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The Swiss franc currency could experience further losses against the US dollar as the pair has officially formed a huge head and shoulders price pattern. Selling any rallies back towards the 0.9200 resistance level in expectation of a bearish reversal appears a good strategy. According to the overall size of the pattern the USDCHF pair could drop towards the 0.9060 level.

The USDCHF pair is only bearish while trading below the 0.9200 level, key support is found at the 0.9165 and 0.9060 levels.

The USDCHF pair is only bullish while trading above the 0.9200 level, key resistance is found at the 0.9220 and 0.9275 levels.

The euro currency is looking increasingly bearish against the British pound as the pair traders towards the bottom end of its established eight-week trading range. The daily time frame shows that the EURGBP pair is approaching the bottom of a large triangle pattern. Heavy losses in the EURGBP pair towards at least the 0.8450 support area is possible if a break under the triangle takes place.

EURGBP pair is only bearish while trading below the 0.8580 level, key support is found at the 0.8520 and 0.8450 levels.

The EURGBP pair is only bullish while trading above the 0.8580 level, key resistance is found at the 0.8640 and 0.8710 levels

US stocks closed at record highs ahead of key corporate earnings. The Dow Jones and Nasdaq 100 indices rose by 126 and 30 points, respectively. They also rallied in the futures market today. The top companies that will publish their results today are Goldman Sachs, JP Morgan, PepsiCo, and Fastenal. Later this week, firms like eBay, Wells Fargo, and Blackrock will publish their results. Stocks also rose as the ongoing wave of corporate consolidation continued. Media reports said that Broadcom, a leading chip company, was in talks to acquire SAS Institute for as much as $20 billion.

The US dollar was little changed during the American and Asian sessions as investors waited for the latest inflation data. Economists expect the data to show that the headline CPI rose by 4.9% in June after rising by 5.0% in May. The core CPI, which excludes food and energy, is expected to increase from 3.8% to 4.0%. The inflation data comes at a time when analysts are concerned about future prices. They point to a slow shift in forces that helped the Fed keep inflation low like globalization, e-commerce, and demographics. They say that some of these forces are reversing, which could mean higher-than-average inflation in the future.

The economic calendar will have some key events today. In Europe, the German statistics agency will publish the latest consumer price index (CPI) data. Economists expect these numbers to show that prices rose by 2.3% in June after rising by 2.5% the previous month. Switzerland will also publish the latest producer price index (PPI) data while Turkey will release the latest retail sales and industrial production data. The numbers come a day ahead of the latest CBRT interest rate decision.

EURUSD

The EURUSD pair was little changed at the current level of 1.1863. On the four-hour chart, the pair has consolidated along the 25-day moving average while the MACD has moved above the neutral level. It has also moved above the upper line of the descending channel. The pair seems to be forming a small bullish flag pattern. Therefore, it will likely break out higher ahead or after the latest US inflation data.

USDCHF

The USDCHF pair was little changed during the Asian session. It is trading at 0.9145., which is substantially lower than this month’s high of 0.9266. On the two-hour chart, it has formed a bearish flag pattern that is shown in red. It has also moved below the important support at 0.9192 and the 25-day moving average. The RSI has moved above the oversold line. Therefore, the pair will likely resume the downward trend as bears target the next key support at 0.9100.

NDX100

The Nasdaq 100 index closed at a record high ahead of key bank earnings. It is trading at $14,888 in the futures market. The pair has moved above the short and medium-term moving averages (MA). The MACD has moved above the neutral line while the RSI is approaching the overbought level. Therefore, the pair will likely keep rising as bulls target the next key resistance at 15,000.

Richard Branson was not the only one flying to the sky recently. The S&P500 and Nasdaq progressed through uncharted territories, as well. Financial and real estate stocks pushed the S&P500 to an all-time high, while Nasdaq was boosted by Tesla, which gained more than 4% yesterday, although the latest news was mostly about Elon Musk being at court to defend its 2016 SolarCity acquisition.

Today, investors will be closely watching the US inflation data. Inflation in the US shot up to 5% in May, as a result of more than 50% rise in energy prices, the jump in second-hand car prices, and of course, the Federal Reserve’s (Fed) ultra-supportive monetary policy. And for the Fed policy to stay this supportive, we need to see at least some slowdown in the inflation figures at today’s print. The headline inflation in the US is expected to have eased to 4.9% in June, from 5% printed a month earlier. Although the figure will be relatively strong compared with the Fed’s 2% inflation goal, any softening will likely bring the ‘transitory inflation’ rhetoric back on table and should further pressure the yields to the south, and the equity prices to the north. A print above the 5% mark, however, will likely revive the worries that inflation may not fade as rapidly as the US policymakers first thought, and should, in theory, boost appetite in stocks of businesses which could more easily pass the rising material costs on to their clients.

In the FX, a softer-than-expected US inflation should lead to a softer US dollar as well, yet the dovish shift from the European Central Bank (ECB) should remain the main catalyzer on the EURUSD. Any advance driven by a strong dollar could be an interesting top-selling opportunity for the euro bears looking for a further slide in EURUSD into next week’s ECB meeting.

In commodities, gold will likely remain offered near and above the $1800 per oz, given that risky trades remain too appetizing for investors to sit on non-interest-bearing gold.

What will happen to the euro-franc?

The franc appreciated meaningfully since the ECB pulled its inflation target to 2% and said it would allow some overshoot above this level. The EURCHF tanking a figure in a single session.

The globally weakening euro is bad for Switzerland which is fighting so hard against a stronger franc.

Therefore, the Swiss National Bank (SNB) will likely continue fighting against the franc appreciation through FX interventions, as there is little chance to see the SNB moving more dovish on its own monetary policy by pulling the rates lower. The Swiss benchmark rate is already at -0.75% and lowers interest rates won’t encourage investors to divest from the franc, as the motivation to enter and to hold the Swiss franc is not necessarily financial, it’s mostly seeking a refuge.

Moving forward, we could see some paradoxes in SNB policy. Inflation will also become a problem for Switzerland. The best remedy to rising inflation is a strong currency. Yet, the SNB will do its best to keep the franc as soft as possible to prevent any further damage on already expensive Swiss exports to the rest of the world. In this respect, the SNB can only keep its rates steady, buy more euros, and hope that a new wave of market turmoil wouldn’t increase inflows to its beloved Swiss franc.

In the short run, given that the first appreciation shock is behind, the EURCHF should recover toward the 1.09 mark. But in the longer run, a globally softer euro can only weigh on EURCHF, which should further slide and settle within the 1.0750/1.0850 region.

Against the US dollar, the expectation is a slow but steady US dollar appreciation, and a long-term USDCHF at 1.0, as the Fed would start unwinding its asset purchases and move towards an interest rate normalization.

General trend

• US financial earnings in focus (JPMorgan, Goldman).
• Nikkei 225 has remained higher [Topix Marine Transportation, Retail, Banks, Information & Communication and Electric Appliances indices rise].
• Hang Seng extends gain, TECH index rises over 2%.
• Shanghai Composite traded modestly higher during the morning session [Gainers include Property and Consumer Staples indices; IT and Financial indices lag].
• S&P ASX 200 pares gain [Resources and Financial indices pare gains].
• Companies due to report during the NY morning include ConAgra Brands, Fastenal, First Republic Bank, Goldman Sachs, JPMorgan, Pepsico.
• RBNZ meeting on July 14th will not be followed by a press conference.
• Singapore to release Q2 advance GDP data on Jul 14th (Wed).

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened 0.0%.
• NEA.AU Raises FY21 Portfolio ACV A$133.8M (Prior A$128-132M), Annual Contract Value A$128.2M.
• (NZ) New Zealand Jun REINZ House Sales Y/Y: 6.2% v 81.4% prior (strongest sales in 5 years).
• (AU) Australia sells A$100M v A$100M indicated in 0.75% Nov 2027 indexed bonds, avg yield -1.0295%, bid to cover 4.7x.
• (AU) Australia Jun NAB Business Confidence: 11 v 20 prior; Business Conditions: 24 v 36 prior.

Japan

• Nikkei 225 opened +0.5%.
• (JP) Bank of Japan (BOJ) expected to offer interest on green loans and lower 2021 GDP outlook at this week's meeting - press.
• (JP) Bank of Japan (BOJ) expected to offer interest on green loans and lower 2021 GDP outlook at this week's meeting – press.
• 5423.JP Raises Aug H Beam Price to ¥106K/ton from ¥103K/ton; Maintains Hot Rolled Coil price ¥110k/ton.
• (JP) Japan MoF sells ¥1.2T v ¥1.2T indicated in 0.500% 20-year JGBs, avg yield: 0.4040% v 0.4330% prior, bid to cover 3.51x v 3.62x prior.

Korea

• Kospi opened +0.2%.
• (KR) South Korea Minimum Wage Commission agrees to raise 2022 minimum wage 5.1% to KRW9,160/hr.
• (KR) South Korea Vice Fin Min Lee Eog-weon: Volatility is increasing due to coronavirus; Govt to strengthen market monitoring and risk factors.

China/Hong Kong

• Hang Seng opened +0.7%; Shanghai Composite opened 0.0%.
• (CN) CHINA JUN TRADE BALANCE: $51.5B V $44.8BE; Exports Y/Y: 32.2% v 23.0%e; Imports Y/Y: 36.7% v 29.5%e; Jun Trade Balance with US: $32.6B v $31.8B prior.
• (CN) CHINA JUN TRADE BALANCE (CNY): 332.8B V 270.0BE; Exports Y/Y: 20.2% v 15.1%e; Imports Y/Y: 24.2% v 20.8%e.
• (CN) China Customers Spokesman Li: Imports and exports expected to slow in H2 due to higher base in 2020; Imported inflation risks manageable.
• (CN) Former PBOC Official Sheng: RRR cut affords China room to deal with shifts in US FED policy; Economic recovery remains insufficient and imbalanced.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Net CNY0B v Net CNY0B prior.
• (CN) China PBOC sets Yuan reference rate: 6.4757 v 6.4785 prior.
• 13.HK Has made 1st commercial sale of Orpathys in China, triggers $25M milestone payment from AstraZeneca.

North America

• SOGO China Market Regulator (SAMR) Grants unconditional approval to Tencent to acquire the company and take it private.
• (MX) Mexico Fin Min Herrera: do not expect a rate tightening cycle until 2022.
• (CN) US Biden Administration said to be considering a digital trade deal as a counter to China's digital presence in Asia.
• (US) US Senate Budget meeting reported having stopped without a deal.
• BA US FAA: Aware of manufacturing quality issue near the nose of certain 787 Dreamliners in the co's inventory of undelivered planes.

Europe

• (EU) Bank of Spain (BOS) Dep Gov Delgado: ECB may use tools to rein in excessive dividends, likely to lift dividend cap this year, companies should pursue a more average payout policy - press.

Levels as of 01:15ET

• Hang Seng +0.7%; Shanghai Composite +0.7%; Kospi +0.5%; Nikkei225 +0.5%; ASX 200 +0.2%.
• Equity Futures: S&P500 0.0%; Nasdaq100 +0.1%, Dax +0.8%; FTSE100 +0.1%.
• EUR 1.1866-1.1859; JPY 110.39-110.31; AUD 0.7487-0.7476; NZD 0.6990-0.6981.
• Commodity Futures: Gold +0.1% at $1,807/oz; Crude Oil +0.2% at $74.21/brl; Copper +0.0% at $4.33/lb.

Market movers today

• The key event today for markets will be the US CPI release for June, which will give insights whether inflationary pressures start to abate. Consensus is looking for continued high CPI inflation of 4.9%, but the monthly increase in core CPI is expected to slow to 0.4% m/m from 0.7% m/m in May. Overall, we expect inflation pressures in the US to remain elevated and settle at a higher level than before the pandemic, but not spin out of control, see Research US - Higher inflation but not spinning out of control due to still well-behaved expectations, 14 June.

The 60 second overview

Trade relations: In order not to endanger progress on a minimum global corporate tax deal, the EU decided to postpone the release of its controversial digital levy that has met stiff opposition from Washington. It is another sign that transatlantic relations are on the mend after the EU and US already last month struck an agreement on a long-running Airbus-Boeing subsidy dispute. Separately, the Biden administration is also mulling proposals for a digital trade agreement covering Indo-Pacific economies as a way to check China's influence in the region.

Equities: Asian shares are up this morning, after S&P 500 and tech-heavy Nasdaq 100 closed at new highs yesterday. US banks will kick off the Q2 earnings season today and expectations for solid reports are underpinning the stock rally. Big dividends from European banks may be off the table after ECB official Margarita Delgado said the central bank could take steps to stop excessive pay-outs.

FI: European bond yields continue to decline on the back of the statements from various ECB officials and despite the significant supply this week.

FX: Monday proved a quiet start to the week for FX majors. G10 bilateral currency moves were kept within +/- 1 standard deviation for the session leaving EUR/USD close to 1.1850, EUR/NOK around 10.30, EUR/SEK just shy of 10.20, and EUR/GBP close to 0.8550.

Credit: Credit indices were aligned with relatively stable equity markets on Monday. iTraxx Xover was roughly flat (closed at 232.7bp) and iTraxx Main was also flat (closed at 46.6bp). HY cash bonds tightened slightly (-1.4bp) IG cash bonds were also marginally tighter (-0.8bp).

Daily Pivots: (S1) 0.8530; (P) 0.8549; (R1) 0.8561; More...

EUR/GBP continues to stay in range of 0.8529/8616 and intraday bias remains neutral for the moment. On the downside, break of of 0.8529 will resume the choppy decline towards retesting 0.8470 low. On the upside, decisive break of 0.8616 resistance will argue that corrective fall from 0.8718 has completed. Further rise would be seen to 0.8670 resistance for confirmation.

In the bigger picture, price actions from 0.9499 are still seen as developing into a corrective pattern. That is, up trend from 0.6935 (2015 low) would resume at a later stage. This will remain the favored case as long as 0.8276 support holds. However, firm break of 0.8276 support will suggest that rise from 0.6935 has completed and turn medium term outlook bearish.

Daily Pivots: (S1) 1.5818; (P) 1.5866; (R1) 1.5902; More...

EUR/AUD is staying in consolidation from 1.5976 temporary top and intraday bias remains neutral first. Another rise could be seen with 1.5614 support intact. On the upside, break of 1.5976 will resume the choppy rise from 1.5250 to 1.6033 key support turned resistance next. Sustained break there will argue that longer term trend has reversed, and target 1.6827 resistance for confirmation.

In the bigger picture, outlook stays bearish with 1.6033 support turned resistance intact for now. Fall from 1.9799, as a correction to to long term up trend from 1.1602 (2012 low) is still in favor to resume through 1.5250 later. However, However, firm break of 1.6033 will argue that such decline has completed. Stronger rebound would then be seen 38.2% retracement of 1.9799 to 1.5250 at 1.6988.

Daily Pivots: (S1) 1.0844; (P) 1.0855; (R1) 1.0864; More....

EUR/CHF is staying in consolidation above 1.0823 temporary low and intraday bias remains neutral for the moment. Outlook also remains bearish as long as 1.0985 resistance holds. On the downside, break of 1.0823 will resume the whole fall from 1.1149, to 1.0737 cluster support next.

In the bigger picture, current development argues that rebound from 1.0505 (2020 low) might be completed with three waves up to 1.1149 already. Sustained trading below 55 week EMA (now at 1.0885) will affirm this bearish case. Further break of 1.0737 cluster support (61.8% retracement of 1.0505 to 1.1149 at 1.0751) will bring retest of 1.0505 low.

Daily Pivots: (S1) 130.56; (P) 130.77; (R1) 131.10; More....

Focus stays on 131.02 minor resistance in EUR/JPY. Firm break there 131.02 resistance will argue that corrective fall from 134.11 might have completed with three waves down to 129.60 already, on bullish convergence condition in 4 hour MACD. Intraday bias will be turned back to the upside for 132.68 resistance and above. On the downside, break of 129.60 will resume the the correction. But we'd expect strong support from 38.2% retracement of 121.63 to 134.11 at 129.34 to bring rebound.

In the bigger picture, rise from 114.42 is seen as a medium term rising leg inside a long term sideway pattern. Next target is 137.49 (2018 high). Decisive break there will open up the possibility that it's indeed resuming the up trend from 94.11 (2012 low). For now, outlook will stay bullish as long as 127.07 resistance turned support holds, in case of pull back.