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EUR/USD

Current level - 1.1159

The outlook here is bearish below 1.1180 resistance, for a slide through the local low at 1.1132, towards 1.1020 major support.

Profit-taking affects gold curbing silver and platinum

Resistance Support
intraday intraweek intraday intraweek

1.1180

1.1360

1.1108

1.1022

1.1300

1.1610

1.1020

1.0838

 

USD/JPY

Current level - 111.58

The violation of the previous high at 111.40 signals, that the uptrend is renewed, heading for a break through 112.10 area, towards 113.00 zone.

Resistance Support
intraday intraweek intraday intraweek

112.10

112.10

111.40

109.08

113.00

114.30

109.10

108.12

 

GBP/USD

Current level - 1.2739

My outlook here remains bearish below 1.2825, for a slide through 1.2634 low, towards 1.2480 support area. 

Resistance Support
intraday intraweek intraday intraweek

1.2825

1.2970

1.2685

1.2610

1.2880

1.3050

1.2610

1.2480

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GBPAUD bias is to the downside after a break below the 50-day moving average and below the key psychological 1.7000 level on June 9.

Momentum oscillators are showing that the downside bias is gathering momentum. RSI is trending down and is below 50 in bearish territory, while MACD is also showing bearishness as it is below zero and falling.

Prices are currently testing the 200-day moving average at 1.6654. It is expected to provide support but a daily close below it would bring about more weakness in the market and accelerate a further decline. Next support would come into view at 1.6240 before 1.5902 (March 16 low).

To the upside, major resistance is provided by the psychological 1.7000 level. A break above this opens the way towards 1.7200 and 1.7500.From here, we could see a re-test of the high at 1.7650. This would bring about a bullish bias and a resumption of the uptrend from 1.5902.

As long as the market can stay above the 200-day moving average, the uptrend that took place from 1.5902 to 1.7650 will likely remain intact. But the short-term bias is to the downside. Looking at the bigger picture, the pair has a neutral outlook.

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The US dollar was firmer on the back of hawkish comments from Federal Reserve officials. Sterling held onto Monday's losses as all eyes turn to the mansion House speeches later by Bank of England Governor Mark Carney's speech and UK Chancellor Philip Hammond. The aussie rose despite mixed RBA minutes.

The greenback rose to a 3-week high against the yen at 111.76 as higher US Treasury yields helped lift the US currency. Comments from New York Fed President William Dudley and Chicago Fed President Charles Evans on Monday suggested the US central bank will continue on its rate hike path. Vice-Chair Stanley Fischer speaks later today.

The aussie rebounded after Australia's central bank released minutes of its latest policy meeting. The minutes showed the RBA remains concerned about high household debt and its threat to financial stability but despite this, the central bank gave a relatively upbeat assessment of the economy, suggesting to markets that it will not cut rates in the near future. This helped the Australian dollar rebound to eventually rise above the key $0.7600 level by late session trading.

The pound will be in focus today as the UK's finance minister and Bank of England governor are due to speak later at Mansion House. Any hint by Governor Carney that suggests he sees no rush to raise interest rates would be negative for the pound. Meanwhile, markets are eager to see what Philip Hammond will say regarding Brexit. Cable touched a session low of $1.2722 before rising towards $1.2750.

The euro traded near lows of $1.1140, close to 2-week low of $1.1131 touched on June 15.

In commodities, gold fell to $1242.76 an ounce, its lowest in a month, while WTI crude oil continued to trade below the key $45 a barrel level.

Source: Author: XM

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Investors fell in love again with tech stocks. The sector which was held responsible for the pullback in equities in the last two weeks is driving indices to record highs. Suddenly valuations are no longer a worrying factor, and Fed tightening is less of a concern. It seems like bargain hunters were waiting for the opportunity to dive in. Although many market participants considered tech stocks either expensive or bubble-like after the S&P 500 information technology sector soared 22% from the beginning of the year to 9 June, it still doesn't make sense to compare this rally with the tech bubble burst in 2000. The current leaders in the sector are the FAAMG's 'Apple, Alphabet, Microsoft, Amazon, and Facebook'. Their aggregate average forward P/E ratio stands at around 23.5, which is less than half the forward P/E for big tech stocks in 2000. Cash balances are more than six times higher than the levels of 2000 and cash flows are in a much better shape. Although valuations are not comparable to 2000, they are still high in contrast to previous levels. Given that earnings are expected to continue growing at a rapid pace, the overstretched valuations are justified, and any dip will be seen as an opportunity to buy.

Comments from New York Fed President William Dudley provided the dollar with a boost yesterday. He seemed confident that inflation would return as the jobs market pushes wages higher. More interestingly, he said that he is not paying too much attention to signals of concern from bond markets, which has been flattening for some time. Fixed income traders were sending negative messages more recently, the most obvious being that they don't believe the tightening cycle path will continue as expected. Although yields on ten-year bonds moved higher after Dudley's comments, they are still not signaling high confidence in economic growth. Thus, economic data in the next couple of weeks should be robust enough to convince bond investors that the economy is on the right track, and for the dollar to continue appreciating. Fed Vice Chair Stanley Fischer is due to speak today. If he shares Dudley's views, the dollar is likely to continue rallying.

Brexit talks began yesterday. The first day of the negotiations ended calmly with both sides agreeing to focus on Britain's exit bill and the rights for EU citizens living in the UK and vice versa. It will probably take some time for negotiations to start influencing the Pound's direction. Instead, investors today will focus on what BoE's Mark Carney has to say after three MPC policymakers voted to raise interest rates last week. Rising prices and falling wages is one of the biggest challenges a central bank can face, and investors need more clarity on what tools are available to tackle these problems.

Source: ForexTime

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The RBA is getting more concerned about the outlook for consumption and, just as it didn't get too depressed by the rise in the unemployment rate to 5.9 percent earlier this year, it won't get too excited by the fall to 5.5%.' - Paul Dales, Capital Economics

The Reserve Bank of Australia remained concerned over employment and the housing market, official data released on Tuesday showed. The Central bank said that real estate prices were surging in Sydney and Melbourne but noted that price pressures started to ease to some extent, minutes of the Bank's last meeting when policymakers kept interest rates unchanged at 1.50% revealed. Apart from that, the RBA said that employment growth improved significantly over the past several months, while the number of hours worked dropped. The Bank held its meeting before employment data for May was released and showed that the jobless rate fell to a four-year low of 5.5% and the economy gained new jobs for the third consecutive month. Policymakers expressed concerns over housing debt, as it offset household earnings. The RBA stated that weak pay growth would unlikely rebound in the near future and, therefore, consumer spending is expected to remain weak. Despite the weak Q1 performance, policymakers said that economic growth would likely pick-up in the upcoming quarters.

 

Author: Dukascopy Swiss FX GroupWebsite: http://www.dukascopy.com/

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Dollar rose mildly overnight but strength was so far limited. Comments from Fed officials were mixed and provided little guidance to the greenback. Meanwhile, Japanese Yen trades broadly lower on solid risk appetite and recovery in yields. DOW and S&P 500 surged to record close at 21528.99 and 2453.46 respectively. Nikkei followed and gains 0.81% to 20230.41. US 10 year yield recovered by adding 0.033 to 2.190, but it's still limited below 2.229 resistance. Similarly, dollar index is held below 97.77 resistance. EUR/USD is also staying above 1.1109 support. There is no change in Dollar's bearish trend yet.

Mixed comments from Fed officials

Comments from Chicago Fed President Charles Evans suggested he could lean towards waiting until the of the year to decide whether to raise interest rate again. He noted that "I don't see why we would not be served to allow more time to wait." He said that the current environment of low inflation "supports very gradual rate hikes and slow preset reductions in our balance sheet". And, "it remains to be seen whether there will be two rate hikes this year, or three, or four or exactly when we start paring back reinvestments of maturing assets." Evans urged Fed to "assure the public that we recognize the new low-inflation environment and that we are not overly conservative central bankers who see our inflation target as a ceiling."

On the other hand, New York Fed President William Dudley was more positive. He didn't sound much concerned with low inflation. Instead, he noted that the US is "pretty close to full employment. And if labor market continues to tighten further "wages will gradually pick up". And with that "inflation will gradually get back to 2%". Regarding the economy, Dudley also expressed that he is "confident" that the expansion has "quite a long way to go".

Timetable and structure agreed for Brexit negotiation

UK and EU representatives met in Brussels yesterday for the first formal Brexit negotiation. Agreement was made that talks until October should focus on the three issues of financial settlement, citizens rights and Northern Ireland. Further talks will be held in the weeks of July 17, August 28, September 18 and October 9. UK's Brexit Minister David Davis said he was "encouraged" by the first talks that "laid solid foundations for future discussions and an ambitious but achievable timetable". On the other hand, EU's chief negotiation Michel Barnier said that little was achieved other than setting a timetable and a structure for negotiations.

BoE Forbes warned of costs of waiting too long

The hawkish BoE MPC member Kristin Forbes warned that for a period, policy makers have been "underestimating the inflationary pressures". And there's a "cost to waiting" before the central bank raise interest rates. She noted that "the increase in headline inflation isn't just a temporary effect of the exchange rate that's going to go away." And policy makers have to be "very cautious in how these exchange-rate effects will affect these permanent components of inflation." She also said that that "if you wait for wage growth to pick up, you've waited too long." Forbes will end her term by the end of this month. BoE has appointed Silvana Tenreyro, an economics professor at the London School of Economics, to replace Forbes.

RBA minutes added nothing new

RBA minutes showed that the central bank was confident that growth will pick up again the the weak Q1. Nonetheless, the board cautioned the developments in labor and housing markets and said they "warranted careful monitoring". In particular, the minutes said that "members observed that low growth in incomes, along with high levels of household debt, appeared to have been constraining growth in household consumption." Overall, the minutes added little to what Governor Philip Lowe said yesterday. Lowe painted an optimistic picture and said that growth over the next couple of years will be "a bit stronger than it has been recently".

On the data front...

Australia house price index rose 2.2% qoq in Q1. German PPI dropped -0.2% mom, rose 2.8% yoy in May. Eurozone will release current account today. US will release current account later while Canada will release wholesale sales.

USD/JPY Daily Outlook

Daily Pivots: (S1) 110.96; (P) 111.27; (R1) 111.84; More...

USD/JPY's rally continues today and breaches 111.70 resistance. Intraday bias remains on the upside for near term channel resistance (now at 113.02). Sustained break there will suggest that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. On the downside, below 110.63 minor support will turn intraday bias neutral. Break of 108.81 will extend the fall from 118.65 through 108.12 low before completion.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Source: Action Forex

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