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For the 24 hours to 23:00 GMT, the USD declined 0.63% against the CAD and closed at 1.3235.

The Canadian Dollar gained ground, after the Bank of Canada (BoC) Governor, Stephen Poloz signalled that the BoC could raise interest rates sooner than estimated, after he stated that the central bank's 2015 interest rate cuts “have largely done their work” and economic recovery from weak oil prices appeared to be broadening.

In the Asian session, at GMT0300, the pair is trading at 1.3228, with the USD trading slightly lower against the CAD from yesterday's close.

The pair is expected to find support at 1.3195, and a fall through could take it to the next support level of 1.3163. The pair is expected to find its first resistance at 1.3277, and a rise through could take it to the next resistance level of 1.3327.

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

Key Points:

• The recent rout seems to have lost its momentum.
• Support is relatively robust around the current level.
• The EMA bias remains staunchly bullish.

The EURAUD is worth a look in this week as a decent, albeit simple, reversal set up seems to be forming which could see some gains back on the menu. Any subsequent recovery is unlikely to erode all of the losses seen over the past week or so but the resulting gains could still be worth considering for those looking sidestepping some of the FOMC volatility.

Taking a closer look at exactly what is going on, the first thing to note is that selling pressure has been decelerating over the last few sessions and now seems to have stalled at the 1.4853 support. Nevertheless, this isn’t entirely surprising given the presence of the 23.6% Fibonacci retracement around this price and the movement of stochastics into oversold territory. As for what this means going forward, we can expect that the current support acts as a cap on downside risks and we should also see the bulls wade back into the fray – potentially pushing the pair higher once more.

Indeed, future upside action is looking rather likely which is due in no small part to the EMA bias. Specifically, despite the more than 300 pip rout from the 1.52 handle, the moving averages remain staunchly bullish. As illustrated, the 12 and 20 day averages have yet to crossover and both of these remain well and truly above the 100 day average. Combined with the robust zone of support already discussed, it looks as though there is little where for the pair to go but up – from a technical perspective at least.

In the event that we do see this rally take hold, we don’t quite expect it to entirely erase the last few weeks’ losses but it will go a long way in recovering some the slip. In particular, we suspect that upsides may run into some stiff resistance at the 1.5099 handle which represents a historical turning point. Furthermore, the parabolic SAR bias remains above price action which would suggest that we may have actually entered a medium-term downtrend that could also help to prevent a full recovery from taking place.

Overall, the outlook is somewhat in the bulls favour moving ahead but they may lose out to the bears in the medium to long-run. As a result, pay particular attention to the technical readings and the fundamentals as the EURAUD reaches that 1.5099 handle has it could prove to be the start of yet another slide for the pair.

Key Points:

• Price action trending within an ascending channel.
• RSI oscillator is showing divergence.
• Watch for the bullish channel to breakdown ahead of the FOMC vote.

The New Zealand Dollar has been a net beneficiary from the building uncertainty around the U.S. Federal Reserve’s forward path on rate hikes. Subsequently, the currency pair has rallied relatively strongly, within an ascending channel, over the past month to its current level at 0.7220. However, the upward momentum could be coming to an end as some interesting technical signals suggest a pullback could be on the cards in the coming days.

In particular, the 4-hour timeframe provides some illuminating clues as to what is potentially looming for the Kiwi Dollar. Currently, price action has reached some lofty heights above the 72 cent handle but the momentum has seemingly stalled and we are now moving in a sideways direction. However, this sideways movement is placing the lower extremity of the channel at risk of which a breach could commence a steady decline. Additionally, there are some signs of divergence between price action and the RSI Oscillator with the later currently trending lower despite price action moving sideways.

Subsequently, there are plenty of reasons to suggest that the Kiwi Dollar might be preparing for a break lower in the coming days. This is especially prescient given the fundamental risk event that is looming for the pair in the coming session with the FOMC getting ready to revisit their interest rate regime. Any hawkish moves by the central bank could lead to a significant downside momentum shift for the NZD and potentially see the currency pair slipping back below the 70 cent handle in the short term. Additionally, the RBNZ has already said that they view the Kiwi Dollar as overvalued and this adds plenty of credence to the view that the pair is ready for a decline.

Ultimately, the next few days are likely to be relatively critical for Kiwi Dollar with a range of downside risks, both fundamental and technical, looming on the horizon. Subsequently, the most likely scenario is price action breaking below the lower channel constraint at 0.7194 and moving steadily towards support around the 71 cent handle and possibly as low as 0.7050 in extension. Subsequently, it would pay to monitor price action in the coming hours because the move will be fairly rapid following the potential breakdown. However, watch for volatility around the FOMC decision because the very nature of central banking makes it highly unpredictable.

Currency pair GBP/USD

The GBP/USD showed a bullish bounce at the key support trend line (blue), which indeed caused an expansion of wave 2 (blue) via an ABC zigzag (orange). A bearish breakout could confirm wave 3 (red). The GBP/USD wave 2 is invalidated if price breaks above the 100% Fibonacci level.

The ABC (orange) correction could continue above the resistance (red) if price manages to use the Fibonacci levels of wave 4 (grey) without breaking below the 61.8% Fibonacci level. The breakout would probably complete 5 waves (grey) within wave C (orange).

Currency pair EUR/USD

The EUR/USD is either building a reversal or a sideways zone. A break above the 100% Fib resistance level at 1.13 (red line) invalidates the potential reversal whereas a break below support (blue) would increase the chance of a wave 3 (blue) unfolding.

The EUR/USD invalidates wave 2 (orange) if price manages to break above the 100% Fib level.

Currency pair USD/JPY

The USD/JPY is testing both support Fibonacci levels of wave 2 (orange) and a resistance trend line (red). A break above resistance could see price challenge the Fibs of wave 3 (orange).

The USD/JPY would invalidate the wave 2 (orange) if price breaks below the 100% Fibonacci level.

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

EUR/USD prices are, once again, little changed this morning. As you can see, the buyers and sellers remain battling for position around the 1.12 handle. Directly overhead we have June's opening level at 1.1238, followed closely by the mid-level resistance at 1.1250. Below 1.12, there's little support until price connects with the mid-level barrier at 1.1150.

A quick look at the weekly chart shows that the single currency remains trading around the underside of a major supply at 1.1533-1.1278. Managing to cap upside since May 2015, this is not an area one should overlook. Looking down to the daily timeframe, however, the candles are now seen sandwiched between supply coming in at 1.1327-1.1253 and support pegged at 1.1142.

Our suggestions: Based on the above notes our desk has shown interest around the 1.1150 neighborhood, due to the base converging with the following structures (green area):

• A H4 trendline support taken from the high 1.1268.
• A H4 trendline support etched from the low 1.1075.
• A H4 61.8% Fib support at 1.1155 drawn from the low 1.1074.
• A H4 78.6% retracement level pegged at 1.1147 penciled in from the low 1.1109.
• A daily support level seen at 1.1142.

Seeing as how this zone is rather small, we will not be placing pending buy orders here. Instead, we've chosen to wait for a reasonably sized H4 bull candle to form, preferably a full-bodied candle. This will help prove buyer interest exists here which IS needed due to where price is trading from on the weekly chart right now.

Data points to consider: US Inflation and retail sales data at 1.30pm, FOMC statement, projections and Fed funds rate decision at 7pm, followed closely by the FOMC Press conference at 7.30pm GMT+1.

Levels to watch/live orders:

• Buys: 1.1150 region ([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).

GBP/USD

With downside attempts being limited for now by 1.2602/1.2698 (a daily zone marked in pink), further buying could take place today. There are a few notable features about this zone that deserve mention: a daily support level coming in at 1.2673, a daily 61.8% Fib support at 1.2625 (taken from the low 1.2365) and a daily AB=CD (black arrows) 127.2/161.8% ext. completion point seen at 1.2602/1.2698 (drawn from the high 1.3047). The advance from this area, however, was likely helped by the string of upbeat UK data released during yesterday's London morning segment.

Although the H4 candles easily cleared the 1.27 handle, upside momentum seems to have diminished after connecting with the mid-level resistance at 1.2750. The next upside hurdle beyond this number can be seen on the weekly chart in the form of a resistance level pegged at 1.2789, shadowed closely by the 1.28 handle.

Our suggestions: In view of the near-full-bodied daily bullish candle printed from 1.2602/1.2698, a trade above 1.2750 could be an option today. However, to take advantage of this potential move, we would strongly recommend waiting for a H4 close to form above 1.2750, and then look to trade any retest of this level seen thereafter, targeting the 1.28 region as the initial take-profit zone.

Data points to consider: UK Employment figures at 9.30am. US Inflation and retail sales data at 1.30pm, FOMC statement, projections and Fed funds rate decision at 7pm, followed closely by the FOMC Press conference at 7.30pm GMT+1.

Levels to watch/live orders:

• Buys: Watch for H4 price to engulf 1.2750 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe buy signal to form following the retest – see the top of this report – is advised] stop loss: dependent on where one confirms this level).
• Sells: Flat (stop loss: N/A).

AUD/USD

In view of weekly price recently shaking hands with supply coming in at 0.7610-0.7543, the sellers could very well make an appearance from here this week. We see little in the way of support from this angle until price links with a trendline support etched from the low 0.6827.

In agreement with weekly flow, daily action also recently whipsawed above supply formed at 0.7556-0.7523 and touched base with an AB=CD 127.2% completion point (see black arrows) at 0.7568 (taken from the low 0.7328). This move likely took out a truckload of buy stops from above the said supply and therefore has potentially provided enough liquidity for the big boys to sell into.

For those who read Tuesday's report you may recall that our desk highlighted the H4 supply zone at 0.7571-0.7557 as a potential area to short from. This was mainly due to this area's connection with the said higher-timeframe supplies. As can be seen from the H4 chart, the unit sold off beautifully from this base and clocked a low of 0.7524. For any of our readers who managed to get short from here, further downside is likely as we do not expect the local support at 0.7520 to hold for much longer, since the more attractive zone is positioned below at 0.75/0.7512.

Our suggestions: Other than Tuesday's call to short the aforementioned H4 supply zone, we do not have much else to hang our hat on right now. Buying from the said H4 support area would, in our opinion, be too much of a risk given where price is coming from on the bigger picture! So therefore, remaining flat may be the safer option today.

Data points to consider: Chinese Industrial production numbers at 3am. US Inflation and retail sales data at 1.30pm, FOMC statement, projections and Fed funds rate decision at 7pm, followed closely by the FOMC Press conference at 7.30pm GMT+1.

Levels to watch/live orders:

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

USD/JPY 

Despite the unit establishing support on the retest of the 110 handle, price was somewhat directionless during yesterday's trading. The next hurdle in the firing range from here can be seen around the H4 mid-level resistance at 110.50, followed relatively closely by June's opening level at 110.83.However, we do feel that the bulls are rather vulnerable here. Our reasoning lies within the higher-timeframe structure.

Weekly bears continue to remain in a relatively strong position after pushing aggressively lower from supply registered at 115.50-113.85. We know there's a fair bit 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). In conjunction with weekly flow, daily price also shows a potential AB=CD correction in the works taken from the high 114.36, which could see price drive lower to 107.15-107.90: a support zone that's glued to the top edge of the said weekly support area.

Our suggestions: In light of the above notes, our team has no interest in buying from 110 today. Instead, what we're looking for is a H4 close to print below this level. That way, we'd not only have space to sell down to at least the H4 mid-level support at 109.50, but we'd also be trading in line with higher-timeframe flow.

Data points to consider: US Inflation and retail sales data at 1.30pm, FOMC statement, projections and Fed funds rate decision at 7pm, followed closely by the FOMC Press conference at 7.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for H4 price to engulf 110 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe sell signal to form following the retest – see the top of this report – is advised] stop loss: dependent on where one confirms this level).

USD/CAD

Of late, the USD/CAD has taken some significant punishment, losing over 200 pips in two days! The move was, we believe, triggered by comments from the Senior Deputy Governor at the BoC, who hinted at a hawkish shift in monetary policy.

Yesterday's move, as you can see, ran through multiple H4 supports and ended the day bottoming just ahead of the 1.32 handle. Technically speaking, the reason for price not connecting with this psychological band was due to daily price linking with support pegged at 1.3212. Also of interest is the weekly demand at 1.3223-1.3395. Although the zone is under pressure at the moment, there's still a chance (now we see that daily support is in motion) that bids will hold this area steady.

Our suggestions: Given the current landscape, longs from the 1.32 handle could be something to consider today. However, to be on the safe side, we would require additional confirmation in the form of a (preferably full-bodied candle) H4 bullish candle. This, of course, would not guarantee a winning trade, but it will show that there is buyer interest, and this is the best we have.

Data points to consider: US Inflation and retail sales data at 1.30pm, FOMC statement, projections and Fed funds rate decision at 7pm, followed closely by the FOMC Press conference at 7.30pm GMT+1.

Levels to watch/live orders:

• Buys: 1.32 region ([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).

USD/CHF

Much like its inversely correlated cousin the EUR/USD, the USD/CHF is, once again, little changed this morning. Bids and offers appear to be balanced between the 0.97 handle and June's opening level penciled in at 0.9680. With that being said though, a push to the upside is likely here due to having seen the weekly Quasimodo support level at 0.9639 hold steady and daily price showing room to extend up to supply pegged at 0.9825-0.9786.

Our suggestions: Despite the higher timeframes indicating that further buying may be at hand, the H4 chart is just a minefield of resistances at the moment! Not only do we have the 0.97 level sitting just ahead, we also have a H4 61.8% Fib resistance plugged at 0.9732, followed closely by the H4 mid-level resistance at 0.9750.Therefore, we believe that remaining on the sidelines may be the better bet for now.

Data points to consider: US Inflation and retail sales data at 1.30pm, FOMC statement, projections and Fed funds rate decision at 7pm, followed closely by the FOMC Press conference at 7.30pm GMT+1.

Levels to watch/live orders:

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

DOW 30

For those who have been following our reports over the past few days you may recall that our desk had recently taken a small long position at 21164 and placed stops below the H4 support area (21139-21101) at 21097. The position is still active, but we have liquidated 50% of the trade around the 21234 neighborhood.

Fortunately, the index punched to fresh record highs during yesterday's segment, and we are now looking to trail this market with the remainder of our position. The stop is now positioned below Monday's session low (21192) at 21188. Ideally, we're looking for H4 price to remain above the H4 support level coming in at 21268, as a close below here could imply that our stop-loss order is at risk of being filled.

Our suggestions: Should H4 action pullback and retest 21268 and hold as support, our team may, dependent on the time of day, consider adding to our position. A H4 bullish candle (preferably a full-bodied candle) would be a fantastic sight as this would be enough evidence to trigger an additional buy in this market.

Data points to consider: US Inflation and retail sales data at 1.30pm, FOMC statement, projections and Fed funds rate decision at 7pm, followed closely by the FOMC Press conference at 7.30pm GMT+1.

Levels to watch/live orders:

• Buys: 21164 ([live] stop loss: 21188). 21268 region ([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

During the course of yesterday's sessions, the yellow metal printed a clear-cut daily indecision candle that pierced through the lower edge of a daily support area coming in at 1271.0-1261.7. On the H4 chart, price came within shouting distance of the support level at 1259.1, and has since rallied back up to just ahead of June's opening level at 1269.0. Up on the weekly chart, nevertheless, bullion continued to drive lower from an area comprised of two weekly Fibonacci extensions 161.8/127.2% at 1313.7/1285.2 taken from the low 1188.1 (green zone) last week. From this scale, there's room for the precious metal to continue pumping lower until we reach the demand base coming in at 1194.8-1229.1.

Our suggestions: Although June's opening level is bolstered by both May's opening level at 1270.5 and the weekly zone mentioned above, we are still wary of selling this market, mainly due to the daily support zone currently in play. Should this area be consumed, then shorts, at least in our opinion, would be a no brainer. But for now, however, we're going to take the side of caution and remain on the sidelines for the time being.

Levels to watch/live orders:

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

Global Markets:

• Asian stock markets: Nikkei up 0.20 %, Shanghai Composite fell 0.55 %, Hang Seng declined 0.20 %, ASX 200 rose 0.95 %
• Commodities: Gold at $1272 (+0.25 %), Silver at $16.88 (+0.65 %), WTI Oil at $46.00 (-0.95 %), Brent Oil at $48.35 (-0.80 %)
• Rates: US 10-year yield at 2.21, UK 10-year yield at 1.03, German 10-year yield at 0.26

News & Data

• China Industrial Production y/y 6.5 % vs 6.3 % expected
• China Retail Sales y/y 10.7 % vs 10.6 % expected
• China Fixed Asset Investment y/y 8.6 % vs 8.8 % expected
• South Korea Unemployment Rate 3.6 % vs 4.0 % previous
• New Zealand Current Account q/q NZ$0.24bln vs NZ$0.92bln expected
• New Zealand Current Account y/y -NZ$8.13bln vs -NZ$7.28bln expected
• New Zealand FPI m/m 2.4 % vs -0.8 % previous

Markets Update:

Volatility in the FX market remained low overnight. The main event was the release of Chinese industrial production and retail sales data. Both slightly exceeded expectations, but failed to support the local stock markets, which declined overnight.

Traders are waiting for the interest rate decision of the Federal Reserve. The probability is high that the central bank will increase rates tonight. The more interesting parts for traders will be the FOMC economic forecasts and statements. Due to the mixed US economic data in the past months, traders have become sceptical. The US Dollar should rally should the Fed signal that it remains confident in the US economy, and that two more hikes are coming this year.

GBP/USD recovered following yesterday’s higher than expected inflation data. The Bank of England will decide on interest rates tomorrow, and yesterday’s data is increasing the pressure on BoE Governor Carney and his team. GBP volatility should remain high today, as the UK will release its latest employment numbers this morning. Key resistance is seen at 1.2790/1.28.

EUR/USD continues to consolidate around 1.12, while USD/JPY is trading around 110. Price action is likely to stay quiet ahead of the FOMC meeting. AUD/USD and NZD/USD are consolidating as well, but USD/CAD is still seeing higher volatility following the hawkish comments from a BoC official on Monday.

Upcoming Events:

• 09:30 BST – UK Unemployment Rate
• 09:30 BST – UK Average Earnings
• 09:30 BST – UK Claimant Count Change
• 10:00 BST – Euro Zone Industrial Production
• 13:30 BST – US CPI
• 13:30 BST – US Retail Sales
• 19:00 BST – Fed Interest Rate Decision
• 19:30 BST – FOMC Press Conference
• 23:45 BST – New Zealand GDP

Oil and Gold both await different data highlights in tonight's New York session.

CRUDE

Crude yet again attempted to pick itself up off the floor overnight only to run into a wall yet again, with both Brent and WTI finishing roughly unchanged from the previous day. The wall, in this case, was OPEC's announcement that the market rebalancing was happening at a “slower pace” than expected with the exempt Libya and Nigeria's production increasing. More importantly, the unheralded American Petroleum Institute's (API) crude inventories showed an increase of 2.8 million barrels versus and expected 2.7 million drawdowns.

This leads us into the main event for oil traders this week, which is not this evening's FOMC rate decision, rather it is official DOE Crude Inventories Report where the street is again predicting a roughly 2 million barrel drawdown. Traders will be nervously hoping that this is one of the weeks that the official numbers are uncorrelated with the API ones. Should this not be so and they reveal another increase in inventories following last
week, we can expect to see both Brent and WTI coming under sustained selling pressure again.

Brent spot trades at 48.15 in early Asia with resistance still sold at 49.00 and support at 47.25.

WTI spot trades at 45.90 with resistance around 46.50 and support at 45.50 and 45.00. A break of the latter implying a retest of the May low at 43.50.

GOLD

Gold continues to be locked in a 1260 to 1270 range as bullion traders await this evening U.S. CPI and the FOMC Rate Decision. With geopolitical risk having receded over the last week, Gold is now trading on fundamentals and will be thus, subject to the nuances of U.S. Dollar weakness or strength. Clarity on this front should emerge following the releases above, at least in the short term.

With a lot of stale short-term long positioning in gold, quite a bit of it no doubt at less than salubrious levels above 1280.00, the risk could be a further washout to the downside if the Federal Reserve retains its hawkish stance this evening.

Gold has significant initial support at 1259.00, with a break implying the yellow metal could drop to the 1240.00/1245.00 region, home to the 100 and 200-day moving averages. Above, Gold has resistance at 1270.50 and then 1282.00.

Gold trades at 1269.50 in early Asia, and we would expect that financial markets in the region will remain muted ahead of the main event tonight. Gold should, therefore, meander between 1265.00 and 1272.00 through the session.

Short term GBPJPY Elliott Wave view suggests the decline from 5/10 high shows a 5 swing sequence, thus favoring more downside. Decline from 5/10 high is unfolding as a double three Elliott Wave structure. Down from 5/10 peak (148.11), Minor wave W ended at 141.47 and Minor wave X ended at 143.96. Minor wave Y is currently in progress and has scope to retest 4/16 low (135.58). Support can be seen at 135.7 – 137.3 area for at least 3 waves bounce.

Subdivision of Minor wave Y is proposed to be unfolding as a triple three Elliott Wave structure. Down from 6/1 peak (143.96), Minute wave ((w)) ended at 140.68, Minute wave ((x)) ended at 142.77, Minute wave ((y)) ended at 139.52 and Minute second wave ((x)) is in progress as a flat and expected to complete at 140.2 – 14.1.2 area. While near term bounce stays below 142.75, and more importantly below 143.95, expect pair to extend lower. We don’t like buying the pair.

GBPJPY 1 Hour Elliott Wave Chart

STOCKS

Overall stocks are stable and could either remain ranged or move up in the near term

Dow (21328.47, +0.44%) rallied closer to our initial target of 21400 in line with expectations and may meet even our next target 21600 by the end of the week if the FOMC policy statement goes in its favor. Bullish momentum remains intact above 21000.

Dax (12764.98, +0.59%) has been trading in a contracting range of 12650-850 for the last 6 weeks which may continue for a few days more unless the Fed and ECB meet triggers an expansion in volatility.

Shanghai (3140.50, -0.42%) is stuck in the narrow range of 3130-65 for the last few sessions but another retest of 3130 may trigger a sharp upmove for a fresh swing high above 3165.

Nikkei (19919.09, +0.10%) is very quiet ahead of the BOJ meet coming on Friday 16th Jun, but as long as the support of 19825 and 19750 hold, it may bounce back to 20200 or even higher.

Nifty (9606.90, -0.10%) has been in a shallow corrective mode for the last 6 days but as long as it trades above the support of 9535-20, the chances of a fast upside reversal for 9700 and higher remain open.

COMMODITIES

Gold (1271) is hovering around its key resistance of 1272 and if the resistance breaks, a quick bounce towards 1310 can’t be ruled out. Otherwise it remains in a slow corrective move which may take it to the support of 1242. Silver (16.90) also moved lower in line with our expectation and trading within the range of 16.50-17.60 regions. We might see less volatility in the market ahead of today’s FOMC interest rate announcement at 11.30 p.m IST.

Copper (2.58) is trading within the narrow range of 2.56-2.67. Only above 2.67, higher resistances of 2.84 can come into consideration. We will remain bullish on copper while it is trading above 2.55 regions.

Brent (48.36) and WTI (46.02) had tested their respective supports of 47.40 and 44.20, and bounced a little, keeping the upside possibility of 50.22 (Brent) and 47.50 (WTI) open. If Brent and WTI manage to close above 50.30 and 47.50 in the next couple of sessions, another attempt for 52 and 49.55 can be seen. Market is waiting for today’s U.S Weekly crude oil inventory data. If the anticipation of -2.3 M Barrel of shortage could match the actual outcome then that would be beneficial for both Brent and WTI. Otherwise a surplus or a less than expected shortage could bring the bearish possibilities again into consideration.

FOREX

The Fed is expected to hike the rate today but the market is more curious about the future rate path or if the central bank will say anything about trimming the $4.5 trillion balance sheet.

Dollar Index (96.98) may have ended the 4-day correction from 97.31 at 96.90 today and may bounce back to 97.50 fast or even higher depending on the Fed statement. Weakness only below 96.85 but not preferred.

Euro (1.1215) has made a small triangle pattern in the last 4 days which may resolve to the downside very soon. A break below 1.1190 may trigger a fast decline towards 1.1140 and 1.1100.

Dollar-Yen (110.03) has been almost unchanged in the last couple of sessions but needs a break above 110.35 for an upside reversal. Immediate support comes at 109.80.

Pound (1.2747) has been finding support at 1.2630 levels for the last 3 sessions but a failure to recover above 1.2800 may push it down to 1.2600 once again. The larger trend still remains weak.

As discussed yesterday, Aussie (0.7536) has been stalling near the previous week’s high of 0.7567 and may rise to 0.7590-0.7610 yet but it may be the time for caution as a short term correction can be expected from anywhere in the area of 0.7570-0.7610.

Dollar-Rupee (64.34) ended the day lower after spending mostly near 64.45 levels. Despite the weak closing today, the support of 64.30-20 is expected to hold and push it back to 64.60-80.

INTEREST RATES

The US yields took a pause before FOMC outcome. The 10Yr (2.20%) could head towards 2.25% while the 30YR (2.86%) could move up to 2.90% if the FOMC outcome meet the expectation.

The Japan-US 10YR (2.15%) has bounced from immediate support and could test 2.2% regions. Overall the yield spread looks bullish for the near term.

Market Preps for FOMC

The USD picture remains one of enduring weakness as the markets squares towards tomorrow's FOMC meeting tonight where they are widely expected to deliver their second rate hike for the year. With the rate hike now 96% priced in focus will fall on the Fed's forward guidance and importantly their views surrounding low inflation and balance sheet reduction. So the statement and Yellen's comments will be fervently scrutinised with the risk shaded towards a hawkish delivery given just how low further rate hike expectation are priced in beyond the June hike. More specifically, if the Feds keep dot plots on track while offering any references to transitory inflation weakness, this will be viewed hawkish and should provide a boost to the USD

Overnight US PPI came out hotter at 2.4%YoY (vs. 2.3% exp), and Investors now turn focus to the key CPI report released before tonight's FOMC. Certainly, the market's tone leading up to the FOMC will be influenced by this data as an above consensus print will carry with it considerable weight leading up to the Fed comments and likely beyond. Keep in mind; it was two consecutive misses on the CPI, the Fed's preferred measure for gauging inflation, that chilled the market's expectations for more hikes beyond June. Make no mistake it is inflation uncertainty that remains front and foremost and tonight's CPI print will carry a lot of influence for the markets

US equities rebounded from a two-day slumber with the Dow ringing in another record high as investors are showing little concern about the impending US rate hike or a hawkish Fed lean for that matter.Onward and upwards, so it appears.

Currency markets were incredibly subdued overnight, not untypical of pre-FOMC trade but traders likely used the Attorney General Jeff Session's Senate testimony as an excuse to sit idle as headline after headline added up to much ado about nothing. But none the less there were some highlights of note in currency desks

Canadian Dollar

The Loonie remained front and centre after and rallied hard after BoC Governor Poloz confirmed the bank's hawkish lean. In fact, he came across brazenly hawkish sending money markets scrambling for yield with STIRT traders now pricing in over 20 basis points of hikes into year end. Considering the market was pricing in the little chance of a hike 2017, the Bank's policy pivot certainly caught more than a few dealers flat footed hence the breadth of the Canadian Dollar rally on the currency markets.

British Pound

Taking prudent measures, PM May has reshuffled her cabinet with the important movers and shakers along with some moderate backroom negotiators suggesting there is some hope for a not so nasty divorce.

Sterling gaped higher overnight as UK inflation came in hotter as the effects of a weaker Pound continues to work its way through the economy. Also, freshly minted shorts felt the squeeze when talks of a softer Brexit started to pick up steam as this outcome would be viewed much more market friendly.

But it's far too premature for markets to start pricing a soft Brexit storyline The UK political landscape is fraught with landmines just waiting for a leadership misstep. At best we could enter a period of political paralysis and at worst the UK could end with a horrible Brexit deal but no viable alternative.

Japanese Yen

USDJPY remains silent doing little more ebb and flowing on risk sentiment and ping-ponging US yields. However, expect dips will continue to supported into the FOMC despite the dollar demise risk from a dovish rate hike

I suspect dealers will look to play USDJPY aggressively on either side of the Fed coin, so I would expect some fireworks one way or the other as the Fed statement is digested.

Keep in mind the BoJ policy meeting is a lingering risk into weeks end. While they're widely expected to leave policy unchanged, the key will be the bank's forward guidance. Keep in mind the BOJ recent comments talking about Re-Calibrating Communications on Future Exit caused some bewilderment last week. But given that US 10 yields have been falling fairly dramatically it's more likely the BoJ has already been tapering, but we may still see some aggressive action if the bank does formally announce a reduction in JGB purchases from JPY80tn annually to JPY 60tn

Euro

The Euro has remained glued to the 1.1200 level, but the ECB did release a statement that it sold a small portion of its USD holdings to make in an investment worth EUR500mn in Renminbi. The central bank said the investment “reflects the importance of China as one of the euro area's largest trading partners” and completes a decision taken by the Governing Council on May 20.

Not many drivers to point out but of not is the resilience the EUR has shown in the face of a somewhat dovish ECB meeting last week which suggests there remain decent demand and a consensus that traders are looking through the ECB's short-term view.