Emmanuel Macron that "the timetable for the Brexit negotiation remains on course and will begin next week." And she emphasized that "we have been very clear we want to maintain a close relationship and a close partnership with the EU and individual member states into the future, including in the areas we've discussed this evening."

While the negotiation may really start next week, UK's stance on it is still very unclear after last week's election. There were calls for a multi-party negotiation team and a softer Brexit approach. Meanwhile, Labour has indicated that they will not agree a Brexit consensus with the Conservatives until May ditches her "no deal is better than a bad deal" rhetoric.

On the data front

China industrial production rose 6.5% yoy in May, fixed assets investments rose 8.6% yoy, retail sales rose 10.7% yoy. Japan industrial production was finalized at 4.0% mom in April. Australia Westpac consumer confidence dropped -1.8% in June. New Zealand current account balance turned into NZD 0.24b surplus in Q1.

German CPI was finalized at -0.2% mom, 1.5% yoy in May. UK employment data will be a key focus in European session. Sterling will look into the data for more upside momentum while traders await tomorrow's BoE announcement. Eurozone will release industrial production and employment.

While FOMC rate decision and press conference is the major focus, Dollar will first face the test of CPI in early US session. Retail sales and business inventories will also be released.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3193; (P) 1.3259; (R1) 1.3306; More....

USD/CAD drops further to as low as 1.3211 so far as the decline from 1.3793 extends. Intraday bias remains on the downside with focus on 1.3222 support, which is close to medium term channel support. As noted before, we're holding on to the view that whole choppy rise from 1.2460 has completed at 1.3793. Decisive of 1.3222 will affirm our bearish view and target 1.2968 key support for confirmation. On the upside, above 1.3285 minor resistance will turn bias neutral and bring recovery. But upside should be limited by 1.3387/3537 resistance zone to bring another decline.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and could have completed at 1.3793, ahead of 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. In that case, USD/CAD should decline through 1.2460 support to 50% retracement of 0.9406 to 1.4869 at 1.2048.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the AUD declined 0.11% against the USD and closed at 0.7536.

LME Copper prices declined 1.6% or $93.0/MT to $5659.0/MT. Aluminium prices declined 0.6% or $11.0/MT to $1877.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7537, with the AUD trading slightly higher against the USD from yesterday's close.

Earlier in the session, data showed that Australia's Westpac consumer confidence index fell to a level of 96.2 in June, dropping for a third consecutive month, compared to a reading of 98.0 in the prior month.

Elsewhere, in China, Australia's largest trading partner, industrial production climbed 6.5% on an annual basis in May, beating market expectations for an advance of 6.4%. Industrial production had registered a similar rise in the previous month. Moreover, the nation's retail sales climbed 10.7% YoY in May, in line with market expectations. In the prior month, retail sales had registered a similar rise.

The pair is expected to find support at 0.7519, and a fall through could take it to the next support level of 0.7502. The pair is expected to find its first resistance at 0.7559, and a rise through could take it to the next resistance level of 0.7582.

Going ahead, Australia's unemployment rate data for May, and consumer inflation expectations for June, due to release tomorrow, will be on investors' radar.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages

For the 24 hours to 23:00 GMT, the EUR rose 0.07% against the USD and closed at 1.1209, after the Euro-zone's ZEW economic sentiment index climbed to a level of 37.7 in June, notching its highest level in nearly two years, as investors remained upbeat about the region's growth prospects after recent data indicated renewed vigour in the common currency bloc. The index had registered a level of 35.1 in the previous month.

Separately, mood amongst German investors surprisingly weakened in June, after data showed that the economic sentiment index registered an unexpected drop to a level of 18.6, compared to market expectations of a rise to a level of 21.8. The index had registered a reading of 20.6 in the previous month. On the other hand, the nation's current situation index advanced to a nearly six-year high level of 88.0 in June, surpassing market expectations for the index to increase to a level of 85.0 and following a level of 83.9 in the previous month.

In economic news, the US NFIB small business optimism index surprisingly remained steady at a level of 104.5 in May, while market participants had envisaged for a rise to a level of 105.2.

In the Asian session, at GMT0300, the pair is trading at 1.1212, with the EUR trading slightly higher against the USD from yesterday's close.

The pair is expected to find support at 1.1190, and a fall through could take it to the next support level of 1.1167. The pair is expected to find its first resistance at 1.1230, and a rise through could take it to the next resistance level of 1.1247.

Looking ahead, investors will concentrate on the Euro-zone's industrial production data for April and Germany's final consumer price inflation figures for May, both slated to release in a few hours. Later today, all eyes would be on the Federal Reserve's (Fed) monetary policy decision, as the central bank is widely expected to announce an interest rate hike.

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

For the 24 hours to 23:00 GMT, the GBP rose 0.66% against the USD and closed at 1.2752, after recent data indicated a more-than-expected rise in UK's inflation.

Britain's consumer price index (CPI) advanced more-than-expected by 2.9% on an annual basis in May, surging to a four-year high level, thus exerting further pressure on the Bank of England (BoE) to try and limit spiking inflation. In the previous month, the CPI had risen 2.7%, while markets anticipated for it to gain 2.7%.

In the Asian session, at GMT0300, the pair is trading at 1.2750, with the GBP trading slightly lower against the USD from yesterday's close.

The pair is expected to find support at 1.2676, and a fall through could take it to the next support level of 1.2601. The pair is expected to find its first resistance at 1.2791, and a rise through could take it to the next resistance level of 1.2831.

Moving ahead, traders would keep a close watch on Britain's ILO unemployment rate for the three months to April, slated to release 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 0.19% against the JPY and closed at 110.06.

In the Asian session, at GMT0300, the pair is trading at 110.04, with the USD trading a tad lower against the JPY from yesterday's close.

Earlier in the session, Japan's final industrial production rebounded 4.0% on a monthly basis in April, confirming the flash estimate. Industrial production had fallen 1.9% in the previous month.

The pair is expected to find support at 109.88, and a fall through could take it to the next support level of 109.73. The pair is expected to find its first resistance at 110.23, and a rise through could take it to the next resistance level of 110.43.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD traded flat against the CHF and closed at 0.9688.

In the Asian session, at GMT0300, the pair is trading at 0.9686, with the USD trading marginally lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9665, and a fall through could take it to the next support level of 0.9644. The pair is expected to find its first resistance at 0.9704, and a rise through could take it to the next resistance level of 0.9722.

Amid no economic releases in Switzerland today, investor sentiment would be governed by global macroeconomic factors.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.