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For the 24 hours to 23:00 GMT, the USD declined 0.43% against the CHF and closed at 0.9555.

In the Asian session, at GMT0300, the pair is trading at 0.9565, with the USD trading 0.1% higher against the CHF from yesterday's close.

The pair is expected to find support at 0.9546, and a fall through could take it to the next support level of 0.9527. The pair is expected to find its first resistance at 0.9591, and a rise through could take it to the next resistance level of 0.9617.

Ahead in the day, Switzerland's KOF leading indicator data for June, slated to release in a few hours, will pique investor attention.

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

For the 24 hours to 23:00 GMT, the USD declined 0.35% against the CAD and closed at 1.2993.

In the Asian session, at GMT0300, the pair is trading at 1.2978, with the USD trading 0.12% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.2952, and a fall through could take it to the next support level of 1.2926. The pair is expected to find its first resistance at 1.3024, and a rise through could take it to the next resistance level of 1.3070.

This afternoon, investors will eye Canada's crucial GDP data for April, to gauge strength in the nation's economy.

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

Market movers today

Several interesting inflation figures due out today. First , the euro area will release preliminary inflation for June. Given the German, Italian and Spanish figures (and our estimate that French HICP inflation will have declined by 0.1pp) euro area inflation should be down by 0.14pp from 1.40% y/y in May. Hence, we estimate it will round up to 1.3%. Note that package tours have a very low weight in French HICP, so the upside risk is limited.

Another interesting inflation print today will be the core PCE from the US. Core inflation has surprised on the downside recently and moved lower since February, reversing the upward trend seen in 2016. The print today will give more info on how much of this is driven by transitory factors and what is due to softer underlying price pressure.

Also in the US, the Chicago PMI has been very strong recently and not shown the same decline as in the ISM and some regional surveys. We doubt that Chicago PMI can continue to buck the trend of softer data and look for a decline today.

In the Scandi sphere, focus turns to Norwegian data for retail sales, unemployment and credit growth.

Selected market news

The fear that recent hawkish talk from the Fed, ECB, Bank of Canada (BoC) and the Bank of England (BoE) means that monetaryicy stimulus will be taken away faster than expected has sent bond yields higher and notably EUR and GBP higher in recent days, but overnight the ‘normalisation' fears finally grabbed equity markets too. Equities have for a while priced in a somewhat more upbeat out look for the global economy than other asset classes, but look a bit fragile in the current environment given recent price momentum. Losses in the European session yesterday have been echoed in the US and Asia; notably, the S&P500 saw the largest fall in more than a month, whereas it was the largest drop in European equities since September last year.

Albeit mainly talk and little action from central banks so far, we are looking at what looks increasingly like markets flying into a new taper tantrum, but one which could be more broad-based than in 2013 when it was mainly fears of Fed tightening. This time round, a series of central banks have joined the call for ‘normalisation' . While the Sintra policy conference was used by policy makers to deliver hawkish talking, we note that this comes readily after the BIS sent out its annual report discussing, among other things, how the world is ‘inching towards norm alisation'. Notably, Norges Bank has already moved somewhat in this direction and there is a possibility the Riksbank could go in the same direction next week.

On a separate note, the South Korean president is in Washington for a two-day summit with President Trump, which started yesterday. With little material news from the talks so far, this comes at a time when North Korea continues to flex its military muscles and as the US administration is accusing another neighbour of North Korea's, China, of not backing Trump's hard stance against the regime.

Asia Mid-Session Market Update: China official PMIs hit 3-month high; Japan core CPI reaches 2-year high

US Session Highlights

(US) Q1 FINAL GDP ANNUALIZED (3RD READING) Q/Q: 1.4% V 1.2%E; PERSONAL CONSUMPTION: 1.1% V 0.6%E

(US) Q1 FINAL GDP PRICE INDEX: 1.9% V 2.2%E; CORE PCE Q/Q: 2.0% V 2.1%E

(US) INITIAL JOBLESS CLAIMS: 244K V 240KE; CONTINUING CLAIMS: 1.95M V 1.94ME

(US) Nevada reports May casino gaming Rev $991.6M, +3.5% y/y; Las Vegas strip rev $546.8M, +3.0% y/y

Stocks turned yesterday's rally around on its heels, sending prices south on strong volumes. Nasdaq was the worst hit, down -1.4%, with volumes about 36% above its 3-month average. The VIX index jumped 18%, reaching 11.9, but off its session high. Financials managed to buck the downtrend, with the S&P sector posting a 0.7% rise. Concern over Fed tapering of the balance sheet continued to play on investors, as bond prices fell further today. 10-year Note yield went as high as 2.29% before closing lower at 2.27% for a 4bps increase on the day.

US markets on close: Dow -0.8%, S&P500 -0.9%, Nasdaq -1.4%

Best Sector in S&P500: Financials

Worst Sector in S&P500: Technology

Biggest gainers: AYI +10.5%; SWN +6.0%; STZ +5.0%

Biggest losers: INCY -4.1%; LRCX -3.7%; MKC -3.6%

At the close: VIX 11.4 (+1.4pts); Treasuries: 2-yr 1.37% (+2bps), 10-yr 2.27% (+5bps), 30-yr 2.81% (+4bps)

US movers afterhours

NKE Reports Q4 $0.60 v $0.49e, Rev $8.7B v $8.61Be; Guides FY18 (FX neutral): Rev mid to high single digit range; gross margin to expand beyond high end of long term goal; double digit EBITDA expansion - earnings call; +7.8% afterhours

HAIN Engaged Capital discloses 9.9% stake; have had talks with management and will engage in further discussions; +5.7% afterhours

AOBC Reports Q4 $0.57 v $0.38e, Rev $229.2M v $210Me; Guides Q1 adj EPS $0.07-0.12 v $0.32e, R$140-150M v $178Me ; -9.4% afterhours

CARA Announces top-line results from phase 2b trial of Oral CR845 in Chronic Pain Patients with Osteoarthritis of the Hip or Knee; -28.1% afterhours

Politics

(US) GOP operative reportedly tried to obtain stolen Clinton emails during 2016 campaign; said to have implied he was working with former Nat Security Advisor Mike Flynn - WSJ

Key economic data

(CN) CHINA JUNE MANUFACTURING PMI (GOVT OFFICIAL): 51.7 (3-month high) V 51.0E; NON-MANUFACTURING PMI: 54.9 (3-month high) V 54.5 PRIOR

(JP) JAPAN MAY NATIONAL CPI Y/Y: 0.4% V 0.5%E ; CPI EX FRESH FOOD (CORE) Y/Y: 0.4% (2-year high, 5th straight month of increase) V 0.4%E

(JP) JAPAN JUNE TOKYO CPI Y/Y: 0.0% V 0.3%E; CPI EX-FRESH FOOD Y/Y: 0.0% V 0.2%E

(JP) JAPAN MAY JOBLESS RATE: 3.1% V 2.8%E (5-month high); Job to applicant: 1.49 v 1.48e (43-year high)

(JP) JAPAN MAY PRELIMINARY INDUSTRIAL PRODUCTION M/M: -3.3% V -3.0%E (biggest decline in years); Y/Y: 6.8% (3-year high) v 6.9%E

(JP) JAPAN MAY OVERALL HOUSEHOLD SPENDING Y/Y: -0.1% V -0.7%E (15th consecutive month of decline)

(NZ) NEW ZEALAND MAY BUILDING PERMITS M/M: +7.0% V -7.4% PRIOR; first increase in 3 months

Speakers and Press

China

(CN) China Premier Li: Should attach importance to decline in foreign direct investment (FDI) this year - press

(CN) China State Planner (NDRC): Energy supply is still under pressure in some areas amid peak demand summer period - press

(CN) BoA/ML cuts China 2018 GDP target to 6.4% from 6.6% - press

Japan

(JP) Japan cabinet: Increase in jobless rate due to rise in people quitting to seek better jobs and expansion of participation - press

(JP) Japan Finance Min Aso: Reiterates economy recovering from deflation; No changes to monetary or fiscal policy

Australia/New Zealand

(AU) UBS: RBA will not "join hawkish central bank club"; Wants to see Q2 CPI data before deciding on economic conditions

(AU) Mark Barnaba named to RBA Board for a 5-year term from Aug 31st

(NZ) BNZ no longer expects RBNZ to raise rates in Feb 2018 and instead sees mid-2018 for a rate hike

Korea

(KR) South Korea, Japan, and US will hold trilateral talks on trade at next week's G20 - Korean press

(KR) South Korea President Moon and US President Trump promise to make joint efforts to denuclearize North Korea - Korean press

Asian Equity Indices/Futures (00:00ET)

Nikkei -1.1%, Hang Seng -0.8%, Shanghai Composite -0.2%, ASX200 -1.5%, Kospi -0.4%

Equity Futures: S&P500 -0.1%; Nasdaq -0.4%, Dax -0.2%, FTSE100 -0.2%

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

EUR 1.1375-1.1420; JPY 112.15-112.40; AUD 0.7580-0.7615; NZD 0.7260-0.7285

Aug Gold +0.3% at 1,253/oz; Aug Crude Oil +0.4% at $44.95/brl; Sept Copper +0.7% at $2.69/lb

(IA) Iran July Crude Oil exports may decline 7% m/m to 1.86M bpd - financial press

(CN) PBOC SETS YUAN MID POINT AT 6.7744 V 6.7940 PRIOR; 3rd straight firmer fix; Strongest Yuan fix since Nov 9th

(CN) PBOC skips open market operations (6th straight skip)

(CN) China Finance Ministry sells 3-month bills at 3.33%

Asia equities notable movers

Australia

Spotless (SPO) -0.9%; Reiterates opposition to Downer takeover; Board consistent in view the offer does not represent adequate value

Japan

Lintec (7966) -1.8%; Nikkei Q1 earnings preview

Sojitz Corp (2768) +0.4%; Nikkei Q1 earnings preview

Hong Kong

China Fortune Financia (290) +8.5; Reports FY17

Luk Fook Holdings (590) +1.9%; Reports FY17

Ju Teng International Holdings (3336) -1.2%; Guides H1 Net -60% to -50% y/y

Integrated Waste Solutions (923) -4.1%; Reports FY17

Kwoon Chung Bus Holdings (306) -5.3%;

Key Points:

• Price action reaches the upper channel constraint.
• Key reversal zone has been reached.
• Bearish Divergence evident on the RSI Oscillator and MACD.

The EURGBP has been trending within a fairly reliable channel over the past few months as the pair continues to feel the impact of risk around the Brexit. As expected, price action has been trending steadily higher since it touched the lower channel in late April. However, price action could be reaching the extent of its rally given that the top of channel has been reached in the past few days.

A quick review of the daily chart demonstrates the dilemma that is currently facing the pair as price actions upward direction appears to have been largely capped by the top of the channel. Subsequently, the past few days have seen price turn sideways in direction and take a more consolidative shape. However, there are some negative factors building with the RSI Oscillator appearing to show some divergence as the indicator trends steadily lower whilst price action retains its current position. In addition, the MACD is also displaying some divergence with the key indicator taking a very definite downward tilt.

Subsequently, there are plenty of technical factors to suggest that we might be seeing the first stage in a bearish move for the pair. This isn’t surprising given that price action is presently sitting in a key area of resistance and especially considering the aforementioned divergent indicators. Additionally, today’s trading session has now seen price action break below the bullish trend line and we are all but ready to see a sharp decline in the coming days.

Ultimately, the most likely scenario for the EURGBP is price action stalling around the 0.8780 mark during the remainder of Friday’s session before commencing a steady decline back towards 0.8648, and 0.8476 in extension. This would relieve significant pressure upon the oscillators as well as allow price action to follow the divergence lower. However, keep a close watch on any potential volatility from the UK GDP figures which are due out in the coming session. Most estimates put the result somewhere in the range of 0.2% for the quarter but be wary of any deviations.

Key Points:

• After some solid gains, the AUD may need to cool-off going ahead.
• Overbought status is likely to exert some selling pressure.
• Losses should be limited to the 0.7611 handle.

After breaking through a zone of resistance that had presented a major obstacle to ongoing upsides, the AUD has reached yet another reversal zone that could see more moderate week moving forward. Indeed, losses may now be seen for the pair and that very zone of resistance that was giving us trouble at the start of the week could now represent a near-term cap on losses.

As shown below, this week's solid effort on the bull's part has pushed the AUDUSD above the zone of resistance identified at the start of the week and all the way up to the long-term declining trend line. As a result, it's no small wonder that traders are beginning to grow weary of reversal for the pair in the coming sessions. The breaking of not one but two well tested resistance levels is not a overly common event – especially given the coincidence of a historical reversal point and a falling trend line around the 0.7716 handle.

What's more, both stochastic and RSI readings are well and truly overbought which will be giving the bulls pause for thought. Combined with the degree to which the pair is challenging the upside Bollinger band, a tumble in the coming days is looking rather likely if it is not indeed already underway. Whilst not shown, candles on the shorter time frames are begin to suggest that a bearing engulfing is occurring which could mean that control of the pair is already being hand off to the bears.

Once a downtrend does take root, the Aussie Dollar is expected to tumble back to around the 0.7611 mark. Here, a historic reversal zone and the 23.6% Fibonacci level should dampen the bear's spirits and encourage yet another uptick in buying pressure. Importantly, the pair will have moved out of overbought territory by this stage which will leave it able to mount another attempt at breaking though the long-term trend line. Of course, whether or not it can actually breakout will need to be looked at closer to the time.

Overall, keep an eye on the Aussie Dollar moving ahead as, whatever happens, it's likely to be worth watching. Nevertheless, there is a fairly robust technical argument for a reversal which should be underway shortly. All this being said, don't neglect the fundamental side of things as this could still lead to some upsets along the way.

• GBPUSD breaks 1.30 and nears nine month high;
• Spike in European yields may be aiding equities slip in recent days;
• Plenty of data today as central bankers take a day off.

Friday is shaping up to be much like the days that preceded it, with equities set for another negative start and sterling building on recent gains as yields continue to climb in response to this week’s central bank commentary.

Sterling has got off to another positive start on Friday as it takes another run at 1.30 against the dollar. Once again the pair has breached the level but has so far failed to break above the highs set in the middle of May of 1.3048, a break of which would see it trade at its highest level in nine months.

Rising yields in UK and European bonds are driving the moves in sterling and the euro – both of which are up more than 2% on the dollar this week – with the slew of commentary from prominent central bankers being deemed much more hawkish than anticipated. The quite deliberate shift, particularly from the Bank of England, is a significant shift from policy makers with previous comments being broadly neutral or erring on the dovish side. The inflation scenario in the UK is clearly spooking policy makers at the BoE – as seen by this month’s vote – far more so than it was investors who were largely shrugging it off.

The sharp moves in bond markets may also be aiding the declines in equity markets in recent days, while futures are indicating that we’re facing another day in the red with small losses seen at the open. It’s also worth noting that today is quarter-end which may have some impact on how equities trade throughout the session.

We may not be flush with central bankers today, as has been the case for much of the week so far, but there will be a constant stream of data released throughout the day which should keep things interesting. Flash CPI data from the eurozone is the most noteworthy this morning, coming as the ECB contemplates trimming the monthly bond purchases again. We’ll also get the final release of first quarter UK GDP, which is expected to remain unchanged at 2%. This will be followed this afternoon by a number of releases from the US including inflation, income and spending figures.

STOCKS

Almost all the global indices have fallen sharply and could test decent support below current levels. We would have to wait for confirmation if the indices would bounce back next week or continue to extend the downward correction for a few more days.

Dow (21287.03, -0.78%) has not surprised us by facing sharp rejection from the long term crucial resistance near 21500. To break above 21500 would be difficult just now and while that holds, we may look for sideways movement if not a further fall towards 21000 in the coming week. Some support near 21170 may keep it sideways and narrow ranged but we expect a fall in the medium term.

Dax (12416.19, -1.83%) came down to test 12400 in line with our expectation and could face a decent support near current levels. Dax could possibly rise in the early sessions next week but in case 12400 breaks, the fall could extend towards 12000 levels in the medium term.

Shanghai (3174.52, -0.42%) is almost stable and could test 3150 next week before again rising back towards 3200. Movement in the 3150-3200 region may continue for some more sessions.

Nikkei (20000.88, -1.09%) is headed towards 21000, a crucial medium term resistance which could produce some corrective dip back to 19000 in the coming sessions.

While Nifty (9504.10, +0.14%) is below 9600, there is scope of testing 9400-9380 on the downside. Narrow and stable movement is possible next week. The 9600 level is acting as an immediate resistance and while that holds the index looks sideways to bearish for the coming sessions.

COMMODITIES

Gold (1245) and Silver (16.60) keep trading in the narrow range of 1233-1248 and 16.30-17.10 respectively. If the 95 support hold for Dollar Index (95.25) then it could bounce back towards 97, limiting upside for bullion. Thus bullion may test the supports of 1230 and 16.30 where the price action may determine the near to medium term path.

Copper (2.68) moved higher in line with our expectation and trading within a range of 2.65-78. In the medium term 2.55-57 are going to be a strong support and we will remain bullish while it is trading above those levels.

Brent (47.80) and WTI (45.23) closed higher and trading as per our recommended levels. Both Brent and WTI may test the strong resistance of 48 and 46 today but it remains to be seen if it manages to rise above it to open the door for 50 and 48 or not. A rejection from 48 (Brent) and 46 (WTI) may push it down strongly towards 46 and 43 once again.

FOREX

Although the Euro (1.1440) continues to be strong, remain aware of Resistance in the 1.1450-1550 region on the Euro Weekly Candles. We would not want to get too excited about strength beyond 1.1550 while the German 30Yr (1.225%) remains below long-term trendline Resistance at 1.25%.

The Pound (1.3017) might be able to rise further towards 1.32 in the near term, but paradoxically, the Pound-Rupee (84.25) has an important Resistance near the current level. This might suggest Rupee strength. More on that later.

Dollar-Yen (11.85) did rise to 112.93 just after the better than expected US GDP data release yesterday, very close to our target of 113 but has come off sharply from there. This suggests that Dollar-Yen may now be sold on rallies while below 113. The Euro-Yen (127.98) has been unable to sustain yesterday's high of 128.86, suggesting limited upside for the Euro from here.

The Aussie (0.7698) has moved up well, coming up to the lower end of our target region of 0.7700-7800. It looks like it can advance into the 0.7700-7800 region also.

Good strength has been seen in the Chinese Yuan over the last few days as the USDCNY (6.7668) has fallen from 6.8425 on Tuesday to 6.76 today. This should reduce the scare on Emerging Market currencies.

Dollar-Rupee (64.63) had risen to 64.92 in the offshore market last night but has come off from there to trade near 64.75 on the NDF market just now. We allow for a test of 64.80 in the Onshore market today, but continue to look for sideways range trading overall.

INTEREST RATES

The US yields have risen sharply yesterday after the release of US GDP which came out at 1.42% higher than the market expectation of 1.20%. The 10YR (2.27%) is trading at the exact levels mentioned yesterday. In case it manages to break above 2.27%, we may negate an immediate fall towards 2.20% and focus on higher levels of 2.35%. Else a fall back to 2.20% is possible.

The US 10-5YR (0.42%) has risen sharply and could test channel resistance near 0.45% before again coming off from there.

The German 10Yr (0.45%) and the 30Yr (1.225%) have risen sharply in the last couple of sessions and has come up to test important resistance levels. The 30Yr is just below important resistance at 1.227% and if that holds, the Yield could come down in the near term; else a break above 1.227% could take it higher towards 1.40% next week. The 10Yr is also facing similar resistance near current levels and is probably on the verge of breaking on the upside. This could act as an important cue to identify movement in the Euro. (Refer to FOREX Section above)

Short term EURJPY Elliott Wave view suggests the decline to 122.35 on 6/15 low ended Intermediate wave (X). Rally from there is unfolding as an impulse Elliott Wave structure with extension. This 5 wave move could be a wave A of an Elliott wave zigzag structure structure, where Minute wave ((i)) ended at 124.46 and Minute wave ((ii)) ended at 123.62. Minute wave ((iii)) ended at 127.84, Minute wave ((iv)) at 126.46 and Minute wave ((v)) of A ended at yesterday’s peak 128.84. Near term, while bounces remain below there expect the pair to pull back in larger degree 3, 7, or 11 swings to correct cycle from 6/15 low before the rally resumes again. We don’t like selling the Index and expect buyers to appear after 7 or 11 swings pull back for extension higher. This view remains valid as far as pivot at 6/15 low 122.35 remains intact.

EURJPY 1 Hour Elliott Wave Chart

A co-ordinated game changer

A game changer of a week as hawkish central bank commentary steamrolled the markets. And as the G-10 central bank band plays on, traders are now contemplating who will be next to join the lineup No one want’s to miss out on this party realising there’s a co -ordinated policy shift afoot and the chance to catch the removal of an easing bias is far too seductive for traders to ignore.

Euro

EUR continues it’s relentless march higher driven as much by an omnipresent apprehension that one is missing out as it is about conviction. But the groundswell of support for the Euro is undeniable as traders see this as a rare opportunity to catch a ride on the wave of shifting policy.

Japanese Yen

After peaking at near 113.00 on the upside surprise to Q1 US GDP data, a broader shift in risk sentiment sent the pair toppling to below 112 before regaining some traction.Double-digit percentage corrections on the NASDAQ are unsettling investors and risk has turned sour.

Australian Dollar

Jumping on the bandwagon appears to be the trade of the day.Everyone including their dog is clamouring for the top side of exposure on the Aussie as the markets contemplate the possibility the RBA will join the ensemble of hawkish central banks. And while a rate hike is highly unlikely next week, shifting out of neutral would be sufficient to provide the spark to push Aussie even higher. If there was ever a case made for fear of missing out, I suspect we see that reflected in current AUD price action

Looking at the day ahead

The depth of today’s economic calendar is of epic so that traders will be glued to their screens most of the day… so back to it.