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Daily Pivots: (S1) 1.1777; (P) 1.1809; (R1) 1.1848; More...

Intraday bias in EUR/USD remains neutral as range trading continues above 1.1751. Another fall is still mildly in favor with 1.1880 resistance intact. On the downside, break of 1.1751 will resume the fall from 1.2265, as the third leg of correction from 1.2348, to 1.1703 support. However, on the upside, break of 1.1880 resistance will indicate short term bottoming and turn bias back to the upside, for stronger rebound to 1.1974 resistance first.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair. However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again.

Daily Pivots: (S1) 1.3799; (P) 1.3847; (R1) 1.3926; More....

Focus remains on 1.3908 resistance in GBP/USD. Decisive break there will indicate that fall from 1.4248 has completed. Intraday bias will be turned back to the upside for retesting this high. On the downside, below 1.3766 minor support will turn bias to the downside for 1.3570. Break there will resume the fall from 1.4248 to 1.3482 resistance turned support.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed. GBP/USD would then be seen in another leg of long term range pattern between 1.1409 and 1.4376. Deeper fall could then be seen to 61.8% retracement of 1.1409 to 1.4248 at 1.2493, and even below.

Asian markets continue to trade in risk averse mode today but selling has somewhat decelerated. Commodity currencies remain the weakest ones for the weak on risk-off sentiment, while Aussie is ignoring stronger than expected inflation reading. Yen and Swiss Franc are both strong, but they were outshone by Sterling. The Pound is supported by IMF's forecast upgrade on UK. Meanwhile, Dollar and Euro are mixed as focus now turns to FOMC meeting, which is unlikely to reveal something new at this stage.

Technically, 1.3908 resistance in GBP/USD is an immediate focus. Firm break there will suggest completion of fall from 1.4248 and retest of this high could be seen next. If that happens, we'd keep an eye on 1.1880 resistance in EUR/USD as well as 0.9116 support in USD/CHF. Break of these levels will affirm Dollar's weakness, compared to European majors at least.

In Asia, at the time of writing, Nikkei is down -1.71%. Hong Kong HSI is down -0.27%. China Shanghai SSE is down -0.65%. Singapore Strait Times is down -0.46%. Japan 10-year JGB yield is down -0.0059 at 0.014. Overnight, DOW dropped -0.24%. S&P 500 dropped -0.47%. NASDAQ dropped -1.21%. 10-year yield dropped -0.042 to 1.234.

BoJ opinions: Important not to tighten prematurely

In the Summary of Opinions of July 15-16 meeting, BoJ noted that it should "continue to support financing, mainly of firms, and maintain stability in financial markets by conducting monetary easing through the three measures"

Even though core CPI is likely to increase on the back of rise in commodity prices, there is "a long way to go" to achieve target in a stable manner. Hence, it is "important not to tighten monetary policy prematurely". Also, the "deflationary mindset is strongly entrenched in Japan".

Australia CPI rose 0.8% qoq, 3.8% yoy in Q2

Australia CPI rose 0.8% in Q2, slightly above expectation of 0.7% qoq. Annual rate accelerated to 3.8% yoy, up from 1.1% yoy, matched expectations. RBA trimmed mean CPI came in at 0.5% qoq, 1.6% yoy. RBA weighted mean CPI was at 0.5% qoq, 1.7% yoy.

Head of Prices Statistics at the ABS, Michelle Marquardt said: "Rising fuel prices accounted for much of the increase in the June quarter CPI, with prices surpassing pre-pandemic levels".

"The annual CPI movement was significantly influenced by COVID-19 related price changes from this time last year... These 'base effects' led to a sharp increase in the annual CPI movement", she added. "In situations such as this, it is useful to consider underlying inflation measures such as the trimmed mean, which are designed to remove large, one-off price impacts".

Fed to hold the cards of tapering to chest

FOMC is widely expected to keep monetary policy unchanged today. Without new economic projections, the focus will be on the policy statement and press conference. In particular, Fed Chari Jerome Powell would likely just reiterate that the Committee is in talks of QE tapering. Yet, it is premature to make any conclusion.

Also, more information about policy changes will be revealed at the Jackson Hole symposium in late August, followed by the September meeting. The formal announcement of tapering could indeed be made in December.

Some suggested readings on Fed:

• FOMC Preview – Policy Stance to Stay Intact Despite Surging Inflation
• FOMC Meeting Preview: Taper So Close, Yet So Far Away
• Fed Meeting: Slowly Getting the Taper Ball Rolling
• July Flashlight for the FOMC Blackout Period

Elsewhere

Germany Gfk consumer sentiment and Swiss ZEW expectations will be released in European session. US will also release goods trade balance and wholesale inventories. Canada will release CPI.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3799; (P) 1.3847; (R1) 1.3926; More....

Focus remains on 1.3908 resistance in GBP/USD. Decisive break there will indicate that fall from 1.4248 has completed. Intraday bias will be turned back to the upside for retesting this high. On the downside, below 1.3766 minor support will turn bias to the downside for 1.3570. Break there will resume the fall from 1.4248 to 1.3482 resistance turned support.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed. GBP/USD would then be seen in another leg of long term range pattern between 1.1409 and 1.4376. Deeper fall could then be seen to 61.8% retracement of 1.1409 to 1.4248 at 1.2493, and even below.

Economic Indicators Update

FOMC is widely expected to keep monetary policy unchanged today. Without new economic projections, the focus will be on the policy statement and press conference. In particular, Fed Chari Jerome Powell would likely just reiterate that the Committee is in talks of QE tapering. Yet, it is premature to make any conclusion.

Also, more information about policy changes will be revealed at the Jackson Hole symposium in late August, followed by the September meeting. The formal announcement of tapering could indeed be made in December.

Some suggested readings on Fed:

• FOMC Preview – Policy Stance to Stay Intact Despite Surging Inflation
• FOMC Meeting Preview: Taper So Close, Yet So Far Away
• Fed Meeting: Slowly Getting the Taper Ball Rolling
• July Flashlight for the FOMC Blackout Period

Australia CPI rose 0.8% in Q2, slightly above expectation of 0.7% qoq. Annual rate accelerated to 3.8% yoy, up from 1.1% yoy, matched expectations. RBA trimmed mean CPI came in at 0.5% qoq, 1.6% yoy. RBA weighted mean CPI was at 0.5% qoq, 1.7% yoy.

Head of Prices Statistics at the ABS, Michelle Marquardt said: "Rising fuel prices accounted for much of the increase in the June quarter CPI, with prices surpassing pre-pandemic levels".

"The annual CPI movement was significantly influenced by COVID-19 related price changes from this time last year... These 'base effects' led to a sharp increase in the annual CPI movement", she added. "In situations such as this, it is useful to consider underlying inflation measures such as the trimmed mean, which are designed to remove large, one-off price impacts".

Full release here.

In the Summary of Opinions of July 15-16 meeting, BoJ noted that it should "continue to support financing, mainly of firms, and maintain stability in financial markets by conducting monetary easing through the three measures"

Even though core CPI is likely to increase on the back of rise in commodity prices, there is "a long way to go" to achieve target in a stable manner. Hence, it is "important not to tighten monetary policy prematurely". Also, the "deflationary mindset is strongly entrenched in Japan".

Full Summary of Opinions here.

Short Term Elliott Wave in CADJPY suggests that the cycle from June 1, 2021 peak has ended in wave ((4)) at 85.4. The internal subdivision of wave ((4)) unfolded as a double three Elliott Wave structure. Down from wave ((3)) peak on June 1, wave (W) ended at 87.97 and rally in wave (X) ended at 90.407. Final leg lower wave (Y) ended at 85.4 which should also completed wave ((4)) in larger degree. The pair has started wave ((5)) higher but still needs to break above wave ((3)) at 91.185 to rule out a larger double correction.

Up from wave ((4)), wave ((i)) ended at 86.74 and pullback in wave ((ii)) ended at 86.25. Pair resumes higher in wave ((iii)) towards 88 and dips in wave ((iv)) ended at 87.41. Final leg higher wave ((v)) of 1 ended at 88.04. Wave 2 pullback is currently in progress to correct cycle from July 19 low before the rally resumes. The internal of wave 2 is unfolding as a zigzag Elliott Wave structure. Down from wave 1, wave ((a)) ended at 87.03. Pair should rally in wave ((b)) then turns lower again in wave ((c)) before ending wave 2. Near term, as far as July 19 pivot low at 85.4 stays intact, expect dips to find support in 3, 7, or 11 swing for further upside.

CADJPY 60 Minutes Elliott Wave Chart

STOCKS

Asians are trading weak ahead of the US Federal Reserve meeting outcome tonight. While most of the indices are well within their current trading range, the big surprise is from Shanghai which has broken below the strong support level of 3400 contrary to our expectation. Inability to bounce back could be bearish for Shanghai going forward. Dow has to break above 35100 to move up further. DAX is oscillating within its 15200-15800 range. Nikkei has dipped towards the lower end of its 27000-29500 range. Sensex and Nifty have also declined sharply yesterday after testing the upper end of their 52000-53200 and 15600-15900 range respectively earlier. Will the Fed meeting outcome provide the possible trigger to break the current range in equities on the upside? We will have to wait and watch.

Dow (35058.52, −85.79, -0.24%) has failed to sustain above 35100 and has come back into the 35000-35100 resistance zone. A sustained rise past 35100 is needed to see the rise to 36000. A fall below 35000 can drag the Dow to 34500-34000 again and will delay the rise to 36000. The broader view is however bullish with strong supports at 34000 and 33000.

DAX (15519.13, −99.85, -0.64%) seems to lack strength to move up towards the upper end of its 15200-15800 range. While below 15600, a test of 15200 is possible in the near-term. We expect the range to remain intact for some more time. The bias remains bullish to break the range on the upside and move up to 16000-16200 eventually.

Nikkei (27660.08, −310.14, -1.11%) has failed to rise past 28000 and is coming down again towards the lower end of its 27000-29500 range. While above 27000, the bias is bullish to see an upside breakout above 29500 and see a rise to 31000 going forward. As mentioned yesterday, a strong break below 27000 will only turn the outlook bearish to see 26000 on the downside.

Shanghai (3378.02, −3.17, -0.094%) has declined below 3400 contrary to our expectation to sustain above it. Our long-term view of seeing 3700-3800 could be getting negated now. Inability to bounce back above 3400 can drag Shanghai to 3200 and even lower in the coming weeks.

Sensex (52578.76, −273.51, -0.52%) has come-off sharply yesterday. The 52000-53200 range remains intact. As such the expected bullish breakout above 53200 and the rise to 54000 might get delayed further.

Nifty (15746.45, −78, -0.49%) has failed to break above 15900 and has come-down sharply. The 15600-15900 range will continue to remain intact for some more time. The broader view is bullish to see a break above 15900 and a rise to 16000-16200 eventually. Strong supports are at 15600 and 15500.

COMMODITIES

Crude prices continue to trade higher and could test immediate resistances while Gold has also recovered on Dollar weakness ahead of the FED policy meet statement due tonight and could head towards 1820. Silver has broken below 25 and could head towards 24-23 in the medium term while Copper can range within 4.65-4.40 before rising towards 4.80 in the longer run.

Brent (74.95) and WTI (72.12) both have risen well today. As mentioned yesterday, Brent can rise towards $75-76 while WTI can rise towards $74 before again coming off from there in the near term. Failure to fall from expected levels would be strongly bullish for a possible extension towards $78-80 (Brent) and $75/78 (WTI) in the longer run. For now watch price action near mentioned resistances.

Gold (1804.30) has recovered the fall seen yesterday on weakness in the Dollar Index. While the index remains below 92.50 and continues to fall, Gold could rise to test 1820.

Silver (24.78) has dipped below 25 and if it does not rise back to 25+, it is bearish for a fall to 24-23 in the medium term.

Copper (4.5790) has dipped from 4.60 instead of heading further up. We may expect a possible trade within 4.65-4.40 before an eventual rise towards 4.80 is seen in the longer run.

FOREX

Volatility is seen in the currency markets today as we wait for the post FED policy meet announcements especially on interest rates, inflation and when the FED is likely to start reducing its purchases of government bonds. Dollar Index has fallen below immediate support at 92.50 and Euro has risen past 1.1820. We need to see if this sustains and continues to break below 92 and above 1.1830/50 respectively, which could then indicate a reversal. Aussie is stable while Pound has bounced well and could be headed towards 1.3950/40 on a break above 1.39. EURJPY looks ranged within 130.5-129. USDCNY has surged above 6.50 validating the possible triangle formation mentioned last week. We need to watch USDINR to see if it rises to test 74.60/70 on the upside or falls sharply to 74.30/20 on the downside.

Euro (1.1821) has moved up again as the Dollar Index fell ahead of the final statement due after the FED policy meet due today. All eyes are on the FED post meeting conference for announcements regarding inflation, economic growth and interest rates and when the FED is likely to start reducing its purchases of government bonds. As expected yesterday, a break on Euro above 1.1830/50 would be an initial signal for a bullish break out and could open up chances of a rise towards 1.19 and beyond in the longer run. Watch price action over the next 1-2 sessions to see if the rise sustains.
Dollar Index (92.44) has broken below immediate support at 92.50 and needs to break below 92 to indicate further fall going forward. Need to keep an eye whether the current fall is only due to expectations from the FED meeting outcomes or is likely to sustain. While below 92.50, the index is bearish.

EURJPY (129.78) is holding below immediate resistance at 130.50 and while that holds, a broad range of 130.50-129.50/129.00 may hold for now.

Dollar-Yen (109.77) has fallen sharply from 110.60 but we may expect a bounce back from 109.00-109.50 soon. Failure to see a bounce from 109 could make the pair vulnerable to a sharper fall in the near term.

Aussie (0.7361) is likely to trade in a stable fashion within 0.7330-0.74 while Pound (1.3821) has been rising well over the past few sessions and any break above 1.39 can be further bullish towards 1.3950-1.40 on the upside. Watch price action at 1.39 over the next couple of sessions.

USDCNY (6.5055) has also finally risen above 6.50, validating the triangle pattern that we had mentioned last week. While there could be some pull back from current levels towards 6.4950-6.50, view is bullish for the medium term towards 6.52/55.

USDINR (74.47) rose back sharply from 74.35 yesterday instead of sustaining lower. We expect 74.60/70 to hold on the upside and push back USDINR down towards 74.40/20 or even lower in the longer run. For now 74.30-74.60/70 may hold unless we see a break on the downside to signal any fresh movement.

INTEREST RATES

The US Treasury yields have dipped at the far-end ahead of the US Federal Reserve meeting outcome tonight. The 30Yr is at a key support and the 10Yr has support slightly below current levels. We expect the supports to hold and produce a corrective bounce before the broader downtrend resumes again. The German yields are coming closer to their key intermediate supports within their downtrend. A corrective bounce is possible from the upcoming supports and then a fresh fall is possible. The 5Yr GoI is stuck in a narrow range and is attempting to break the range on the upside and move up further.

The US 2Yr (0.21%) and 5Yr (0.71%) Treasury yields remain stable while the 10Yr (1.25%) and 30Yr (1.90%) have dipped. The 30Yr has to sustain above 1.9% in order to see a corrective bounce to 2.1%-2.2% in the coming weeks. A break below 1.9% can drag it to 1.7%. The 10Yr on the other hand has support at 1.2% and 1.1% from where we expect it to bounce towards 1.45%-1.5% first and then resume the broader downtrend.

The German 2Yr (-0.75%), 5Yr (-0.73%), 10Yr (-0.44%) and 30Yr (0.03%) have dipped further. Our view of testing -0.45%/-0.50% (10Yr) and 0%/-0.05% (30Yr) on the downside remains intact. Thereafter a corrective bounce to -0.30%/-0.25% (10Yr) and 0.10% (30Yr) can be seen and then the broader downtrend can resume again eventually.

The 5Yr GOI (5.6902%) is attempting to break the narrow 5.66%-5.7% on the upside. Such a break, if seen, can take the yield up to 5.76% in the coming days.

Key Highlights

• Gold price is forming a support base above the $1,790 zone.
• A key declining channel is forming with resistance near $1,808 on the 4-hours chart.
• EUR/USD seems to be eyeing a steady recovery wave above 1.1840.
• The Fed interest rate decision is scheduled today (forecast – no change from 0.25%).

Gold Price Technical Analysis

Recently, gold price saw a downside correction from the $1,834 high against the US Dollar. The price declined below the $1,820 support zone to enter a short-term bearish zone.

The 4-hours chart of XAU/USD indicates that the price struggled to stay above $1,800, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

There was a break below the 23.6% Fib retracement level of the upward move from the $1,750 swing low to $1,834 high. However, the bulls were active near the $1,790 zone.

It seems like the 50% Fib retracement level of the upward move from the $1,750 swing low to $1,834 high is acting as a support. There is also a key declining channel forming with resistance near $1,808 on the same chart.

If there is an upside break above $1,810 and $1,820, the price is likely to test $1,834. The next key resistance is near the $1,850 level. If not, the price could start a fresh decline below the $1,790 support level. The next major support is near the $1,775 level.

Looking at EUR/USD, the pair is likely forming a base above 1.1750 and it could recover if there is a clear break above 1.1840.

Economic Releases to Watch Today

• Fed Interest Rate Decision - Forecast 0.25%, versus 0.25% previous.
• Canadian Consumer Price Index for June 2021 (MoM) – Forecast +0.4%, versus +0.4% previous.
• Canadian Consumer Price Index for June 2021 (YoY) – Forecast +3.2%, versus +3.6% previous.

Investors turned cautious as Wall Street digests peak earnings, growth worries worsen on new guidance from the CDC, and uncertainty over how far China's regulatory crackdown will span. After the close, massive earnings from Apple, Amazon, and Microsoft did little to right the ship.

Big Tech Earnings

Apple's earnings impressed, but a lot of that strong performance was already priced in. The iPhone super cycle is here as strong progress was shown in switching Android customers over and growth in China. Apple showed they are able to diversify revenue streams with strong beats with Service , Mac, iPad, services, and wearables revenue.

Supply issues are impacting iPad and Mac sales and that is probably one of the reasons that is keeping share prices under pressure.

Microsoft

Microsoft had decent results, but decent doesn't get the job done if you are a mega-cap tech stock. Microsoft shares slump over worries that this is as good as it will get for Azure sales. Microsoft had a strong beat with both the top and bottom line but that was widely expected. Microsoft CFO Hood noted that chip shortages will have some impact over the next full year.

Alphabet

Alphabet shares hit record highs after delivering a massive earnings beat. Adjusted EPS impressed at $27.26, well above the consensus estimate of $19.35 and last year's $10.13, while operating margin surged 31%, a beat of the 26% estimate. Everything impressed for Alphabet: Google's ad business roared back, YouTube Ads revenue nearly doubled, and cloud revenue rose over 53% from a year ago.

Starbucks

Starbucks shares slumped on disappointing sales in China and after narrowing comp sales guidance for the year.

The key takeaway from this wrath of earnings was that risk appetite will likely struggle going forward given the persistent struggles with supply chains, concerns over growth in China, and uncertainty over how much more monetary and fiscal support this economy will see. Wall Street has priced in lower interest rates for longer and now we need to see if the current delta variant concerns will make the Fed push back any hint of taper announcement until the end of the year.

Oil

Crude price rose slightly after API data showed US stockpiles fell 4.73 million barrels last week. Most energy traders were unfazed by last week's build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resume their declining trend. The US is still in peak driving season and everyone is trying to make the most of this summer.

Gold

Gold is anchored at the $1800 level until after the Fed Chair's Powell press conference. Given the recent risks to the global outlook and persistent inflationary theme across earnings, Fed Chair's Powell conference could show some major hints on when the Fed might be eyeing a taper announcement. The bond market has priced in lower interest rates for longer and that has yet to provide a boost for bullion. Powell will probably stick to the dovish scripts but a hawkish surprise could unsettle markets if inflationary pressures are acknowledged. Gold prices will either have a dovish Fed support a rally above the $1850 level tomorrow or it could be in for a rough week.