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BoJ Governor Haruhiko Kuroda said in a speech, "waiting until specific guidelines and ideas are fixed will only delay our response to the urgent global issue of climate change". Instead, "it will be important to adopt a learning-by-doing approach: implement the crucial measures first, then make adjustments when necessary."

"The Bank will follow appropriately the evolving nature of climate-related issues, exchange dialogue with domestic and foreign stakeholders, including through active participation in international discussions," he said, "and will constantly review its measures and make adjustments where needed.

Full speech here.

Asian shares were mixed this morning with the Hang Seng painted red as investors kept a close eye on China following a crackdown on its technology and education industry. European stocks have opened firmly in the red, mirroring the caution from Asia while US futures are lower despite all three major indices on Wall Street closing at fresh record highs.

It’s a big day for big tech as heavyweights such as Apple, Microsoft and Alphabet will report their latest quarterly earnings. If these titans report much better-than-expected quarterly results and revenues, this could further empower US equity bulls. In the meantime, a sense of caution is likely to linger across markets as investors adopt a guarded approach due to the Asian volatility and Federal Reserve policy meeting on Wednesday.

Big week for the dollar

Watch this space as the next few days could be volatile for the dollar.

Investors will be presented with an array of economic reports this week ranging from the US consumer confidence and second quarter GDP to core PCE inflation among other important releases.

On top of this, the Federal Reserve policy meeting will be closely scrutinised for more clues on the central bank’s next move. It was only last month that the Fed rattled markets with their hawkish “dot plot” surprise. Interestingly since then, Federal Reserve Chairman Jerome Powell has remained persistently dovish and stuck to his view that the recent spike in inflation is “transitory”. All eyes will be on his press conference on Wednesday and whether he sticks to the script or changes the tune.

If he reiterates the Fed’s ongoing mantra that price increases are temporary, this could weaken the dollar. However, with the US economy recovering and annual inflation hitting a 13-year high, the Fed may find it increasingly difficult to defend its dovish monetary stance.

Given how the dollar continues to display high levels of sensitivity to inflation expectations, real yields and US economic data, fasten your seatbelts and brace yourself for a potentially wild ride.

Commodity spotlight – Gold

Gold prices wobbled above $1792 this morning as investors awaited the Federal Reserve meeting on Wednesday.

While bugs may draw strength from the shaky risk sentiment following crackdowns in China, the precious metal is likely to remain confined within a range until the Fed meeting. A hawkish central bank could deliver a heavy blow to zero-yielding gold. However, a meeting filled with doves may boost the precious metal’s allure, possibly sending prices higher.

Speaking technicals, gold remains under pressure on the daily charts. Sustained weakness below the psychological $1800 level may drag prices lower towards $1760. If bulls can secure control back above $1800, gold has the potential to retest $1825 which is just below the 200-day Simple Moving Average.

The selloff in Hong Kong intensified today with HSI losing a massive -1105 pts or -4.22%. The crush on tech continued with Chinese stocks like Meituan and Alibaba down -12.7% and -5.5% respectively. The Shanghai SSE also dropped -2.49%. Negative sentiment is spreading into European session, with major indexes down around -1% in initial trading.

The HSI is now standing at an important support level around 25000 handle a 61.8% retracement of 21139.26 to 31183.35 at 24976.10. Some support might be seen here on oversold condition. But prospect of a strong rebound is limited. The development this week suggests that whole rise from 21139.26 has completed with three waves up to 31183.35 as a corrective move. Fall from there is at best a leg inside a medium term side way pattern, and at worst a the third of the long term pattern from 33484.07. In the latter case, HSI could target 21139.26 and below. We'll see how it goes.

EURJPY is declining somewhat today after the bounce off the 128.55 support level and the 200-day simple moving average (SMA), visiting the 130.00 round number again. The price is still developing below the short-term SMAs and the RSI indicator is suggesting a potential pullback as it is pointing down in the negative territory. However, the stochastic oscillator is gaining momentum in the overbought region.

More descending moves could take the market until the immediate support of the 38.2% Fibonacci retracement level of the up leg from 121.60 to 134.11 at 129.35. Below that, the 128.28-128.55 area, which overlaps with the 200-day SMA may halt the downside actions. If the sellers pressure persists, the pair could meet the 50.0% Fibonacci of 127.85.

On the other hand, a successful jump above the 20-day SMA could drive the price towards the 23.6% Fibonacci of 131.20 and the 40-day SMA at 131.45. Above that, the next resistances are coming from 132.70 and the more than three-year high of 134.11.

In conclusion, EURJPY has been in a bearish mode since June 1 but is still trading above the 200-day SMA. Any climbs above 134.11 could shift the long-term outlook back to bullish one.

The Australian dollar accelerates lower in early European session on Tuesday, driven by risk aversion on further drop in Chinese stocks.

The situation with Covid-19 is mixed, as Victoria state is about to ease measures but New South Wales records new virus cases that continues to sour the sentiment and weigh on risk-sensitive Aussie dollar.

The picture on daily chart suggests that larger bears remain in play, following multiple failure of recovery attempt to break above falling 10DMA (0.7378) and today’s fresh weakness, which signals an end of brief correction from new multi-month low at 0.7289 (July 21).

Daily moving averages are in full bearish setup and momentum is heading south, deeply in the negative territory, maintaining negative signals.

Violation of 0.7289 low would signal bearish continuation and open way towards target at 0.7231 (Fibo 76.4% of 0.6991/0.8007 upleg/200WMA).

Falling 10 DMA marks solid resistance, followed by descending 20DMA (0.7430), with clear break here to ease bearish pressure. Investors focus on Wednesday’s end of Fed policy meeting to get more ideas about central bank’s next steps.

Res: 0.7378, 0.7397, 0.7409, 0.7430.
Sup: 0.7330, 0.7289, 0.7254, 0.7231.

The sentiment is mixed after spillover from China’s crackdown on its technology sector. The DAX 30 index has recovered most of its recent losses and is testing the key resistance at 15700.

The RSI’s double top in the overbought area has so far tempered the bullish fever.

A breakout could help build up momentum and clear the last resistance at 15810. On the downside, 15500 is the fresh support to let buyers catch their breath. A deeper correction could send price action towards 15200.

The New Zealand dollar rallies against a muted greenback as traders await this week’s Fed meeting. The pair is testing the 30-day moving average on the daily chart.

The bearish bias would make a rebound an opportunity to sell into strength. However, the break above the psychological level of 0.7000 gives buyers a glimmer of hope.

They will need to clear the major hurdle at 0.7040 to expect a turnaround. Otherwise, a fall below 0.6945 may resume the sell-off, and 0.6810 would be the next target.

The sterling bounced higher after data showed that Covid cases in the UK fell for five consecutive days. The pound has bounced off the origin of the February rally (1.3570) and the bulls would like to see how far they can push.

Price action may meet stiff selling pressure in the supply zone between 1.3800 and 1.3860. A drop below 1.3740 would keep a lid on the pound. Then 1.3600 could soon be revisited.

On the upside, sellers would start to cover if offers in the mentioned zone get lifted, paving the way for a potential reversal.

The 1,810.00 level provided enough resistance for the price of gold to start a decline. On Tuesday morning, the price had reached below the 1,800.00 level and traded between the 1,795.00 and 1,800.00 levels.

A potential recovery of the commodity price could find resistance in the 1,800.00 mark, which would be strengthened by the 55 and 100-hour simple moving averages. Above this level, the 1,810.00 mark together with the 200-hour SMA would provide additional resistance.

On the other hand, a decline below the 1,795.00 mark would have no technical support. However, note that the 1,790.00 level reversed a decline last Friday.

The US Dollar declined by 52 pips or 0.41% against the Canadian Dollar on Monday. The currency pair breached the 50– hour simple moving average during yesterday's trading session.

As for the near future, the exchange rate could continue to edge lower. Bearish traders might target the weekly support line at 1.2453 during the following trading session.

However, the daily support level at 1.2530 could provide support for the USD/CAD currency exchange rate within this session.