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Daily Pivots: (S1) 110.41; (P) 110.61; (R1) 110.83; More...

USD/JPY's break of 110.41 support argues that rise from 107.47 has completed at 111.65, after rejection by 111.71 key resistance. Intraday bias is turned back to the downside for 55 day EMA (now at 109.79) first. Sustained break there will suggest that it's at least correcting the whole rise from 102.58, and targets 38.2% retracement of 102.58 to 111.65 at 108.18. For now, risk will be mildly on the downside as long as 111.65 resistance holds, in case of recovery.

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. Though, as notable support was seen from 55 day EMA, rise from 102.58 is mildly in favor to extend higher. Decisive break of 111.71/112.22 resistance will suggest long term bullish reversal. Rise from 101.18 could then target 118.65 resistance (Dec 2016) and above. However, sustained break of 55 day EMA would revive some medium term bearishness, and open up deep fall back towards 102.58 support.

US stocks surged to new record overnight, shrugging off FOMC minutes. But Asian markets are walking another path, as led by the free fall in Hong Kong stocks. Yen surges broadly on risk aversion, followed by Swiss Franc. Commodity currencies are generally pressured, with Aussie weighed down by dovish RBA comments too. Euro, Sterling and Dollar are mixed for the moment, awaiting ECB minutes for more guidance.

Technically, USD/JPY's break of 110.41 support suggest rejection by 111.71 key medium term resistance. It's also a very early sign of larger bearish reversal. Immediate focus will be on 130.02 support in EUR/JPY to double confirm near term bearishness in Yen crosses. Similarly, AUD/JPY is now eyeing 82.11 support and break will resume the whole fall from 85.78.

In Asia, Nikkei closed down -0.68%. Hong Kong HSI is down -2.40%. China Shanghai SSE is down -0.78%. Singapore Strait Times is down -0.55%. Japan 10-year JGB yield is down-0.0060 at 0.031. Overnight, DOW rose 0.30%. S&P 500 rose 0.34%> NASDAQ rose 0.01%. 10-year yield dropped to as low as 1.296, before closing down -0.049 at 1.321.

S&P 500 hit new records, shrugs off FOMC minutes

US stocks regained bullishness overnight, with S&P 500 and NASDAQ closing at new record highs. FOMC minutes noted that tapering of asset purchases would happen "somewhat earlier" than expected, after seeing more data over the "coming months". Meanwhile, rate hike could also come "somewhat earlier" than expected. The overall messages were largely consistent with the prior statement and projections.

Suggested readings on FOMC minutes:

• FOMC Minutes Reveals that QE Tapering to Begin Later this Year
• FOMC Minutes: More Details From The Fed, But No More Clarity
• (FED) Minutes of the Federal Open Market Committee

S&P 500 rose 0.34% or 14.59 pts to close at 4358.13. The current medium term up trend is still on track to 100% projection of 2191.86 to 3588.11 from 3233.94 at 4625.94. In any case, near term outlook will stays bullish as long as 4257.16 support holds, in case of retreat.

Hong Kong stocks in free fall on fear of more regulatory crackdown

While US stocks were strong, Asian markets are trading notably lower today, as led by the free fall in Hong Kong. Selloff in Chinese tech stocks intensified after the Chinese government announced a step up in oversight on Chinese stocks listing in the US. The announcement came just after the surprised crackdown on ride-hailing giant Didi, days after it's mega IPO last week.

At the time of writing, HSI is down -2.5%. Considering the downside momentum, the break of 38.2.% retracement of 21139.26 to 31183.35 at 27346.50 is starting to make outlook bearish. Focus is now on 26782.61 resistance turned support. Sustained break there will suggest that whole rise from 21139.26 has completed at 31183.35 in a corrective three-wave structure. That would at least open up a bearish case for 61.8% retracement at 24976.10 and below.

RBA Lowe wants to see results, not forecast, for rate hikes

In a speech, RBA Governor Philip Lowe said, it is "not enough" for inflation to be "forecast" in the rate of 2-3% target for the central bank to lift interest rates. He emphasized, "We want to see results before we change interest rates". Also, "the bond purchases will end prior to any increase in the cash rate".

He added that for inflation be sustainably in target rate, it's like that "wage growth will need to exceed 3 per cent". It will take "until 2024" for inflation to be sustainably within the target range.

Lowe also emphasized that "the condition for an increase in the cash rate depends upon the data, not the date; it is based on inflation outcomes, not the calendar." Also, the tapering to AUD 4B purchase in bonds a week "does not represent a withdrawal of support".

On the data front

Japan bank lending rose 1.4% yoy in June, below expectation of 3.0% yoy. Eco Watcher sentiment rose to 47.6 in June, up form 38.1, above expectation of 41.9. Current account surplus widened to JPY 1.87T in May, above expectation of JPY 1.59T.

UK RICS house price balance rose to 83 in June, above expectation of 78. Swiss unemployment rate rose to 3.1% in June, up from 3.0%, above expectation of 3.0%. Germany trade surplus narrowed to EUR 12.6B in May, below expectation of EUR 15.8B.

USD/JPY Daily Outlook

Daily Pivots: (S1) 110.41; (P) 110.61; (R1) 110.83; More...

USD/JPY's break of 110.41 support argues that rise from 107.47 has completed at 111.65, after rejection by 111.71 key resistance. Intraday bias is turned back to the downside for 55 day EMA (now at 109.79) first. Sustained break there will suggest that it's at least correcting the whole rise from 102.58, and targets 38.2% retracement of 102.58 to 111.65 at 108.18. For now, risk will be mildly on the downside as long as 111.65 resistance holds, in case of recovery.

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. Though, as notable support was seen from 55 day EMA, rise from 102.58 is mildly in favor to extend higher. Decisive break of 111.71/112.22 resistance will suggest long term bullish reversal. Rise from 101.18 could then target 118.65 resistance (Dec 2016) and above. However, sustained break of 55 day EMA would revive some medium term bearishness, and open up deep fall back towards 102.58 support.

Economic Indicators Update

The Swiss franc currency has recovered strongly from the 0.9190 support area against the US dollar and look likely to break towards a new high. The daily time frame shows that the next major upside target for the USDCHF pair is found around the 0.9300 level. The EURUSD pair shares an inverse correlation with the USDCHF, so further EURUSD weakness under the 1.1800 level is also very bullish for the USDCHF pair.

The USDCHF pair is only bullish while trading above the 0.9220 level, key resistance is found at the 0.9275 and 0.9300 levels.

The USDCHF pair is only bearish while trading below the 0.9220 level, key support is found at the 0.9190 and 0.9100 levels.

The Australian dollar is at risk of falling to a new yearly low against the US dollar, following a heavy rejection from the 0.7580 resistance level. The rejection is important because it was the neckline area of a large head and shoulders pattern. The bearish price pattern is currently warning that the AUDUSD pair could be about to stage a drop towards the 0.7280 support level.

The AUDUSD pair is only bearish while trading below the 0.7590 level, key support is found at the 0.7400 and 0.7280 levels.

The AUDUSD pair is only bullish while trading above the 0.7590 level, key resistance is found at the 0.7650 and 0.7700 levels.

Gold is still trading with a reasonable bid-tone around the $1,800 level despite the US dollar index continuing to strengthen broadly. Golds bulls need to clear the $1,815 level to encourage further buying interest towards the $1,830 resistance area. The four-hour time frame continues to show that a large inverted head and shoulders pattern with a $65.00 upside projection is in play.

XAUUSD is only bullish while trading above the $1,795 level, key resistance is found at the $1,815 and the $1,840 levels.

If XAUUSD trades below the $1,795 level, sellers may test the $1,780 and $1,770 support levels

The US dollar rose against key currencies after the Fed published the latest minutes of the previous meeting. Fed officials said they were not ready to reduce the $120 billion monthly asset purchases. The minutes show members will likely intensify talks on ending these purchases in a meeting scheduled for later this month. The members also agreed that the current phase of high inflation was temporary. They also projected that they would raise interest rates from near zero by 2023. The currency will react to the latest initial jobless claims numbers scheduled for later today.

The Japanese yen declined against the US dollar after the latest bank lending by the Bank of Japan (BOJ). The data showed that foreign investors reduced their stakes in Japanese stocks by more than 310 billion yen in June. They cut their holdings by an additional 146 billion yen in the previous month. This probably explains why the Nikkei 225 index has declined slightly recently. Further, foreigners reduced their Japan bond holdings by more than 190 billion yen. Meanwhile, the country’s current account increased from more than 1.32 trillion in May to 1.98 trillion yen. The current account measures the value between exported and imported goods and services.

The economic calendar will have some limited events today. Key ones to watch are the Switzerland unemployment rate that is expected to drop from 3.0% to 2.9%. Germany will publish the latest exports and imports data. The country’s exports will likely be affected by the ongoing chip shortage that has had a negative impact on the automobile industry. The Energy Information Administration (EIA) will publish the latest oil inventories data while Brazil, India, and Mexico will publish the latest inflation data.

USDJPY

The USDJPY pair declined to a multi-week low of 110.38. On the four-hour chart, the pair has moved between the lower and middle line of the Bollinger Bands. It also declined below the lower line of the ascending channel. The MACD has moved below the neutral level while the Moving Average of the Oscillator has moved above the neutral level. The pair will likely keep falling as bears target the next key support at 110.

JPN225

The Nikkei 225 index declined to a low of ¥28,195 after data showed that foreigners are dumping Japanese stocks. This price is substantially lower than the year-to-date high of almost ¥30,000. On the four-hour chart, the pair has dropped below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has been in a downward trend. It is also along the lower side of the descending channel. Therefore, the index will likely keep falling, with the next level to watch being at ¥28,000.

EURUSD

The EURUSD pair declined to the lowest level since April after relatively hawkish FOMC minutes. The pair managed to move below the support at 1.1845 and 1.1800. It is trading at 1.1785. It has also moved below the 25-day moving average and the Ichimoku cloud. Therefore, the path of least resistance for the EURUSD pair is to the downside.

The Eurozone single currency declined by 41 pips or 0.35% against the US Dollar on Wednesday. The EUR/USD currency pair breached the weekly support level at 1.1801 during Wednesday's trading session.

As for the near future, the exchange rate could continue to decline in a downtrend channel. Bearish traders might target the 1.1760 area within the following trading session.

However, short traders could encounter support at 1.1780 within Thursday's trading session.

The British Pound declined by 62 pips or 0.45% against the US Dollar on Wednesday. The currency pair pierced the support level at 1.3774 during yesterday's trading session.

Currently, the GBP/USD exchange rate is trading near the support level at 1.3772.

If the support line holds, buyers could pressure the price higher during the following trading session.

However, if the currency exchange rate breaks the support level at 1.3772, the next target for bearish traders would be near the weekly S1 at 1.3733.

The US Dollar rose by 36 pips or 0.32% against the Japanese Yen on Wednesday. The surge was stopped by the 55– hour simple moving average during Wednesday's trading session.

All things being equal, the exchange rate could continue its downtrend momentum during the following trading session. The potential target for sellers will be near the 110.00 area.

However, the weekly support level at 110.46 could still provide support for the USD/JPY currency exchange rate in the shorter term.

The yellow metal has declined by 107 pips or 0.59% against the US Dollar on Wednesday. A breakout occurred through the lower boundary of an ascending channel pattern during Wednesday's trading session.

Given that breakout has occurred, bearish traders are likely to continue to drive the exchange rate lower during the following trading session. The potential target for bears will be near the 1780.00 area.

However, the 100– hour simple moving average at 1793.06 could provide support for the XAU/USD pair within this session.