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Sterling is steadily in range as the latest poll on the eve of today's election showed that the Conservative could get an increased majority. According to ICM, Conservatives got a 12 point lead over Labour, 46 to 34. ComRes suggested a 10 point lead with Conservatives at 44, Labour at 34. YouGov said Conservatives got 42 and Labour got 35, 7 point lead. Meanwhile, Survation results showed Conservative at 41.3, Labour at 40.4, a mere 0.9 point lead. YouGov Director Anthony Wells said that "the seven-point Conservative lead is the same as at the previous election, but we think it is likely they will nevertheless be returned with an increased majority." But there is one key factor that analysts pointed out. The turnout of young voters is uncertain and they typically support Labour.

* Poll released on June 7

Technically, EUR/GBP, currently at 0.8680, is close to top of medium term range of 0.8303/8851. 0.8654 is an important near term suppot for the cross and a firm break there will indicate near term reversal. GBP/JPY is close to a near term fibonacci level at 140.35. Break there would pave the way to test on 135.58 support. But a break of 143.93 resistance will indciate near term reversal and target 148.09. GBP/USD's recovery from 1.2768 is corrective looking so far and lacks decisive momentum. Key levels to watch are 1.3047 and 1.2768.

Euro holds breath ahead of ECB

Euro spiked lower overnight on talk that ECB would lower inflation forecasts in new staff economic projections to be released today. But the common currency quickly recovered. Bloomberg quoted unnamed source noting that ECB staff forecasts inflation to be at 1.5% in 2017, 2018 and 2019. That's quite notable downward revision from prior forecasts of 1.7%, 1.6% and 1.7% respectively. Weakness in energy price is seen as a major factor for the change. This will add to the case for policymakers to be have more patience regarding any stimulus exit.

ECB is widely expected to keep key interest rate at 0% and deposit rate at -0.4% today. The asset purchase program will be left unchanged, at EUR 60b per month. ECB officials have generally expressed the view that it won't raise interest rate before ending the asset purchase in December. It's still generally expected that, due to receding political risks, the central bank will end the asset purchase after that, and there could be an announcement of some sort in September. The main focus is indeed on whether ECB would close the door for further stimulus by changing the language.

Markets shrugs Comey's statement

US equities and treasury yields closed mildly higher yesterday, as markets seem to have taken ex-FBI Director James Comey's written testimony well. Comey will appear in a hearing before Senate Intelligence Committee regarding US President Donald Trump's intervention in FBI investigation. In Comey's statement, he noted that Trump asked him to back off from a probe into former national secrutiy advisor Michael Flynn. And Trump told Comey, "I need loyalty. I expect loyalty". But it seems that the markets were expecting much worse from Comey and some noted that it's not that "smoking gun" that some predicted.

10 year yield is trying to get support from 38.2% retracement of 1.336 to 2.621 at 2.130 for the moment. It remains to be seen if TNX will rebound from here and the key structure resistance is at 2.297. But a rebound from 2.130 would likely help lift up the greenback. And given then EUR/USD is close to 1.1298, a rebound in Dollar that sends EUR/USD through 1.1109 would trigger position squaring and accelerate the move.

Loonie lower as oil plunges

Canadian Dollar weakened following another sharp decline in oil price. WTI dived to as low as 45.65 after data showed unexpected surge in US stockpiles by 3.3m barrels in the week ended June 2. WTI is now set to have a test on 38.2% retracement of 26.05 to 55.24 at 44.09. Meawnwhile, near term outlook in USD/CAD will stay bearish as long as 1.3570 minor resitsance holds.

On the data front

Japan Q1 GDP growth was finalized at 0.3% qoq, below expectation of 0.6% qoq. GDP deflator dropped -0.8% yoy. Japan current account surplus widened to JPY 1.81T in April. China trade surplus widened to USD 40.8b, CNY 282b in May. AUstralia trade surplus narrowed sharply to AUD 0.56b in April. UK RICS house price balance dropped to 17 in May.

Looking ahead, Swiss will release unemployment rate and CPI in Europea session. Germany will release industrial production while Eurozone will release Q1 GDP final. Canada will release housing starts and new housing price index. US will releas initial jobless claims as usual on Thursdays.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9615; (P) 0.9646; (R1) 0.9676; More.....

USD/CHF is staying in tight range above 0.9613 temporary low for the moment and intraday bias stays neutral first. Deeper decline is still expected as long as 0.9807 resistance holds. But in case of deeper fall, we'd start to look for bottoming signal again as it approaches 0.9443 key support level. However, considering bullish convergence condition in 4 hour MACD, break of 0.9807 will indicate near term reversal and turn outlook bullish for 1.0099 resistance next.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.

Economic Indicators Update

Global Markets:

• Asian stock markets: Nikkei and ASX 200 both up 0.05 %, Shanghai Composite gained 0.15 %, Hang Seng rose 0.25 %
• Commodities: Gold at $1287 (-0.50 %), Silver at $17.54 (-0.45 %), WTI Oil at $45.97 (+0.55 %), Brent Oil at $48.38 (+0.67 %)
• Rates: US 10-year yield at 2.18, UK 10-year yield at 1.00, German 10-year yield at 0.26

News & Data

• China Trade Balance $40.81bln vs $46.32bln expected
• China Imports 14.8 % vs 8.5 % expected
• China Exports 8.7 % vs 7.0 % expected
• Japan GDP q/q 0.3 % vs 0.6 % expected
• Japan GDP y/y 1.0 % vs 2.4 % expected
• Japan Current Account JPY1.95trln vs JPY1.70trln expected
• Australia Trade Balance A$0.55bln vs $1.95bln expected
• Australia Exports -8.0 % vs 2.0 % previous
• Australia Imports -1.0 % vs 5.0 % previous

Markets Update:

Markets remained quiet in Asia, ahead of three major risk events – the ECB meeting, the Comey testimony and the UK elections.

Comey already released his written testimony yesterday, and the reaction in the market was neutral. Traders did not identify anything that could really hurt US President Trump. Nevertheless, his testimony in front of the committee this afternoon will be closely watched.

The Euro did not move much since yesterday. Traders are waiting for the ECB rate decision. While no changes in rates or QE are expected, the central bank is likely to change their economic outlook. However, low inflation will prevent the ECB from abandoning their loose monetary policy soon. The key levels in EUR/USD are 1.12, 1.1108, 1.1070 and to the topside 1.13 & 1.1420.

Volatility will be high today in the GBP pairs. The market is expecting that Theresa May’s party will win the election, which is why GBP/USD is approaching 1.30. However, if it will be a tight race as the polls suggest, there could be volatile moves prior to the official results. Should May win, GBP is likely to appreciate a bit further. The worst scenario would be a “hung parliament”. The uncertainty would likely bring both the Pound and UK stock markets under pressure.

Upcoming Events:

• 06:45 BST – Swiss Unemployment Rate
• 07:00 BST – German Industrial Production
• 07:15 BST – Swiss CPI
• 12:45 BST – ECB Rate Decision
• 13:30 BST – US Initial Jobless Claims

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

For those who read Wednesday's report you may remember us mentioning that we had taken a short position from 1.1282, and were looking to target the H4 mid-level support at 1.1250 as the initial take-profit zone. As you can see, the trade worked out nicely and hit 1.1250. Unfortunately, we moved our stop to breakeven following this and were taken out shortly after.

Despite H4 price trading back above 1.1250, we still feel the bears have general control of this market, at least from a technical standpoint. This is due to seeing the single currency not only trading around the underside of a weekly supply at 1.1533-1.1278, but also a daily supply, which is glued to the underside of the weekly zone at 1.1327-1.1253.

Our suggestions: To prove seller interest remains, we'd like to see a decisive H4 close form below 1.1250. This – coupled with a retest of 1.1250 and a reasonably sized H4 bear candle (preferably a full-bodied candle) would, in our humble opinion, be enough to begin considering shorts down to 1.1200, and possibly the daily support at 1.1142.

Data points to consider: EUR Minimum bid rate at 12.45pm, ECB Press conference at 1.30pm. US Unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for H4 price to engulf 1.1250 and then look to trade any retest seen thereafter ([waiting for a reasonably sized H4 bear candle to form following the retest is advised] stop loss: ideally beyond the candle's wick).

GBP/USD:  

In yesterday's report we noted the 1.2957/1.2979 area (marked in green on the H4 chart) was of interest. This is due to this zone being formed by the underside of both weekly and daily supplies. In addition to this, there's also a nearby H4 AB=CD bearish completion point seen within the green zone taken from the low 1.2845.

As you can see, H4 price is currently trading inside the said green zone and the bears are beginning to make an appearance. Be that as it may, the UK electorate goes to the polls today and this will likely have a marked effect on this pair and could potentially destabilize this technical setup.

Our suggestions: Given the UK elections today, we will not be taking any setups, be it long or short, on GBP-related pairs today, and probably even tomorrow. ‘Acting in your own best interest' is key to success in this business and sometimes the best position is NO position.

Data points to consider: UK elections (all day). US Unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

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

AUD/USD

Looking at this market from the top this morning, we can see that weekly price is currently teasing the underside of supply penciled in at 0.7610-0.7543. In conjunction with weekly flow, daily action recently whipsawed above supply formed at 0.7556-0.7523 and touched base with an AB=CD bearish completion point (see black arrows) at 0.7563 taken from the low 0.7328.

In view of the higher-timeframe picture, we believe the H4 candles will continue to push lower today and possibly connect with the 0.75/0.7512 zone seen marked in green. If you look on the M15 timeframe, there was an absolutely beautiful shorting opportunity on the break/retest of a trendline support taken from the low 0.7545. We unfortunately missed this setup, but well done to any of our readers who managed to catch it!

Our suggestions: With the bigger picture indicating that shorts may take control, we will continue to watch the lower timeframes for possible shorting opportunities today, with an initial target zone set at 0.75/0.7512.

Data points to consider: Aussie Trade balance figures at 2.30am, Chinese Trade balance data (tentative). US Unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Currently watching for lower-timeframe shorting opportunities.

USD/JPY

In recent sessions, the USD/JPY recovered from just ahead of the 109 handle and ran through offers at the H4 mid-level resistance drawn from 109.50. Right now, the pair looks poised to attack the 110 handle which could very well hold as resistance today. Be that as it may, the H4 mid-level resistance seen above at 110.50 is, in our opinion, a far more attractive line given how well it held as support throughout May (see green arrows).

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 lot 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: With the above notes in mind, our desk remains biased to the downside. With that, both 110 and 110.50 are possible levels to sell from. To prove seller interest, however, we would advise waiting for a reasonably sized H4 bearish candle to take shape, preferably a full-bodied candle.

Data points to consider: US Unemployment claims at 1.30pm GMT+1

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 110 region ([waiting for a reasonably sized H4 bear candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle's wick). 110.50 ([waiting for a reasonably sized H4 bear candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle's wick).

USD/CAD

As can be seen from the H4 chart this morning, the market bounced beautifully from the 1.3434-1.3450 green area during yesterday's trading. The zone is comprised of a 2017 yearly opening level at 1.3434 seen on the weekly chart and the H4 mid-level support pegged at 1.3450 which also represents a support level seen on the daily chart.

The advance seen from the said (green) zone has lifted the currency above the 1.35 handle, with H4 price now seen trading within striking distance of a broken Quasimodo line at 1.3542, followed closely by a mid-level resistance penciled in at 1.3550. These two levels, coupled with the underside of a daily resistance area at 1.3559 forms a potential zone for a bounce (lower red zone). However, it might be worth noting that the H4 resistance seen above this area at 1.3582 could also be targeted given that it's positioned so closely to weekly resistance visible at 1.3588.

Our suggestions: Watch for lower-timeframe confirmed (see the top of this report) shorting opportunities around 1.3559-1.3542. Should this area be engulfed, however, we'll then shift our focus up to 1.36/1.3582 (the upper red zone on the H4 chart).

Data points to consider: US Unemployment claims at 1.30pm. BoC Gov. Poloz speaks at 4.15pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (Stop loss: N/A).
• Sells: 1.3559-1.3542 ([waiting for a lower-timeframe sell signal to form before pulling the trigger is advised] stop loss: dependent on where one confirms this area). 1.36-1.3582 ([waiting for a lower-timeframe sell signal to form before pulling the trigger is advised] stop loss: dependent on where one confirms this area).

USD/CHF

As you can see on the weekly timeframe, the buyers and sellers are behaving somewhat indecisively around the weekly Quasimodo point at 0.9639.The next downside target beyond this hurdle is seen around a support level drawn from 0.9581. Looking down to the daily chart, price recently attacked the underside of a broken Quasimodo line pegged at 0.9678, which we feel could be enough to push H4 price lower into the 0.9572/0.96 region.

This green area marked on the H4 chart is formed by a psychological support handle at 0.96 and a H4 AB=CD (see black arrows) 161.8% bullish completion point at 0.9572. In addition to this, we can also see another H4 AB=CD move possibly in play that terminates around the lower edge of the said green zone (taken from the high 0.9719 – see pink arrows).

Our suggestions: Wait for H4 price to attack 0.9572/0.96 and watch to see if the H4 candles can print a reasonably sized bull candle, preferably a full-bodied candle, before pushing the buy button. This, of course, will by no means guarantee a winning trade, but it will help determine buyer interest and help avoid an unnecessary loss! The first take-profit target from this base will be set around the 0.9650 area.

Data points to consider: US Unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: 0.9572/0.96 ([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).

DOW 30

On Wednesday, we mentioned that our desk had taken a small long position at 21164 and placed stops below the H4 support area (21139-21101) at 21097. The position is still active since yesterday's action spent the majority of the day clinging to the top edge of the said H4 support zone, which , as you can probably see, converges with a H4 trendline support etched from the high 21072.

We see absolutely no higher-timeframe resistance ahead, so fresh record highs are what we expect to be seen before the week's end.

Our suggestions: Essentially, what we're looking for here is trend continuation.

Data points to consider: US Unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: 21164 ([live] stop loss: 21097).
• Sells: Flat (stop loss: N/A).

GOLD:  

The yellow metal, as expected, has begun turning lower from within 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). Similar to when price struck this zone back in mid-April, we expect the bears to drag price action lower from here in the weeks to come.

The story on the daily chart, nevertheless, shows that price is currently retesting a support area formed at 1288.1-1278.3. Provided that this area remains stable, the unit could approach the Quasimodo resistance at 1307.8. Also noteworthy is the possible AB=CD daily bearish pattern (see black arrows) that terminates a tad beyond the said Quasimodo resistance (positioned within the upper limits of the weekly green zone) at 1318.6 (127.2% ext.).

Looking over to the H4 chart, the support area at 1288.1-1284.2 was, in recent hours, breached, but is still managing to hold ground for the time being. It also might be worth acknowledging that this H4 zone is housed within the walls of the daily support area mentioned above at 1288.1-1278.3.

Our suggestions: Unfortunately, we feel this is a risky market to participate in at the moment. A long from the current H4 support area, even though it's bolstered by a daily zone, is chancy knowing where price is positioned on the weekly timeframe. The same, of course, goes for shorts. Selling into the above noted support areas, even with knowing that weekly price is trading within a sell zone would, in our opinion, is still considered too risky.

However, we're still watching for the daily candles to test the aforementioned Quasimodo resistance/127.2% AB=CD completion area (red zone) as it is (given its location on the weekly chart) an ideal sell zone, in our opinion.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1318.6/1307.8 is a potential sell zone to keep an eye on.

Key Points:

• Despite recent losses, the pair may not have shaken its long-term bias.
• Numerous technical readings are now bullish.
• If we don’t see a reversal, losses could extend to the 0.95 handle.

The Swissy has been routing for a number of weeks now and, understandably, this has raised questions over whether or not the long-term technical bias is now shifting to bearish. However, we still have one vital support level left before we break what has been an uptrend lasting more than a year. As a result, it’s now make or break time for the bulls as, if they don’t fight back soon, losses may extend to the 0.95 level and beyond.

As shown below, even though the pair has been in decline since December last year, it has remained broadly bullish over the past 12 months. Additionally, without the unexpected effect of the ‘Trump bump,’ gains might have continued to follow the gentle uptrend that began back in April of 2016. This would have prevented the panicked sell-off that now has so many worried that the pair is destined to move to the downside in the long-term

As a result of this, the suggestion that the bulls have entirely given up is rather unfair as they seem to have simply retreated to a robust zone of support, from which, they can stage a comeback. In fact, a number of technical indicators are now shifting to signal that a reversal is on the cards. In particular, the highly oversold stochastics will be giving the bears pause for thought – especially given that the RSI readings are on the verge of reaching a similar conclusion.

What’s more, whilst it is currently bearish, the Parabolic SAR will invert if we see even a mild upswing which will go a long way in rallying the bulls. Furthermore, when combined with the presence of the trend line and the oversold readings, this reading would certainly suggest that a sizable correction to the upside is now warranted. However, the question remains, how far can we expect to see the pair recover in the medium-term?

Using Fibonacci retracement, we can forecast that the rally is likely to run short of steam at around the 0.9818 mark. This coincides with the 38.2% retracement (typically one of the more robust levels) and also a historical reversal point. Moreover, the 100 day moving average should be generating some dynamic resistance at this price which will mean the pair is facing some fairly strong headwinds as it extends.

Ultimately, don’t rule out the chances of the Swissy remaining bullish in the long-term – as tempting as it might be in the wake of the nearly 500 pip rout seen over the past few weeks. As mentioned, the presence of that trend line and the handful of bullish technical readings should be more than enough to encourage the pair to turn around in the absence of a major fundamental upset. Nevertheless, if the USDCHF does slide below the trend line, be prepared to see it test support as low as the 0.95 handle.

Key Points:

• Price action reaches a key supply zone.
• Watch for momentum to stall and price to decline in the days ahead.
• Downside move back towards 0.7055 likely in the coming week.

The past month has been almost meteoric for the venerable Kiwi Dollar as the currency has continued to rally to its current position at 0.7190. However, despite the strong bullishness, the various technical indicators are signalling that a change could be in the wind for the pair. In particular, price action is nearing a key reversal/supply zone which could be suggesting that a decline is likely in the coming days.

The most concerning factor is the looming supply zone and its relative historical validity in signalling potential reversals. Subsequently, the looming supply zone (0.7214-0.7245) is likely to result in price action's rise stalling and a rapid depreciation occurring once the bulls exit the market. Lending additional weight to the bearish contention is the fact that the RSI Oscillator is also within overbought territory which suggests that the price action will need to decline, or at a minimum moderate, to relieve the pressure on the oscillator.

Fundamentally, the New Zealand Dollar has benefitted from the ongoing strength in the global dairy markets as well as the recent 3.2% gain in the ANZ Commodity price indicator. However, the Kiwi Dollar is still relatively at the behest of the U.S. Federal Reserve's looming rate hike decision. At this stage, it remains unclear whether the central bank will hike rates at its coming FOMC meeting but the reality is that the NZDUSD is likely to be struck with a range of volatility regardless of the outcome. Subsequently, this is likely to result in a change in tack for the pair and, if the central bank hikes rates, will lead to a significant depreciatory period.

Ultimately, the most likely scenario for the pair revolves around a failure to penetrate through the current supply zone starting at 0.7214. This would potentially lead to a sharp decline as the upside momentum falls away and price action starts to move back towards the initial downside target at 0.7055. In addition, any move by the U.S. Federal Reserve to raise rates, or take a hawkish tone in the looming meeting could also cause depreciation for the Kiwi Dollar. Subsequently, there are plenty of factors to suggest that the pair could be in for a rough week ahead given both the technical and fundamental aspects.

Short Term AUDUSD Elliott Wave view suggests the rally from 5/9 low is unfolding as a double three Elliott Wave structure. Up from 5/9 (0.7325) low, Minute wave ((w)) ended at 0.7517 and Minute wave ((x)) ended at 0.7368. Pair has since broken above 0.7517, adding validity that the next leg higher has started. From 0.7368 low, the rally is also unfolding as a double three Elliott Wave structure. Minutte wave (w) ended at 0.7498 and Minutte wave (x) ended at 0.7453. Near term, pair has reached 100% from 5/9 low therefore cycle from 5/9 low is mature and could end any moment. However, short term extension higher to 0.76 area is still possible before pair ends cycle from 0.7368 low while pullbacks stay above 0.7452. As cycle from 5/9 low has reached the minimum target, it’s not a good idea to chase strength at this stage. We don’t like selling the pair either as higher degree trend is bullish and expect profit taking to take place soon in 3, 7, or 11 swing to correct cycle from 5/9 low.

AUDUSD Elliott Wave 1 Hour Chart

STOCKS

Stocks are almost stable. We could expect some ranged movement in the near term before they resume their up-trend.

Dow (21173.69,+0.18%) has been almost stable. Some movement is expected within 21000-22000 but while resistance near 21200 holds, there is some scope of coming off towards 21000.

Dax (12672.49, -0.14%) could get some support from 12600 and if that holds, could move up towards 13000 in the medium term. A break below 12600 if seen, could take it lower towards 12500 before resuming the uptrend.

Shanghai (3134.32, -0.19%) looks bullish and could be headed towards 3150-3170 in the coming sessions.

Nikkei (19990.55, +0.03%) could be headed towards 20500 in the next few sessions while above 19700. If not an immediate rise, some sideways movement is possible in the coming sessions.

Nifty (9663.90, +0.28%) tested 9630 on the downside yesterday and could remain stable just now. Some consolidation in the 9600-9700 region is possible before it resumes its rally towards 9800. Overall near to medium term looks bullish.

COMMODITIES

Gold (1284) is trading at lower levels and may test the support zone of 1275. The bullish momentum is still intact, though the chances of downside can't be fully negated. In case a break below 1275 takes place in the coming sessions, we may have to consider lower levels of 1247 . But till the sub 1270-75 fall really materializes, we prefer to stay as buyer.

On the other hand, Silver (17.59) is sustaining the higher levels comfortably irrespective of the overbought condition. Thus we recommend caution at the higher levels for Silver longs. A failure to sustain above 17.50-60 levels may trigger a sharp fall towards 16.91 regions.

Copper (2.54) is hovering around its pivot at 2.55 of the trading range of 2.44-2.66. Only above 2.66, higher resistances of 2.72-80 can come into consideration. In the medium term 2.44 are going to be a strong support now but a close below that could open up 2.40-35 levels.

We had clearly mentioned in our yesterday's morning briefing that “The short term oversold condition has been rectified with this upward movement” and “ At the same time it could be prudent to be prepared for a sudden turnaround to the downside if there is a mismatch between forecast figure and the actual outcome”.

Yesterday Brent (48.18) and WTI (45.83) fell almost 4.8% as U.S weekly crude oil inventory rose by +3.3M barrels against the expectation of -3.1M Barrels. At present Brent and WTI are trading within the range of 47.40-50.20 and 44.20-47.50 respectively. We think 47.40 (Brent) and 44.20 (WTI) are going to be a strong support as both Brent and WTI are within short term oversold zone.

FOREX

All three of UK election, ECB policy decision and ex-FBI chief Comey's testimony will take place today and can be a short term decider for the markets.

Dollar Index (96.72) bounced back to 97.00 from our support of 96.50-25 but an upside reversal would be confirmed only a break above 97.10. So at this point, Dollar stands in the middle of the bullish breakout levels of 97.10 and bearish breakdown level of 96.25. The near term direction may be clear by tomorrow.

Euro (1.1260) saw some volatility yesterday as it tested 1.1200 before recovering most of the intraday loss. Both the ECB statement and Comey testimony may affect it today and make it clear how far it can rise inside the resistance cluster of 1.1300-1.1450. Repeat, if Euro really weakens from the higher levels, Dollar may bounce back from its support of 96.50-25. Please note, the Euro trend remains up and Dollar trend remains down till now but we stay prepared for the possibility of a sudden trend reversal, which at the moment has 45-50% probability.

Dollar Yen (109.85) has been supported by the Dollar Index resilience and any further global Dollar strength may push it up to 111.20 but to negate the downside risk, it requires a break above 111.70. Till then, the trend remains down.

Pound (1.2956) has risen a bit towards the upper end of the range of 1.2750-1.3050 but till the election result comes, no moves can be trusted. We prefer to wait and watch in which direction the range breaks post result. An upside break may push it to 1.3300 and a downside break may drag it down towards 1.2600.

Aussie (0.7543) is sustaining the higher levels but the advance may be limited to 0.7600-10 this week as Crude and Iron Ore weakened considerably (Check Commodities section).

Dollar Rupee (64.33) remained almost indifferent to the RBI policy announcement as it didn't register any fresh high or low for the week and closed above the support of 64.30, just like the earlier sessions of the week. It remains to be seen if the multiple global events today can bring it out of the range of 64.30-70.

INTEREST RATES

The US yields are rising again and may move up a little more in the next few sessions. The 10Yr (2.18%) could move towards 2.25% while the 30Yr (2.84%) could try to test 2.92% in the near term. The 10-5 Yr (0.44%) may bounce from support at current levels and move back to 0.45%.

The UK yields have started to move down and could re-test supports below current levels. The 20Yr (1.56%) could bounce back from 1.50% while the 5Yr (0.45%) has some more room on the downside towards 0.35%.

The Japan yields have risen sharply and suddenly. The 5Yr, 10Yr and 30Yr are trading at -0.07%, 0.06% and 0.82% from previous levels of -0.09%, 0.046% and 0.80% respectively. There could be some more rise over today and tomorrow followed by some corrective dip in the near term.

The German yields are trading low and looks bearish for the medium term. the 5YR , 10Yr and 30YR are trading at -0.45%, 0.26% and 1.12% respectively.

Crude Inventories crush oil whilst silver may provide an early indicator of a deeper gold correction.

Oil

There is missing on forecasts, and there is coming in at too shallow an angle, bouncing off the atmosphere and spinning into outer space. Such was the U.S. DOE Crude Inventories overnight, coming in at a 3.3 million barrel surplus against and expected 3.5 million barrel draw down. With such a huge miss the effect was predictable with Brent plunging -3.60% and WTI collapsing by -4.30% to end the New York session.

OPEC and Non-OPEC may well have to face some stark choices at their review in July now, as, despite intra-day volatility since rolling over their production cut, oil has now fallen nearly 12%. An unpalatable option of increasing the daily production cut target may have to be seriously put onto the table instead of being talked about in sound bites.

Brent spot trades slightly higher at 48.25 in early Asia on short-term profit taking. It has resistance at 48.75 and then 50.00. It has support initially at 47.75 with a break of this level opening up the May lows of 46.30.

WTI spot is trading at 45.90 in early Asia. Resistance is at 46.50 initially and then 48.00. Support appears just below current levels at 45.50 with a break of this level opening a retest of the May panic liquidation lows at 43.50.

Precious Metals

Gold gave back some of its previous day';s gains overnight, falling -0.50% to close around 1286.75 in New York. An easing of political tensions with Comey';s first testimony published ahead of the first hearing, and the Saudi';s allowing food and medicine shipments to Qatar across their land border may have played a part. The double top at 1296 could have initiated technical based traders to engage in some profit taking as well.

At these levels, gold may already have a lot of today';s event risk built into its price. Especially as the last poll ahead of the U.K Election from YOUGOV suggests, the Conservative';s lead has widened just ahead of the polls themselves. That said, with the results coming out during the Asian session tomorrow morning, the downside for gold is likely to be limited as we run into the weekend even if the 1296/1300 region appears to be quite formidable resistance for now.

Gold has support around 1282 and then 1279 with a break of the latter implying a potential technical move to the 1260 region, especially if the election passes without drama.

Traders may well want to take their cue from Silver in fact, which is hovering at 17.6000 this morning, just above it';s 100 and 200-day moving averages at 17.5550 and 17.5200. A break of 17.5000 implies a much deeper correction for silver and may signal a correction lower in gold as well.

AUDUSD - The pair continues to retain its upside pressure rallying further on Wednesday. On the downside, support resides at the 0.7500 level where a breach will aim at the 0.7450 level. Below that level will set the stage for a run at the 0.7400 level with a cut through here targeting further downside pressure towards the 0.7350 level. On the upside, resistance lies at the 0.7600 level. A cut through here will turn attention to the 0.7650 level and then the 0.7700 level where a violation will set the stage for a retarget of the 0.7750 level. On the whole, AUDUSD remains biased to the upside on further bullishness.

What was expected to be a lull before the storm turned anything but as Forex markets went into a tizzy on some unexpected headlines. All the while risk sensitivity remained fair-minded and stable ahead of the major events., ECB, UK election, and Comey testimony.

Oil prices are back on the slippery slope down with WTI crude slumping 5% to just under USD46/bbl after greased by the EIA s Crude Stocks Change which rose last week, breaking a run of eight consecutive weeks of decline, and predictably oil linked currencies continue to underperform.However, prices have based in early APAC futures trade as level heads start to consider this build will likely reverse next week significantly influenced by the holiday weekend surge in demand.

However, it was the early release of ex-FBI Director James Comey's testimony that has calmed investor's nerves and returned a bid to risk sensitive USDJPY.The long and short of ti was the letter offered no smoking gun or impeachment worthy bombshells and only repeated what the market had already known.

Euro

Euro bulls were sent into a panic when reports emerged citing unnamed “officials” suggesting that the European Central Bank would lower the Eurozone inflation forecast to 1.5% from 1.7% for 2017, 2018, and 2019. EURUSD dropped like a stone from 1.1275 to 1.1205. The overreaction was more due to new weaker Long EUR positioning as short-term traders have been building and Euro ahead of the ECB, as the opportunity to catch an ECB turn in policy is just too enticing. The move was short-lived as the market remains in full buy the EURUSD dip and the single currency finished the day where it started

Japanese Yen

USDJPY price action was just a lively a the dealers boarded the Yen roller coaster amidst risk aversion trades and headlines which suggested the BOJ could upgrade its economic assessment by month end.It certainly appeared a test of 109 level was on the card, but the release of ex-FBI director Comey letter to the Senate Select that had investors smiling and a strong bid returned to USDJPY. But we are not out of the weeds just yet as risk sentiment remains fragile

British Pound

Sterling continues to perform well with final opinion polls pointing to a comfortable Conservative win. Price action this week has reflected this consensus as long Sterling continues to be favoured in the election. I suspect it now turns to what size of the majority will the Tories have with anything about 50 seats likely to see GBPUSD test the 1.3200 level.

Australian Dollar

Price action post a surprisingly robust domestic GDP suggests the market was positioning for the miss in GDP after contributing inputs released earlier this week hinted the data might come in on the weaker side. However, volumes have been rather tepid as G10 focuses on EUR and GBP as we head into event risk with the ECB and UK elections tomorrow.

The market was getting comfortable with a bearish Aussie bias, and we're likely witnessing little more than a clear out of newly minted weaker shorts given the improving domestic data and the fact the RBA statement provided little ammunition to sell the Aussie