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Daily Pivots: (S1) 1.2317; (P) 1.2344; (R1) 1.2370; More...

Range trading continues in USD/CAD and intraday bias remains neutral first. On the upside, firm break of 1.2485 resistance will resume whole rise from 1.2005 for 1.2653 key structural resistance next. On the downside, break of 1.2251 support will argue that rebound from 1.2005 has completed after failing medium term channel resistance. Intraday bias will be back on the downside for retesting 1.2005.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It might have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Daily Pivots: (S1) 0.7513; (P) 0.7525; (R1) 0.7541; More...

AUD/USD's rebound from 0.7443 continues today but stays below 0.7615 resistance. Intraday bias remains neutral first. On the upside, break of 0.7615 will argue that corrective pattern from 0.8006 has completed already. Further rise should then be seen back to 0.7890.8006 resistance zone. On the downside, break of 0.7443 will resume the whole corrective pattern from 0.8006. But we'd expect strong support from 100% projection of 0.8006 to 0.7530 from 0.7890 at 0.7414 to bring rebound.

In the bigger picture, rise from 0.5506 medium term bottom could either be the start of a long term up trend, or a corrective rise. Reactions to 0.8135 key resistance will reveal which case it is. Rejection by 0.8135 key resistance, followed by firm break of 0.7413 resistance turned support, will favors the latter case. Deeper decline would be seen to 38.2% retracement of 0.5506 to 0.8006 at 0.7051 first.

New Zealand Dollar is the star winner in Asian session today on RBNZ rate speculations. The Kiwi has taken Aussie higher today, but the latter lost some steam after unsurprising RBA policy decision. Though, Aussie is still maintaining most of gains, together with Sterling. On the other hand, Dollar, Yen and Euro are the weakest ones.

Technically, EUR/AUD's break of 1.5699 support is the first sign of near term bearish reversal. Deeper fall could be seen back to 1.5418 support next. The question is whether that would be accompanied by break of 0.7615 resistance in AUD/USD to indicate Aussie strength. Or break of 0.8529 support in EUR/GBP to indicate Euro weakness. We'll see.

In Asia, at the time of writing, Nikkei is up 0.33%. Hong Kong HSI is down -0.58%. China Shanghai SSE is down -0.53%. Singapore Strait Times is up 1.18%. Japan 10-year JGB yield is up 0.0092 at 0.045.

RBA moves to AUD 4B per week bond purchase, until at least mid-Nov

RBA decided to keep cash rate target at 0.10% as widely expected. The central bank will continue with bond purchase program after the current one ends in September. But the purchase target will be changed to AUD 4B per week, until at least mid-November. April 2024 bond is kept as the bond for yield target at 0.10%.

The central bank said the expectation that condition for rate hike "will not be met before 2024". This could be seen as slightly more optimism than "this is unlikely to be until 2024 at the earliest." Still, "meeting it will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently."

NZD/JPY jumps as markets now sees Nov RBNZ hike

New Zealand Dollar jumps broadly today as economists pull head their expectation on RBNZ rate hike. The change in forecasts came after strong NZIER Quarterly Survey of Business Opinion, which shows a sharp improvement in both business confidence and demand in firms' own business.

General business confidence jumped to 10.1 in Q2, from Q1's -7.9. Trading activity in the past three months rose to 25.6, from -0.4. Trading activity for the next three months rose to 27.6, from 7.8.

ASB Bank now predicts a rate hike from historical low at 0.25% in November. BNZ quickly followed in expecting a hike this November. Markets are indeed now pricing in 70% chance of that happening.

NZD/JPY's break of 78.46 resistance now suggests that rebound from 76.20 is resuming. Further rise should be seen as long as 77.74 support holds, to retest 80.17 high. At this point, we're not expecting a firm break of 80.17 to resume the up trend from 59.49 low yet. Consolidation pattern from 80.17 could still extend with another falling leg. We'll keep an eye on the upside momentum to assess it again later.

Elsewhere

Japan labor cash earnings rose 1.9% yoy in May, below expectation of 2.1% yoy. Household spending rose 11.6% yoy, above expectation of 10.9% yoy.

Looking ahead, Germany factory orders and ZEW economic sentiment, Eurozone retail sales, and UK PMI construction will be released in European session. US will release ISM services.

AUD/USD Daily Report

Daily Pivots: (S1) 0.7513; (P) 0.7525; (R1) 0.7541; More...

AUD/USD's rebound from 0.7443 continues today but stays below 0.7615 resistance. Intraday bias remains neutral first. On the upside, break of 0.7615 will argue that corrective pattern from 0.8006 has completed already. Further rise should then be seen back to 0.7890.8006 resistance zone. On the downside, break of 0.7443 will resume the whole corrective pattern from 0.8006. But we'd expect strong support from 100% projection of 0.8006 to 0.7530 from 0.7890 at 0.7414 to bring rebound.

In the bigger picture, rise from 0.5506 medium term bottom could either be the start of a long term up trend, or a corrective rise. Reactions to 0.8135 key resistance will reveal which case it is. Rejection by 0.8135 key resistance, followed by firm break of 0.7413 resistance turned support, will favors the latter case. Deeper decline would be seen to 38.2% retracement of 0.5506 to 0.8006 at 0.7051 first.

Economic Indicators Update

RBA decided to keep cash rate target at 0.10% as widely expected. The central bank will continue with bond purchase program after the current one ends in September. But the purchase target will be changed to AUD 4B per week, until at least mid-November. April 2024 bond is kept as the bond for yield target at 0.10%.

The central bank said the expectation that condition for rate hike "will not be met before 2024". This could be seen as slightly more optimism than "this is unlikely to be until 2024 at the earliest." Still, "meeting it will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently."

Full statement here.

At its meeting today, the Board decided to:

• retain the April 2024 bond as the bond for the yield target and retain the target of 10 basis points
• continue purchasing government bonds after the completion of the current bond purchase program in early September. These purchases will be at the rate of $4 billion a week until at least mid November
• maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances of zero per cent.

These measures will provide the continuing monetary support that the economy needs as it transitions from the recovery phase to the expansion phase. The Board is committed to achieving the goals of full employment and inflation consistent with the target. Today's decisions, together with those taken previously, have the economy on a path to achieve those objectives.

The economic recovery in Australia is stronger than earlier expected and is forecast to continue. The outlook for investment has improved and household and business balance sheets are generally in good shape. National income is also being supported by the high prices for commodity exports. Domestic financial conditions are very supportive and the exchange rate has depreciated a little recently. One near-term uncertainty is the effect of the recent virus outbreaks and the lockdowns. But the experience to date has been that once outbreaks are contained and restrictions are eased, the economy bounces back quickly.

The labour market has continued to recover faster than expected. The unemployment rate declined further to 5.1 per cent in May and more Australians have jobs than before the pandemic. There has also been a welcome decline in underemployment and labour force participation is around record highs. Job vacancies are high and more firms are reporting shortages of labour, particularly in areas affected by the closure of Australia's international borders.

Despite the strong recovery in jobs and reports of labour shortages, inflation and wage outcomes remain subdued. While a pick-up in inflation and wages growth is expected, it is likely to be only gradual and modest. In the central scenario, inflation in underlying terms is expected to be 1½ per cent over 2021 and 2 per cent by mid 2023. In the short term, CPI inflation is expected to rise temporarily to about 3½ per cent over the year to the June quarter because of the reversal of some COVID-19-related price reductions a year ago.

Maintaining the target of 10 basis points for the April 2024 bond will continue to keep interest rates low at the short end of the yield curve and support low funding costs in Australia. The yield on this bond is consistent with the target and the RBA remains prepared to operate in the market to achieve the target.

The bond purchase program is playing an important role in supporting the Australian economy. The Bank will continue to purchase bonds given that we remain some distance from the inflation and employment objectives. However, the Board is responding to the stronger-than-expected economic recovery and the improved outlook by adjusting the weekly amount purchased. It will conduct a further review in November, allowing the Board to respond to the state of the economy at that time.

The final draw-downs under the Term Funding Facility were made in late June. In total, $188 billion has been drawn down under this facility, which has contributed to the Australian banking system being highly liquid. Given that the facility is providing low-cost fixed-rate funding for 3 years, it will continue to support low borrowing costs until mid 2024.

Housing markets have continued to strengthen, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, including first-home buyers. There has also been increased borrowing by investors. Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.

The Board remains committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The Bank's central scenario for the economy is that this condition will not be met before 2024. Meeting it will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently.

New Zealand Dollar jumps broadly today as economists pull head their expectation on RBNZ rate hike. The change in forecasts came after strong NZIER Quarterly Survey of Business Opinion, which shows a sharp improvement in both business confidence and demand in firms' own business.

General business confidence jumped to 10.1 in Q2, from Q1's -7.9. Trading activity in the past three months rose to 25.6, from -0.4. Trading activity for the next three months rose to 27.6, from 7.8.

ASB Bank now predicts a rate hike from historical low at 0.25% in November. BNZ quickly followed in expecting a hike this November. Markets are indeed now pricing in 70% chance of that happening.

NZD/JPY's break of 78.46 resistance now suggests that rebound from 76.20 is resuming. Further rise should be seen as long as 77.74 support holds, to retest 80.17 high. At this point, we're not expecting a firm break of 80.17 to resume the up trend from 59.49 low yet. Consolidation pattern from 80.17 could still extend with another falling leg. We'll keep an eye on the upside momentum to assess it again later.

STOCKS

Global equities continue to trade mixed and seem to lack strength. However, Sensex and Nifty remain relatively stronger among them and could outperform if they break their immediate resistances. 53000 on Sensex and 15900 on Nifty are important levels to watch. Nikkei and Shanghai lack strength to see a strong rise. Nikkei can fall to 28500-2800 while it remains below 29000. Shanghai looks vulnerable to break the 3500-3625 range on the downside. Dow was closed yesterday and need to see if it can breach 35100 this week. DAX continues to oscillate around 15600 within its 15400-15800 range.

Dow (34786.35) was closed yesterday. It will have to be seen if it can rise past the 35000-35100 resistance zone from here or not this week. Else, as mentioned yesterday, a fall back to 34000-33500 again cannot be ruled out.

DAX (15661.97, +11.88, +0.08%) continues to oscillate around 15600. The immediate outlook is mixed. 15400-15800 is the possible range of trade. A breakout on either side of this range will decide whether the index can move up to 16000-16200 or fall to 15200-15000 from here.

Nikkei (28732.57, +134.38, +0.47%) has bounced today but needs to rise past 29000 from here to ease the downside pressure of breaking below 28500 and falling to 28000. We will have to wait and watch for a few sessions. While below 29000, a fall to 28500-28000 cannot be ruled out in the coming days. As mentioned yesterday, 28000 is a strong support while above which the long-term trend will still remain up.

Shanghai (3520.17, −14.15, -0.4%) has come-off today and seems to lack strong follow through rise. This keeps alive the danger of the index breaking the 3500-3625 range on the downside and extend the fall to 3450-3400. However, from a long-term perspective, the trend will be up to target 3700-3800 on the upside as long as the index stays above 3400.

Sensex (52880, +395.33, +0.75%) and Nifty (15834.35, +112.15, +0.71%) have risen sharply and are coming closer to their key resistances. 53000 on Sensex and 15900 on Nifty will have to be broken for the indices to gain fresh momentum and rise further to 54000 and 16000-16200 respectively. While these resistances hold, the 52000-53000 (Sensex) and 15600-15900 (Nifty) range can continue to hold for some more time.

COMMODITIES

Crude prices rose sharply as the OPEC+ meeting scheduled yesterday saw dispute between Saudi Arabia and UAE who opposed each other leaving the OPEC+ to abandon the meeting without any final conclusion on output cuts. UAE is opposing Saudi Arabia to extend the current deal to 2022 with phased increased in production. This clash between the two major countries could keep taking crude prices higher. Copper too rose sharply as the inventories in warehouses monitored by the Shanghai Futures Exchange fell 7.3% from last Friday. Copper, if breaks above 4.40/50 can be headed higher towards 4.60/65 else can face rejection in the next few sessions. Gold and Silver look bullish too for the near term and can rise towards 1800-1820 and 27-28 respectively.

Brent (77.58) and WTI (74.99) have risen sharply as the OPEC+ ended the meeting without any conclusion on production cuts. The clash seen between UAE and Saudi Arabia could continue to boost oil prices and we may expect Brent to soon test $80 on the upside before a dip is seen from there. WTI has risen above $75 and could move up too towards $77/78 before any decline is seen in the medium term. Immediate view is bullish.

Gold (1797.50) has risen well and could rise towards 1820 on a break above 1800. Immediate view is bullish.

Silver (26.70) is headed towards 27-28 in the near to medium term. View is bullish for now.

Copper (4.3630) has risen sharply too in line with bullishness seen in other commodities. It has come up to test upper immediate resistance near 4.40/50. Any break above 4.50 seen in the near term could turn bullish towards 4.60/80 on the upside else a decline from 4.50 could be in place this week itself. Watch price action near 4.50/40.

FOREX

Dollar Index has dipped taking Euro higher. Dollar Index may head towards 92 while Euro can test 1.19. EURJPY looks ranged without any clarity of which way to go. USDCNY trades lower and a stronger Euro and Chinese Yuan could be positive for Rupee today bringing down USDONR towards 94. Pound and Aussie have risen well too and looks bullish for the very near term.

Dollar Index (92.16) has dipped in line with strong commodities today but could be short lived as we may expect a bounce from 92 in the near term. A sustained break below 92 is needed for the index to turn bearish towards 91.50 or lower in the longer run. For now, watch for a bounce from 92.

Euro (1.1872) has risen slightly as the Dollar Index dipped. Euro could have scope for a rise towards 1.1880-1.190 before any decline is seen again from 1.19. Any break above 1.19, if seen will be bullish for the medium term.

EURJPY (131.62) has been stable between 131.40-132 region and view is unclear just now for a possible break out on either side of the range. We will have to wait and watch for further clarity on movement from current levels.

Dollar-Yen (110.84) has dipped below 111 and could be headed towards 110.50 or lower in the near term before again bouncing back from there.

Aussie (0.7559) has risen well and while Aussie heads higher we may expect a test of 0.76-0.7650 soon on the upside. Immediate view is bullish.

Pound (1.3878) has bounced well and looks bullish for a rise towards 1.39-1.3950 n the near term. View is bullish for the near term.

USDCNY (6.4630) has dipped and could fall towards 6.45 before again rising towards 6.47/48 in the medium term.
Strength in Chinese Yuan and Euro against the dollar looks positive for

USDINR (74.3050) and could bring down the pair towards 74. Any break below 74 if seen would indicate that a near term top is in place and the pair could be headed lower in the medium term. A rise above 74.40 is needed for the pair to again rise higher but that looks less likely just now.

INTEREST RATES

The US markets were closed yesterday. It will have to be seen if the 10Yr Treasury yield can sustain above its important support this week or not which is needed to avoid a deeper fall from here. The German yields have bounced yesterday and need to see if it can get a strong follow-through rise from here to ease the danger of breaking their important supports. The 10Yr GoI has risen on low volumes but has to breach 6.1% to move up further. The 5Yr GoI has resistance at 5.78%-5.79% from where it can reverse lower again.

The US 2Yr (0.23%), 5Yr (0.86%), 10Yr (1.44%) and 30Yr (2.06%) Treasury yields were closed yesterday. It will have to be seen if the 10Yr can manage to sustain above its crucial support region of 1.4%-1.35% this week. We will have to wait and watch.

The German 2Yr (-0.67%), 5Yr (-0.59%), 10Yr (-0.21%), 30Yr (0.29%) yields have bounced-back across tenors. A strong follow-up rise from here is needed to reduce the danger of breaking below the supports at -0.30% (10Yr) and 0.25% (30Yr) mentioned yesterday. A break below the above mentioned supports can drag the yields lower to -0.45% (10Yr) and 0.10% (30Yr) in the coming days. It will also negate our bullish view of seeing a rise to 0% (10Yr) and 0.55% (30Yr).

The 10Yr GoI (6.0877%) has risen sharply above 6.06%, on low volumes though. It will have to be seen if it can rise past 6.10% from here which will then pave way for further rise and delay the break below 6% that we had been expecting. The 5Yr GoI (5.7594%) remains higher and has room to test 5.78%-5.79% on the upside and then reverse lower.

Key Highlights

• GBP/USD started a minor upside correction from 1.3730.
• There was a break above a major bearish trend line with resistance near 1.3810 on the 4-hours chart.
• The UK Services PMI increased from 61.7 to 62.4 in June 2021.
• The US ISM Services PMI is likely to remain strong near 63.5 in June 2021.

GBP/USD Technical Analysis

The British Pound extended its decline below 1.3800 against the US Dollar. GBP/USD traded as low as 1.3731 before it started an upside correction.

Looking at the 4-hours chart, the pair recovered above the 1.3800 resistance zone. It even surpassed a major bearish trend line with resistance near 1.3810. Moreover, the pair broke the 50% Fib retracement level of the recent decline from the 1.4001 high to 1.3731 low.

An immediate resistance is near the 1.3900. It is close to the 61.8% Fib retracement level of the recent decline from the 1.4001 high to 1.3731 low.

The first major resistance is near the 1.3910 zone. The next major resistance sits near 1.3940 and the 100 simple moving average (red, 4-hours).

On the downside, there is a key support forming near 1.3800. The next major support is near the 1.3780 level, below which the pair could revisit 1.3730.

Overall, GBP/USD could gain momentum if it is able to surpass 1.3900 and 1.3910. Similarly, EUR/USD must climb above 1.1950 to start a decent recovery wave.

Economic Releases

• US Markit Services PMI for June 2021 – Forecast 63.9, versus 63.9 previous.
• US ISM Services PMI for June 2021 – Forecast 63.5, versus 64.0 previous.

Short term Elliott Wave suggests the rally from June 17, 2021 low is unfolding as a 5 waves impulsive Elliott Wave structure. Up from June 17 low, wave ((i)) ended at 74.25 and wave ((ii)) pullback ended at 72. Internal of wave ((ii)) unfolded as an expanded Flat. Down from wave ((i)), wave (a) ended at 72.32, rally in wave (b) ended at 74.45, and wave (c) lower ended at 72. This completed wave ((ii)) in higher degree.

Oil has resumed higher in wave ((iii)). Internal of wave ((iii)) is unfolding as a 5 waves impulse structure. Up from wave ((ii)), wave (i) ended at 74.14 and pullback in wave (ii) ended at 72.97. Oil then extends higher in wave (iii) towards 76.22, and pullback in wave (iv) ended at 74.41. Wave (v) is in progress and expected to complete soon, then it should complete wave ((iii)) in higher degree as well. Afterwards, it should pullback in wave ((iv)) before the rally resumes. Near term, as far as June 29 pivot low at 72 remains intact, expect dips to find support in 3, 7, or 11 swing for further upside.

Oil 45 Minutes Elliott Wave Chart

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