eFXplus DATA

• USD/JPY runs into rsst by 200-WMA & 61.8% of 2017-18 slide @113.27-28
• US housing starts miss, tariffs' stagflation risk steepen Tsy curve
• S-T O/B risk, but uptrend intact while above c111.40 breakout point
• Slew of resistance from 113.27 to 115 likely to slow the advance
• Eyes on whether CNY will be let to slip further & weigh on JPY

AUD/USD is likely to extend its bearish trend as Fed chief Powell's firm stance on U.S. rate hikes and troubles for China's currency present difficulties for the Aussie. Powell's congressional testimony gives the green light to U.S. dollar bulls looking to buy dips.
By reiterating the need for continued hikes, he bolstered the greenback's yield advantage over the Aussie dollar.
China's yuan, trade issues with the U.S. and slowing economy should keep AUD/USD bulls in-check as well.
The yuan hit a new trend low today and there are no signs the PBOC will step in to halt the slide.
Recent Chinese economic data show growth continuing to slow while China-U.S.
trade tensions continue to escalate nB9N1U401O.
Since the Aussie dollar remains a proxy for China, those factors are likely to help limit any gains for AUD/USD.
Technicals bolster a bearish view.
Consolidation of long-term losses persists and should resolve with a break lower while RSIs still provide bears a momentum tailwind.
The 0.7300/20 zone remains support but seems set to break.
Once broken, AUD/USD bears will put 0.7110/ support in their sights.

MUFG Research discusses GBP outlook and notes that the negative impact of heightened UK political uncertainty on the performance of the pound is becoming more evident, which along with today's soft UK CPI print could prompt rate hike expectations to be pushed back significantly. 

"The latest developments clearly highlight the government’s fragile grip on power and lack of flexibility in Brexit negotiations.

Understandably market participants are building in a higher risk premium into the pound to reflect heightened uncertainty, and the risk premium may need to rise further heading into year ahead. The one reassuring development for the pound is that the numbers in parliament should still favour a softer Brexit when it comes to the crunch even if the votes this week do not back up our view," MUFG adds. 

EUR/USD probably won't get much of a boost from today's surprisingly weak U.S. housing data, with dollar bulls likely to use the event as an opportunity to buy the greenback on the dip. Fed chief Powell's upbeat congressional testimony and signal of continued gradual monetary tightening has buoyed rates and left the market expecting them to remain elevated.
That should keep the dollar's significant yield advantage over euro intact and temper any EUR/USD gains, especially since expected incremental ECB rate hikes aren't likely until summer of 2019 at the earliest.
Technicals should also help limit EUR/USD bounces.
The pair now trades below the bearishly aligned 10, 21 and 55-DMAs as well as the daily cloud base while falling RSIs provide a stiffer tailwind for EUR/USD bears.
Any dip in the dollar will be seen as an opportunity for EUR/USD bears to get short as a test of June's low and large 1.1500 seems very likely.

TD Research discusses GBP/USD outlook and sees a room for further decline towards 1.2850 on a break of the 1.3000 level.

"For the rest of the majors, there are local stories at play, especially in the UK.

May upped the ante on the Tory Brexiteer coup by threatening a general election this summer if they derail her Brexit plans. Inflation data offered a nice excuse to chase the momentum lower in GBP, leaving GBPUSD to trade below USDCAD for the first time in quite a while - a symbolic move of the quirkiness of the price action at play.

A break of 1.30 eyes 1.2850 in GBPUSD," TD argues.

Danske Research discusses the USD outlook and flags further strength on the back of ongoing trade tensions.

"When the trade issue surfaced at the start of the year, the US rhetoric was largely associated with a political push for a weaker USD but lately regular economic channels have started to take over. This has changed the impact of trade tensions on, notably, the USD.

Near term, the scorecard highlights the case for USD support if the trade dispute escalates.

The Scandi currencies and the EUR are particularly vulnerable. While EUR/USD could slide towards 1.15 on this, we do not see much further downside in the cross than that from the ECB already being dovishly priced and the Fed increasingly alert to the negative impact of a trade war," Danske argues. 

• AUD/USD slid to a two-week low of 0.7344 during the European morning
• Decline influenced by USD/CNH rise to 1-year high nL1N1UE04X nL1N1UE049
• One of the roles of the AUD is to be a liquid proxy for China sentiment
• 0.7376 (Tuesday's low) is now a resistance level. 0.7395 was Asia high
• Tuesday's drop to 0.7376 was fuelled by upbeat testimony from Powell
• Fed chair speaks again at 1400GMT. Aussie jobs data due Thursday 0130GMT

• EUR/USD has eased from 1.1745 high ahead Powell yesterday to 1.1608 today
• US/German 10-yr rate gap is within 1bp of its widest point since 1988
• EZ inflation rose to 2%, but underlying measures much lower nL8N1UE240
• Good chance CPI has reached a high point. Euro to lose support nL1N1UE03T
• Support @ Jul 2 low at 1.1591, scope under for lower 30-day bol @ 1.1533
• Weekly Ichimoku cloud base at 1.1516 is key for l-term picture (Fri close)

• Bears are in control after thick daily cloud stymied bulls in recent days
• Daily cloud currently spans the wide 1.1741-1.1962 region
• Tuesday saw the 2nd biggest one-day points fall of July, negative
• Rate of fall increases odds of a test of the 1.1575 Fibonacci level
• 1.1575 Fibo -- 76.4% retrace of the 1.1508 to 1.1790 (June to July) EBS rise
• Rising daily cloud base had given bulls greater freedom nL1N1UD047

• UK political concerns weigh on GBP, with cable down to 1.3080 early Europe
• PM May narrowly avoided Commons defeat on EU trade laws Tuesday nL8N1UD3KT
• May threatened rebels with a summer general election-The Times nL8N1UE0FY
• 1.3068 (Tuesday low), 1.3050 (June low) and 1.30 are GBP/USD support levels
• Rally from 1.3068 after May avoided Commons vote defeat topped out at 1.3149
• UK June inflation data due 0830GMT, CPI f/c 2.6 pct YY vs 2.4 pct YY in May

• USD/JPY up to 113.08 earlier in Asia, eased back but bid again.
• Broadly strong USD to blame following more-hawkish-than-eyed Fed.
• Japanese good sellers earlier and more offers above, to help cap.
• Multiple highs from Dec '17-Jan '18 between 113.15-75.
• Ascending 200-DMA at 113.26, break above bullish, risk still on.
• Few option expiries nearby today - 113.00 USD305 mln, 112.00 1.1 bln.

• Tight range today in Asia, as 0.7300/0.7500 range enters a second month
• Leaves daily charts showing conflicting momentum studies, 5, 10 & 20 DMAs
• Despite this, the falling trend channel, which began in Feb remains valid
• Weekly charts remain bearish with 5, 10 & 20 week MAs trending south
• Thus looking through the short term noise, the primary trend is lower
• Channel top a distant 0.7556, on balance selling strength remains favoured

Bank of America Merrill Lynch Research dissects time zone analysis to identify dominant geographic regions for all USD, EUR and JPY G10 pairs.

"When in Rome, do as the Romans do: follow the dominant local trend...US locals are bullish USD and bearish CAD. UK locals are bearish EUR and bullish GBP. Asia locals are bearish JPY," BofAML notes. 

"USD rising in US hours: The top five locally traded currencies in US hours this year are: USD/CAD, EUR/CAD, CAD/JPY, EUR/CHF and EUR/USD. 

EUR falling in UK hours: The top five locally traded currencies in UK hours this year are: EUR/SEK, GBP/USD, USD/SEK, EUR/USD and EUR/GBP 

JPY falling in Asia hours: The top five locally traded currencies in UK hours this year are: NZD/JPY, AUD/JPY, CAD/JPY, CHF/JPY and USD/JPY," BofAML adds. 

• Modest USD gains early has AUD -0.1% with AUD/JPY flat after closing +0.1%
• USD strength post upbeat & 'gradual' Powell testimony, rather than risk led
• No component data or scheduled speeches today, so range trading likely
• Unusually Tenkan & Kijun lines diverge - suggests AUD/JPY may top out
• 83.60, 76.4% June fall has capped - close above would target 84.53 June high
• NY 83.21/83.47 range is initial support/resistance

• Fraction softer as Tokyo open after closing -0.9% - leading USD higher
• May won close parliament vote, but EU to accept plan nL8N1UC1H8
• Fresh Brexit vote remains remote, despite building pressure nL8N1UD11R
• Dip leaves momentum studies, 5, 10 & 20 DMAs edging lower - negative setup
• 1.3050 June & 2018 low supports - break to target 1.2898, 61.8% 2017/18 rise
• NY 1.3068 low & 1.3154, 38.2% of this week's fall initial support/resistance

• Fraction softer early after closing -0.4% with a bearish outside day
• Signal needs a close below yesterday's 1.1649 low to validate
• Neutral momentum studies, 5, 10 & 20 DMAs provide little guidance
• Familiar levels within 1.1500/1.1850 broad range since May
• 1.1610 779M, 1.1625-35 1.7BLN, 1.1645 368M & 1.1725 280M strikes
• NY 1.1649 low & London 1.1745 high initial support/resistance

TD Research discusses EUR/USD outlook and thinks that dips around current levels should provide good entry levels for establishing fresh longs.

"In Europe, the EUR looks set to play its 1.1550 to 1.1850 range while the Brexit bill votes will carry some weight in GBP.

We still believe that the market has priced much much of the bad news in Europe, offering good entry levels here. Most of these currencies screen around 2-sigmas cheap to HFFV and data momentum has recovered smartly.

GBPUSD should be trading around 1.35 and the EURUSD around 1.19," TD argues. 

Bear sentiment has hit AUD/USD again and lower levels are likely after Fed chair Powell took a more hawkish stance than the RBA minutes.
Powell's tip to gradual rate hikes being the best path forward carried more weight with traders than the RBA reinstating in their minutes a suggestion the next rate move is likely up.
Although the RBA's next move could be up it's unlikely to be soon, with markets not expecting hikes until after 2019.
The Fed and RBA rhetoric highlights divergent monetary policy paths, which should keep the greenback's yield advantage intact for the foreseeable future.
AUD/USD should trade heavy and any rallies seen are likely to be sold into as traders gear up for a run to new long-term lows.
Daily lows in the 0.7360 area are immediate support ahead of bigger 0.7300/30 support.
Breaks of those supports seem likely now as AUD/USD trades below the 10 and 21-DMAs and RSIs are biased down again.
Should bears clear the 0.7300/30 zone they will then target significant support in the 0.7110/60 zone.

Fed Chief Powell stirred EUR/USD bears from their slumber.
Downward pressure on EUR/USD took after he gave short shrift to market concerns on U.S. trade policies while noting the economy is nearing the cusp of "several years" of strong jobs markets with inflation hovering near the Fed's 2 percent target.
Powell also left the expected rate hike path intact after noting that the best path forward is to keep gradually raising rates.
The hawkish comments diverge with those of Draghi and the ECB who are set to remain patient on tightening monetary policy.
EUR/USD bears are clearly in charge, with the pair falling sharply from the daily cloud base and 55-DSMA and now threatening to break the 21-DMA.
DE-U.S.
yield spreads edge wider to further weigh upon EUR/USD.
RSIs have turned lower and a daily bearish engulfing candle forms which have technicals favoring the downside.
The July 13 low is support below the 21-DMA.
If that's cleared 1.1500/10 support likely gets tested.
A break there could see the next leg of the long-term bear market take hold.

ING discusses USD/JPY technical outlook and maintains an 'UP rating and recommends buying on dips into the 111.35 breakout level.

"'The daily chart shows a pause within the uptrend after the recent bullish break above the horizontal resistance around 111.35.

There is a target at 118.00 after completing a long-term bottom formation above 110.40, but overhead horizontal resistance comes in between 114.45-115.50 with first resistance coming in at the upper end of the rising trend channel around the 114.20 level.

We recommend buying on weakness towards the recent breakout level around 111.35," ING argues.