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GOLD: The commodity continues to face downside pressure on bearishness. On the downside, support comes in at the 1,240.00 level where a break will turn attention to the 1,230.00 level. Further down, a cut through here will open the door for a move lower towards the 1,220.00 level. Below here if seen could trigger further downside pressure targeting the 1,210.00 level. Its daily RSI is bearish and pointing suggesting further weakness. Conversely, resistance resides at the 1,250.00 level where a break will aim at the 1,260.00 level. A turn above there will expose the 1,270.00 level. Further out, resistance stands at the 1,280.00 level. All in all, GOLD looks to weaken further on bear pressure.

Daily Pivots: (S1) 1.1113; (P) 1.1138 (R1) 1.1159; More....

EUR/USD is still staying in range of 1.1109/1295 and intraday bias remains neutral first. On the upside, decisive break of 1.1298 key resistance will carry larger bullish implication and target 1.1615 resistance next. On the downside, break of 1.1109 support will indicate short term topping and rejection from 1.1298. In such case, intraday bias will be turned to the downside for 1.0838 support.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD staying far above 55 week EMA (now at 1.0932). Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

Daily Pivots: (S1) 0.9727; (P) 0.9747; (R1) 0.9768; More.....

Intraday bias in USD/CHF remains neutral as it's still bounded in the consolidation from 0.9613. As long as 0.9807 resistance holds, near term outlook remains bearish and deeper fall is expected. Below 0.9613 will extend the whole decline from 1.0342 to 0.9548 support and below. 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.

Daily Pivots: (S1) 111.24; (P) 111.51; (R1) 111.72; More...

Intraday bias in USD/JPY remains neutral for the moment. Further rise is expected long as 110.63 minor support holds. Above 111.78 will target near term channel resistance (now at 113.02). Sustained break there will suggest that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. However, break of 110.63 will turn bias back to the downside for 108.81 instead.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

The GBP/NZD has formed a bearish equidistant channel, but recent news gave the push in bullish momentum and the price might reverse. The zone to watch is 0.7560-80 (Channel top, ATR high, EMA89, D H4). Traders should watch for any reversal or continuation patterns within the POC zones. A bullish continuation pattern within the zone might push the price further towards the D H5 at 0.7653 while a bearish reversal pattern could drop the price towards D H3 and L3 - 0.7490 and 0.7370. The GBP/NZD is a very volatile pair and because the price is already at its extremes we might see a short term rejection from the POC soon and that could provide some short term trading opportunities.

Daily Pivots: (S1) 1.2565; (P) 1.2661; (R1) 1.2721; More...

GBP/USD rebounds strongly after dipping to 1.2588 earlier today. As the pair is trying to draw support from 1.2614 key support level, intraday bias is turned neutral first. Deeper fall is still expected as long as 1.2813 resistance holds. As noted before, we're still favoring the bearish case that consolidation pattern from 1.1946 has completed at 1.3047 already. Sustained break of 1.2614 resistance turned support should confirm our bearish view and target a test on 1.1946 low next. However, break of 1.2813 resistance will dampen our view and turn bias back to the upside for 1.3047 and above.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. Price actions from 1.1946 medium term low are seen as a consolidation pattern, which could have completed after hitting 55 week EMA. Break of 1.1946 low will target 61.8% projection of 1.5016 to 1.1946 from 1.3047 at 1.1150 next. In case the consolidation from 1.1946 extends, outlook will stay remain bearish as long as 1.3444 resistance holds.

Sharp volatility in Sterling continues today as hawkish comments from BoE chief economist Andy Haldane propels it higher. Haldane said today that partial removal of monetary stimulus would be "prudent relatively soon". And he noted that "risks associated with tightening too early, on the one hand, and too late, on the other, has swung materially towards the latter in the past six to nine months." He pointed out that "the risks of tightening too early have shrunk as growth and, to lesser extent, inflation have shown greater resilience than expected. And if policy tightened too late, this could result in a much steeper path of rate rises later on."

Haldane's comments was taken seriously by the markets as firstly, he's the chief economist. Secondly, he's perceived by many as the most dovish MPC member. Thirdly, while Kristin Forbes will be released by Silvana Tenreyro, there are potentially still three MPC member, including Haldane, Ian McCafferty and Michael Saunders, that could vote for rate hike ahead. Haldane's comments were in sharp contrast to BoE Governor Mark Carney's, showing a clear split between the board.

Separately, a report by BoE's regional agents noted moderate growth in the country overall. Export volume was helped by depreciation of the Pound and showed continuing growth. More importantly, rising intentions on investments were seen. The report noted that upward pressure on companies' costs due to currency effect "may have passed their peak". Meanwhile, it warned that highest costs are feeding into consumer inflation that could weight on consumptions and some investments.

Technically, nonetheless, GBP/USD is staying below 1.3813 resistance, GBP/JPY below 142.75 resistance, EUR/GBP above 0.8639 support. The pound is staying near term bearish in these pairs.

ECB noted US, China and Brexit as new sources of risks

ECB noted in its monthly economic bulletin that "careful communications by the Federal Reserve System, coupled with a very gradual course of monetary policy tightening, and the decline in vulnerabilities in major emerging markets, appears to have eased the risk of a disorderly tightening of global financial conditions." But the central bank also warned of "new sources of risk". In particular, ECB pointed to the "potentially protectionist direction of the new US administration" that could have a "significant negative effect on the global economy". In addition, "China's vulnerabilities over the medium term are also still elevated". And potential contentious negotiations over Britain's departure from the European Union remain a source of concern".

BoJ Kuroda: economy on firmer footing

BoJ Governor Haruhiko Kuroda said today that the economy is on "firmer footing" but Japan is still "distant from our 2 percent inflation target". He reiterated that "it is appropriate to keep monetary conditions easy with our current market operations framework." Also Kuroda noted that it's he is not thinking about stimulus exit yet. And the pace of JGB purchase could rise again easily. Regarding the economy, he offered an optimistic of assessment of capital expenditure and corporate profits. and Output gap is moving back into positive territory.

The minutes of BoJ's April meeting showed that policy makers were comfortable with the fluctuation in JGB purchases. The minutes noted that "members reaffirmed their view that debt purchases will fluctuate within a range depending on market conditions and agreed this poses no problems to the BOJ's guidance for market operations." This came into question as BoJ recently slowed down the bong purchases. And with the current pace, the total annual increase could be projected as JPY 60T, instead of JPY 80T as the central noted in its communications. Nonetheless, it's been clear that BoJ changed its approach last year to the so called Yield Curve Control framework. That is, the central bank is targeting to keep long term yield at zero, instead of a figure of asset purchase.

On the data front

UK public sector net borrowing dropped to GBP 6.0b in May. Australia Westpac leading index rose 0.0% mom in May. Japan all industry index rose 2.1% mom in April. RBNZ rate decision will be a focus in the upcoming Asian session. The central bank is widely expected to keep OCR unchanged at 1.75%.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2565; (P) 1.2661; (R1) 1.2721; More...

GBP/USD rebounds strongly after dipping to 1.2588 earlier today. As the pair is trying to draw support from 1.2614 key support level, intraday bias is turned neutral first. Deeper fall is still expected as long as 1.2813 resistance holds. As noted before, we're still favoring the bearish case that consolidation pattern from 1.1946 has completed at 1.3047 already. Sustained break of 1.2614 resistance turned support should confirm our bearish view and target a test on 1.1946 low next. However, break of 1.2813 resistance will dampen our view and turn bias back to the upside for 1.3047 and above.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. Price actions from 1.1946 medium term low are seen as a consolidation pattern, which could have completed after hitting 55 week EMA. Break of 1.1946 low will target 61.8% projection of 1.5016 to 1.1946 from 1.3047 at 1.1150 next. In case the consolidation from 1.1946 extends, outlook will stay remain bearish as long as 1.3444 resistance holds.

Economic Indicators Update

• Gold and yen gain in slightly risk averse start to trading on Wednesday;
• Oil stabilises but still looks vulnerable to further downside;
• Sterling finds temporary support after Tuesday's sell-off.

US indices are seen pulling a little further away from record high levels on Wednesday, as we appear to see a slight shift in risk appetite although there are no signs at this stage of a broader trend developing.

We're not in a particularly risk averse environment right now, by any extent, with numerous stock indices trading around record highs, but we do appear to be seeing some today. Gold is making small gains on the back of this today, having suffered over the last couple of weeks since falling just short of $1,300 for the second time in the last couple of months. Another move towards $1,300 again would be a very good sign for the bulls, with the dip having once again been bought at higher levels.

Oil has stabilised on Wednesday but may remain under pressure in the coming days, having fallen sharply on Tuesday despite there being no clear fundamental trigger for the move. Brent and WTI did find some support around $45.50 and $43, respectively, levels that have prompted similar reactions over the course of the last year. With bearish sentiment only appearing to grow though, you have to wonder whether these levels can hold on this occasion or whether $40 could be hit or even breached, in both cases.

For the latter to happen, we may need to see clear evidence that the production cut is either insufficient in clearing the excessive stocks or that compliance with the deal is in doubt. Inventory data from EIA will offer some insight into the success of the cut, with another small drawdown expected. API reported a similar number on Tuesday, claiming inventories fell by 2.72 million last week and while this has been a relatively good guide in the past, we did see last week that it isn't always reliable.

Sterling is trading a little lower once again on Wednesday, adding to losses made on the back of dovish comments from Bank of England Governor Mark Carney on Tuesday. The pound is trading a little lower against the dollar after finding some support around 1.26, a break of which could open up a move back towards April's lows just above 1.2350. Larger losses are being seen against the yen, which is seeing some safe haven flows today, along with Gold, although the key test here falls just above 138.50, a break of which could signal further downside ahead.

The DAX index has dipped lower on Wednesday, giving up the slight gains from the Tuesday session. The index is down 0.51% and is currently at 12,743.50 points. On the release front, there are no major events in Germany or the eurozone. German 30-year bonds sold for 1.02% at auction, lower than the May release of 1.24%.

Germany's economy, the largest in the eurozone, continues to receive a thumbs-up from experts. On Tuesday, the German BDI Federation of Industry added its voice to the chorus, saying that Germany's economic output would increase by 1.5% in 2017. However, the BDI noted that the economy had been buoyed by a weaker euro, lower oil prices and the ECB's accommodative monetary policy. All three of these are ‘external factors', in the sense that Germany has limited influence on them, and a significant change in any one factor could hamper the country's economy. In the meantime, a growing global demand for German products has boosted the export sector and relieved concerns about President Trump's protectionist ‘America first' stance. There was another bullish forecast from the Ifo economic institute revised its prediction for Germany's GDP for 2017 from 1.8% to 2.0%, and economic growth from 1.5% to 1.8%. The report also forecast that inflation would jump to 1.7% in 2017, up from 0.6% in 2016. Stronger economic conditions in Germany have helped raise growth in the eurozone in 2017, although inflation levels in both Germany and the euro-area have been sluggish. This has prompted the ECB to reiterate that it has no plans to tighten monetary policy until inflation moves higher.

The Fed is done with rates hikes for now, but has hinted at one more rate hike in the second half of 2017. As for the markets, they have circled the December policy meeting as the most likely date for a rate move. The CME Group has pegged the odds of a September hike at just 13%, compared to 18% a week ago. However, the odds for a December increase are at 49%, and this could increase if Fed policymakers continue to wax positive about the economy. Earlier this week, Federal Reserve of New York President Charles Dudley continued the upbeat message, cautioning the Fed against halting its current tightening cycle. Dudley said that the tight labor market should lead to higher wages, which in turn would push inflation to the Fed's target of 2.0%. The markets like what they are hearing – not just the positive spin on the economy, but also that the Fed has signaled that it plans to reduce the bloated balance sheet of $4.2 trillion.

Crude oil prices fell by 2% on Tuesday as investors continued to fret about the lingering oversupply, which is showing no sign of easing despite 6 months of output restrictions by major producers. The recovery in prices from the 2014-15 downtrend stalled in January when they peaked at 1½-year highs.

WTI crude has since fallen by 22% from $55.24 on January 3 to a 7-month low of $42.75 a barrel yesterday. Brent crude is also down sharply, declining from $58.37 to $45.42 a barrel. Both benchmarks now stand significantly below their 200-day moving average, while the 50-day moving average has widened its bearish gap. This could be a sign of a new longer-term bear market, having emerged from its last one only a year ago.

In May, OPEC and some non-OPEC countries including Russia, agreed to extend last December's output deal to cap production by a further nine months until the end of March 2018. The initial agreement was for six months, starting in January 2017, but was extended after failing to have a major impact on reducing global inventories, which remain near record levels.

The main reason for the ineffectiveness of the output deal in reducing the supply glut is rising production elsewhere. US output has recovered sharply since the middle of 2016 as US shale producers have successfully managed to cut costs and consolidate following the downturn when many were forced out of the industry. The number of active oil rigs in the United States now stands at a two-year high of 747 according to data from Baker Hughes.

But the US isn't the only major producer that's seeing output rise. Libya and Nigeria, which although both are OPEC members, were exempted from the output deal due to the disruptions they experienced to their production from regional conflicts. However, as those disruptions have now ended, Libya looks set to ramp up its output to 1 million barrels a day in the coming weeks and Nigeria has resumed exports from its Forcados pipeline terminal.

While cheaper oil is good news for consumers, another big slump in oil prices has ramifications for both equity and currency markets. Energy stocks have already taken a knock from the latest plunge and an extended downslide could hurt the overall positive risk sentiment currently being enjoyed by equity markets around the world.

In forex markets, oil-linked currencies such as the Canadian dollar and Norwegian krone have come under pressure from yesterday's losses in oil prices, though so far the impact is limited. The US dollar is up 0.6% against its Canadian counterpart in the past two days and is eyeing the 1.33 level for the first time in a week. Against the Norwegian krone, the dollar has made more substantial gains, rising by 3% since the end of May.

However, a bigger concern for investors is the possible impact of a sustained fall in energy prices on monetary policy. Central banks around the world have just breathed a sigh of relief after eliminating the threat of deflation. A renewed risk of deflationary pressures could force major central banks such as the Federal Reserve to halt or even reverse its current cycle of gradual rate increases. Traders already responded to the possibility of lower inflation, and therefore lower interest rates as a result of the latest rout in oil prices, by buying US treasury notes. The yield on 10-year US treasuries slid back for a second day today towards last week's 7-month lows.