eFXplus DATA

NAB Research discusses its tactical views on EUR/USD and EUR/GBP. 

"We don’t currently see the ECB moving at the 25 July meeting, meaning nothing until the September meeting. That continues to leave the focus on Fed easing and for now a weaker USD.  We suspect EUR/USD will struggle to break 1.15-1.1575 for now, meaning the DXY index is likely to find support around the 94 June 2018-19 range floor," NAB notes. 

"With the USD on the back foot for the coming weeks, GBP/USD can hold its own, but that will leave EUR/GBP sideways to higher. A move in EUR/GBP up to between 0.90-0.92 looks inevitable over the summer given the worsening political backdrop," NAB adds. 

• GBP/USD weak into NY close -0.49% at 1.2676; NorAm range 1.2753-1.2672
• Fed's Powell moderates dovish Fed tone, sees strong U.S. growth
• GBP/USD dogged by UK political, Brexit fears; potential no-deal Brexit
• Hunt would make decision on no-deal Brexit before Oct 31 nL8N23W5E6
• GBP/USD fails again abv 1.2750, eyes 10-DMA support 1.2657
• EUR/GBP +0.09% at 0.8954; USD broadly weak into close, Brexit angst hits GBP

AUD/USD hit a six-day peak and bulls appear ready to test the 76.4% Fib of 0.7025-0.6832, 55-DMA, daily cloud base and possibly June's 0.7025 high ahead of this week's G20 meeting.
Downbeat results from U.S. May new home sales nLNSPHEF5W and June consumer confidence nN9N21F02P fueled AUD/USD gains, as the data drove eurodollar and fed funds futures prices higher, suggesting increased chances of Fed rate cuts.
The U.S. Treasury yield curve also shifted lower, allowing for tighter Australian-U.S.
spreads.
The move down for the U.S. rate complex could be a sign that the Fed could embark on an aggressive rate cut path.
Short-term rates markets in the U.S. now price in nearly 80 bps of Fed cuts by December 2019 FEDWATCH.
Australian rates markets have just over 55 bps of cuts for the same time period RBAWATCH.
The disparity in the pace of expected cuts should keep the greenback on the defensive against the aussie.
Elevated net-short aussie positions should benefit longs as well. If this week's G20 see even the slightest progress made on U.S.-Sino trade relations, risk assets and high beta currencies like the aussie should rally. A rise above June's high would leave the market targeting 0.7070 resistance and the 200-DMA.

Citi Research discusses its expectations for this weekend's Xi-Trump meeting and for tonight's RBNZ June policy meeting.

G20 - "This week’s focus will turn to the G20 meet between Presidents Trump and Xi. Citi’s base case is for a US-China handshake but risk of tariffs remain," Citi projects. 

RBNZ meeting - "Citi analysts expect RBNZ to keep the OCR unchanged at 1.50% this week but retain the option of future cuts. Dovish concerns are driven by the global outlook but domestic activity remains solid with “employment near its maximum sustainable level”. The policy statement could conclude by saying “we will keep OCR expansionary for a considerable period to contribute to maximizing sustainable employment and maintaining low and stable inflation," Citi adds. 

• Cable elicited support pre-1.2708 after extending south from 1.2784
• 1.2708 was Monday's low. 1.2784 = early Europe five-week high
• Drop to threaten 1.2708 influenced by no-deal Brexit fear
• No-deal Brexit: what it might mean for UK economy nL8N23W1L4 nL8N23V2MG
• GBP/USD support points below 1.2708 include 1.2683 (30DMA) and 1.2643
• 1.2643 was June 21 low, before Kashkari's 50bp rate cut call nN9N21F02I

CIBC Research discusses its reaction to today's Canada's wholesale trade print for the month of April.

"Bucking the trend in recent releases, wholesale trade blasted ahead in April. Sales rose 1.7% on the month, and that comes after a robust 1.4% gain in March. Volumes were equally strong, up 1.6% on the month. A sharp rebound was seen in the auto sector, advancing 3.2% after a 1.9% decline in March. Gains were, however, relatively broad-based, with five of seven sectors, representing 86% of sales, higher. Outside of autos, strength was seen in machinery and equipment," CIBC notes. 

"We had been looking for an increase of 0.1% for April GDP, but following this heady report, it's looking like the economy actually advanced by a healthy 0.2% during the month," CIBC adds. 

• AUD/USD eyes 0.6972 as dovish Fed expectations continue to weigh on USD
• 0.6972 was new two-week peak in Asia . 0.6969 was Monday's high
• Mooted offers near 0.70 may cap AUD/USD if it builds on its recent gains
• 0.6832 was 23-week low seven days ago (June 18), before dovish Fed hurt USD
• 25bp Fed rate cut for July 31 is fully priced, with risk of a 50bp cut
• RBA cash rate verdict next week (July 2): 25bp cut is 88% probability

• Rally pauses Monday, new 1.2784 trend high Tues but price looks stretched
• Eyeing sharply narrowing Bollingers, warning of a pick up in volatility
• Early Tues pullback giving a long upper candle wick, bearish
• Momentum and RSI giving little away and short-term averages flattening out
• Converged 10 and 21DMAs losing some significance but pivotal today 1.2670
• Bulls with an eye on further gains target 1.2849, 50% Fibo 1.3190-1.2507

• Talk of very large dollar selling is emerging in relation to month-end
• Equity rebalancing flows notoriously hard to predict but FX specs follow
• Such talk will inspire traders to buy EUR/USD at now elevated levels
• The biggest month-end move often proves to be spec unwinding
• Profit taking EUR/USD sales, perhaps stops, may outweigh equity linked flow
• EUR/USD has also reached must sell levels for corps, CBs, other real money
• EUR/USD has traded 1.12-1.15 most 2019, These are poor level to enter longs

• Five-day bull run extends to 1.1412, strong momentum confirming the move
• Beginning to look strained above 1.1400 however and daily RSI is diverging
• Could just reach 1.1460, 76.4% Fibo 1.1570 to 1.1106 before lower
• Daily cloud seen pivotal to the bull bias, top at 1.1279
• Note a cloud twist at 1.1230 out to July 12, could begin to influence price
• Bulls in control but need consolidation/pullback to 200DMA to keep on top
• Band of major weekly resistance also standing in the way: 1.1416 to 1.1485

• EUR/USD upside potential valid above 200 DMA, in uptrend channel
• Daily chart shows momentum strong - Chikou line above Cloud
• Weekly chart concurs, as break of 200 WMA confirmed last Fri
• But weekly Ichimoku Cloud looming at 1.1437 could deter fresh buying
• Needs catalyst in order to clear final barrier to 1.1500
• Fed's Kaplan tries to tamp down dovish Fed view nN9N21F02Q

EUR/USD: 

24-HOUR VIEW EUR could continue to edge higher but the strong 1.1450 resistance is still likely out of reach. Yesterday, we held the view that the rally in EUR “has scope to extend above 1.1400 but for today, the major 1.1450 is not expected to come into the picture”. While EUR extended its advance as expected, it only touched 1.1403 before ending the day near the high (NY close of 1.1396). The rally in EUR is deep in overbought territory now but with no sign of weakness just yet, EUR could continue to edge higher even though 1.1450 is still likely out of reach (there is another resistance at 1.1430). Support is at 1.1375 followed by 1.1350.

1-3 WEEKS VIEW Scope for rally to extend further but EUR is expected to face solid resistance at 1.1450. EUR edged above 1.1400 yesterday the first time in about 3 months as it touched an overnight high of 1.1403. The price action is not surprising as our view (see update from yesterday, 24 Jun) remain unchanged wherein there is scope for the rally in EUR to extend further but solid resistance is expected near 1.1450. All in, the current advance has gathered more momentum and the risk is still firmly on the upside. Only a move below the 1.1320 ‘key support’ (level was at 1.1275 yesterday) would indicate that the current ‘positive phase’ has run its course.

GBP/USD: 

24-HOUR VIEW GBP is expected to trade sideways, likely between 1.2700 and 1.2770. We expected GBP to “move above the month-to-date high of 1.2763” yesterday but were of the view the next resistance at “1.2800 is unlikely to yield so easily”. GBP subsequently touched 1.2766 before staging a relatively rapid pull-back. Upward momentum has eased considerably and GBP has likely moved into a consolidation phase. In other words, GBP is expected to trade sideways for today, likely between 1.2700 and 1.2770.

1-3 WEEKS VIEW A NY closing above 1.2763 would indicate start of a ‘positive phase’. We detected the uptick in momentum since last Thursday (20 Jun, spot at 1.2655) and held the view that GBP “could test the month-todate high of 1.2763”. In that context, the rise in GBP that touched an overnight high of 1.2766 was not surprising. However, upward momentum has not improved all that much and we continue to hold the view that only a NY closing above 1.2763 would indicate the start of a ‘positive phase’ in GBP (see update from yesterday, 24 Jun). For now, the prospect for such a scenario is not that high but it would continue to improve as long as GBP does not move below 1.2650. Looking ahead, if GBP were to close above 1.2763, it could lead to an advance towards 1.2850.

AUD/USD:

24-HOUR VIEW Improved momentum suggests a move above 0.6980 would not be surprising but 0.7000 is unlikely to break. Our view for AUD yesterday was for it to “move higher but 0.6980 could be just out of reach for now”. AUD subsequently rose to 0.6969 before ending the day on a firm note at 0.6962. In view of the improved momentum, a move above 0.6980 would not be surprising but the prospect for a break of the next resistance at 0.7000 is not high. On the downside, 0.6930 is likely strong enough to hold for today (minor support at 0.6950).

1-3 WEEKS VIEW AUD has moved into a sideway-trading phase, likely to probe the top of the range first. The price action in AUD is line with our narrative from last Friday (21 Jun, spot at 0.6920) wherein AUD has “moved into a sidewaytrading phase” but the improved underlying tone suggests it could “probe the top of the expected 0.6860/0.6980 range first”. The 0.6980 level appears to be within reach as AUD touched 0.6969 during NY hours. Despite the relatively strong gains, upward momentum remains lackluster and the prospect for a sustained rise above 0.6980 is still not high. That said, the risk is tilted to the upside as long as AUD does not move below 0.6860. On a shorter-term note, 0.6900 is already is strong level. Looking forward, if AUD can move and stay above 0.6980, it would suggest the month-to-date peak at 0.7022 would come under threat.

NZD/USD: 

24-HOUR VIEW NZD could test 0.6645 first but a sustained advance above this level is not expected. We highlighted yesterday NZD “could probe the 0.6620 resistance but any gain is viewed as part of a 0.6570/0.6620 trading range”. The subsequent advance was a tad stronger than anticipated as NZD rose to 0.6626 before settling on a firm note at 0.6619. From here, the improved underlying tone suggests NZD could test 0.6645 first but for today, a sustained advance above this level is not expected (the next resistance is some distance away at 0.6680). On the downside, 0.6590 is likely strong enough to hold any intraday weakness (minor support is at 0.6605).

1-3 WEEKS VIEW NZD has moved into a ‘positive phase’ with eyes on 0.6680. We detected the pick-up in momentum last Thursday (20 Jun, spot at 0.6555) and held the view that “the recovery in NZD could test 0.6620”. Upward momentum has improved further as NZD touched 0.6626 yesterday (24 Jun) before closing on a firm note at 0.6619 (+0.44%). From here, NZD is deemed to have moved into a ‘positive phase’ with eyes on the month-to-date peak near 0.6680. On the downside, the ‘key support’ is at 0.6570 (was previously a ‘strong support’ at 0.6540).

USD/JPY: 

24-HOUR VIEW USD could continue to trade sideways, likely within a 107.05/107.55 range. Expectation for sideway trading yesterday was not wrong as USD had a quiet session and traded within a narrow range of 107.23/107.53. Momentum indicators are still mostly ‘neutral’ and USD is expected to continue to trade sideways, likely between 107.05 and 107.55.

1-3 WEEKS VIEW Break of 107.00 would shift focus to 106.60. No change in view from yesterday, see reproduced update below.

USD tried but failed to break the 107.00 level that was first highlighted last Thursday (20 Jun, spot at 107.70). The price action was not exactly surprising as deeply oversold shorter-term conditions suggest USD could consolidate and trade sideways for 1 to 2 days. As long as the ‘key resistance’ at 108.00 is intact (no change in level from last Friday), the current ‘negative phase’ that started 3 weeks ago (03 Jun, spot at 108.30) appears to have legs to extend lower. From here, a break of 107.00 would indicate that USD is ready to tackle the next support at 106.60.

• Flat in Asia, though a nearly 20 pt range and good volume at the Asia open
• RBA's Lowe thought less dovish yesterday, maybe a mistake
• He kept pressure on the gov't to foster growth, while the RBA cuts rates
• RBAWATCH OIS has a July cut at 88.26% and another in November fully priced
• Charts - momentum studies climb, 5, 10 & 21 DMAs conflict at neutral levels
• Neutral setup - today's 0.6954/0.6972 Asian range initial support/resistance
• AUD largely USD driven in the last week and that likely sustained into G20

• Flat, consolidating yesterday's 0.3% gain, as UST yields slipped
• Hard to make a fundamental case for EUR strength - market still short
• Yesterday's strong close validated Friday's bullish outside week
• Close above 1.1348 200 DMA and 1.1392, 61.8% of 2019 fall, a strong break
• Momentum studies head north, 5, 10 and 21 DMAs trend higher, positive setup
• Next stop is the 1.1448 March high, then 1.1460, 76.4% of the 2019 fall
• A close below the 1.1348 200 DMA needed to undermine the topside bias

• Flat after opening little changed, despite a broadly softer USD
• EUR/GBP closed +0.3%, as ongoing UK political uncertainty weighs on GBP
• Boris Johnson's proposed tax cuts will be very expensive nL8N23V55W
• 'No deal' Brexit threat is real, Boris appeases right wing nL8N23V6CI
• Momentum studies climb, 5, 10 & 21 DMAs base/rise - positive setup
• Sustained 1.2770 break would initially target 1.2849, 50% May/June fall
• NY 1.2708 low and early London 1.2766 high are initial support/resistance

• EUR/USD up 0.26% Monday as trend higher continues on dovish Fed expectations
• Friday's close above 200-day MA & 200-week MA (both 1.1348) supports
• A close below the 200-day MA would relieve the upward pressure
• Resistance at 1.1445/60 where March 20 high & 50% of 1.1815/1.1105 converge
• EUR/USD likely to consolidate in Asia, as market awaits Trump-Xi meeting

NAB discusses NZD/USD technical outlook and flags a scope for further gains in the near-term ahead of 0.6680.

"The break of previous 2019 range lows at 0.6575/80 delivered a test towards our one-month target (low of 0.6482), however this indecisive downside breakout has now completed a triple bottom, highlighting strong support  at 0.6480/00," NAB notes. 

"ST momentum bias has shifted to positive, confirming further short squeeze risk. MT momentum has shifted to a neutral bias confirming a necessary pause in the  well-established downtrend. We anticipate a short squeeze being capped in the May/June 0.6480/0.6680 range before the MT downtrend again takes hold," NAB adds. 

• German IFO downbeat but mostly above consensus, EUR/USD buoyed
• Dallas Fed June mfg index falls again , US$ trades heavy
• EUR/USD range tight in NY but US$ sales lead to 1.1400 barrier break
• Techs are bullish, RSIs rise & not overbought, pair above 200-DMA
• EUR/USD shorts nervous as they face growing upside risks

AUD/USD broke above the 21-DMA and set a new 5-day high as risks for shorts increase.
Today's Dallas Fed June manufacturing index fell to -12.1 from -5.3 in May, which bolstered market expectations for Fed cuts.
Rates markets have 25 bps of cuts for July 31 fully priced in and are beginning to factor in 50 bps of cuts FEDWATCH.
U.S. rates markets price in a total of 75 bps of cuts by 2019's end while Australian markets foresee just over 50 bps for the same period RBAWATCH.
The expectations disparity helped tighten Australian-U.S.
yield spreads and lift AUD/USD.
Comments from RBA Governor Lowe overnight also helped boost AUD/USD as he said it is legitimate to question the effectiveness of global monetary easing.
Lowe also said if everyone is easing the effect on exchange rates is offset nS9N21I020.
Lowe's comments could be taken by some investors as a reluctance to cut aggressively, which could underpin AUD/USD.
As it stands now AUD/USD bulls are gaining greater control and technicals highlight that.
RSIs are rising, a monthly doji candle has formed and the 21-DMA lends support.
Tests of the 55-DMA, daily cloud base and June high seem likely.
The 200-DMA will be targeted if June's high breaks.

Nordea Research discusses EUR/USD outlook and keeps flagging long EUR/USD position as the second-best G-10 FX trade in months leading up to the first Fed cut, only outpaced by a long EUR/NZD position.

"As we have shown in recent FX Weeklies, long EUR/USD is usually a super trade in the month heading into the first Fed cut. Only long EUR/NZD has a better track-record in to the first Fed cut.

ECB easing is also a done deal now, as Draghi hinted of easing unless the outlook improves (more QE and a rate cut). The outlook will not improve (before 2020), but the ECB usually delivers when projections are updated – i.e. in September (they will ease with a time-lag after the Fed)," Nordea notes.