eFXplus DATA

ANZ discusses its expectations for this week's FOMC June policy meeting.

"The Federal Open Market Committee (FOMC) meets this week. Given recent dovish comments from Fed officials, we expect a shift to an easing bias. At a minimum, we anticipate a flattening in the dot plot. Chair Powell is likely to reiterate that the FOMC stands ready to support the expansion. We don’t expect a pre-commitment to easing, but acknowledge there are risks to our view," ANZ projects. 

"We look for the FOMC to end quantitative tightening now.  Our call is for the FOMC to start cutting rates later this year as we anticipate ongoing trade uncertainty to linger and weigh on growth and markets. Easier policy will also provide a needed boost to cyclical inflation," ANZ adds. 

• Pair unable to hold below daily cloud base, 21- & 55-DMAs, lift in early NY
• Downbeat data hints at slower US growth, US$ & UST rates slip
• 1.1250 neared but weak EZ inflation expectations temper bulls EUIL5YF5Y=R
• Consolidation above key short-term technicals likely until Fed risk passes
• EUR/USD upside risks could emerge after the Fed meeting

AUD/USD as bears appear in total control ahead of Wednesday's Fed announcement after downbeat U.S. economic data, which forced the greenback and U.S. Treasury yields slightly lower, failed to rally the aussie.
AUD/USD hit a new 5-month low after it broke beneath May's low.
Despite elevated net-short aussie positions 0.6850 traded and broke any option barriers sitting there.
AUD/USD bears have RBA expectations and technicals bolstering their confidence.
Australian short-term rates markets price in a 50% chance of a cut on July 2 but have over 100% chances of a cut on August 6.
Rates markets have near 50 bps of cuts priced in for the remainder of 2019, which helps weigh down AUD/USD.
Technicals Highlight the downside risks as RSIs are biased down with no divergence.
The long upper wick on the June candle as well as today's candle suggest that bears are in charge.
AUD/USD longs will need help from the Fed and its Statement on Economic Projections.
Bulls will need a dovish stance from the Fed and a downbeat SEP to counteract RBA and technical influences.
Should the Fed suggest aggressive cuts are coming, AUD/USD's slide will likely reverse.
Resistance in the 0.7025/30 and 0.7065/70 will then be targeted.

Bank of America Merrill Lynch Research discusses EUR/USD outlook and highlights a bullish bias from the technical and quant perspective.

"Cumulative EUR/USD price action had reset to flat, offsetting depreciation of the last 3 months. The broader USD trend has faltered and rolled over, with the MAA breadth reverting to just +2 after briefly capping at +9 in April, consistent with USD selling we saw in our proprietary flows. "The short-dated SDR flows in EUR/USD leaned more toward calls last week on the back of a robust pickup in volumes. Our positioning model is showing a rare fledgling EUR uptrend forming with rising MAA, supported by bullish Up/Down vol and Residual Skew," BofAML notes. 

"A wedge bottom pattern is confirmed and targets 1.1461, 1.1545, 1.1660 and possibly 1.1830. We favor being long or buying a dip into the mid-1.12s and, while 1.11 holds, looking for a rally to aforementioned targets. A base near 1.11 and breakouts above the 50d SMA, trend line, prior peaks, 100d SMA and April high suggest an uptrend is underway," BofAML adds. 

Don't mistake dollar weakness for GBP/USD strength.
Though cable has managed to rise off session lows, this has more to do with weak NY Fed Mfg data and expectations of a dovish Fed hold after Wednesday's FOMC meeting.
Short-term U.S. rate futures are signaling a 20% chance of a Fed cut on Wednesday, with -25bps price in for July FEDWATCH.
Today's GBP/USD gains are likely to be short-lived as sterling-specific factors keep downward pressure on GBP/USD.
With hard-core Brexiteer Boris Johnson the front-runner for Tory leadership risk of a no-deal British exit from the EU grows, which in addition to adding to UK low growth sentiment, should keep the BoE from hiking rates .
Other PM contenders have not proffered anything new, clinging to hopes for a renegotiated deal with Brussels nL9N21U01Q despite the EU's position to the contrary nB5N22W00C.
Expect any gains from outside stimuli, like a dovish Fed lean on Wednesday to be taken as an opportunity to add to GBP/USD shorts.
GBP/USD finds resistance by 1.2670, the 10/21-DMA area, and 1.2746, the falling 30-DMA.
A break below 1.2560 the May 31's recent trend low, would put the lower 30-day Bolli at 1.2477 and 1.2409, Jan 3's 1019 low, in sharper focus.

MUFG Research discusses the USD outlook around this week's FOMC meeting and notes that Fed sensitivity to downside risks is key for Fed rate cut expectations.

"The Fed is expected to provide a dovish policy update this week at the latest FOMC meeting. Anything less than a clear signal that the Fed is open to cutting rates soon in response to building downside risks to the US economic outlook could leave financial markets disappointed.

The US rate market is well priced for at least a 25bps rate cut to be delivered by July. The need for a more immediate rate cut rests mainly on the Fed’s sensitivity to downside risks to their economic outlook including the ongoing trade tensions between the US and China," MUFG argues. 

"For the US dollar rebound to extend much further in the week ahead, the Fed will have to disappoint expectations for imminent easing," MUFG adds. 

EUR/USD: 

24-HOUR VIEW EUR could dip below 1.1200 but the next support at 1.1170 is unlikely to come into the picture. Last Friday, we expected EUR to “test the 1.1250 support first” before “a recovery can be expected”. However, stronger than expected US retail sales data sent EUR plunging below this level as it hit 1.1200 before ending the day on a weak note at 1.1207. The sharp and rapid drop appears to be running too fast, too soon. From here, while a dip below 1.1200 seems likely, the next support at 1.1170 is unlikely to come into the picture. On the upside, EUR has to reclaim 1.1260 in order to indicate that the current weakness has stabilized (minor resistance is at 1.1240).

1-3 WEEKS VIEW Bias for is for EUR to move lower and test 1.1150. While we indicated since last Thursday (13 Jun, spot at 1.1295) that EUR “has to move and stay above 1.1335 within these 1 to 2 days or a break of the 1.1250 ‘key support’ would not be surprising”, the ease of which it sliced through 1.1250 and the subsequent plunge to 1.1200 was not expected (the subsequent 1-day decline of 0.60% is the largest in 7 weeks). The ‘positive phase’ that started on 04 Jun (spot at 1.1245) has clearly ended. The immediate bias has shifted to the downside but we do not expect the current weakness to be sustained and for the next couple of weeks, we see low chance of EUR threatening the critical 1.1100 support. That said, the current soft patch has room to test 1.1150. Only a move above 1.1290 would indicate that the current mild downward pressure has eased.

GBP/USD: 

24-HOUR VIEW GBP is likely to consolidate its loss and trade sideways, expected to be within a 1.2560/1.2630 range. Expectation for GBP to move higher last Friday was incorrect as it broke several strong support levels with ease and plummet to 1.2580. While further weakness is not ruled out in the coming days, the current decline has moved deep into oversold territory and GBP is unlikely to weaken much from an intraday point of view. From here, GBP is more likely to consolidate its loss and trade sideways at these lower levels. Expected range for today, 1.2560/1.2630.

1-3 WEEKS VIEW GBP is expected to trade with a downside bias but break of 1.2500 is unlikely. After trading sideways and in relatively quiet manner for more than a week, GBP lurched lower and touched 1.2580 last Friday. The low is just above the bottom of our expected 1.2570/1.2770 sideway-trading range that we first indicated on (04 Jun, spot at 1.2665). From here, the ‘sideway-trading phase’ appears to have ended but despite the sharp drop of 0.64% last Friday, downward momentum has not improved by much. However, the underlying tone has clearly weakened and GBP is expected to trade with a downside bias. For now, we do not expect a break of the strong 1.2500 support. Only a move above 1.2680 would indicate that the current mild downward pressure has eased.

AUD/USD: 

24-HOUR VIEW AUD is expected to trade sideways, likely between 0.6860 and 0.6900. We expected AUD to weaken last Friday but held the view that “the next support at 0.6865 is unlikely to come into the picture”. Against our expectation, AUD dropped to 0.6862 before recovering slightly. In view of the oversold conditions, further sustained decline is not expected for today. AUD is more likely to consolidate and trade sideways, expected to be between 0.6860 and 0.6900.

1-3 WEEKS VIEW A NY closing below 0.6865 would indicate that a move to 0.6810 has started. While we shifted our narrative for AUD from to “trade with an upside bias” to “trade sideways” last Thursday (13 Jun, spot at 0.6930), the pace of which the bottom of the expected 0.6865/0.6990 sideway trading range was tested came a surprise (AUD touched 0.6862 during NY hours last Friday). Downward momentum has clearly improved and from here, if AUD were to register a NY close below 0.6865, it would indicate the start of a move to 0.6810. The prospect for such a move is quite high unless AUD can reclaim 0.6935 within these few days.

NZD/USD: 

24-HOUR VIEW NZD could dip below the year-to-date low of 0.6482 but the next support at 0.6455 is not expected. Instead of “drifting lower”, NZD lurched lower as it lost a whopping 1.10% (closed at 0.6493). From here, NZD could dip below last month (and year-to-date) low of 0.6482. For today, the next support at 0.6455 is not expected to come into the picture. On the upside, 0.6540 is expected to be strong enough to cap any intraday NZD strength (minor resistance is at 0.6515).

1-3 WEEKS VIEW NZD has moved into a ‘negative phase’ but 2018 low of 0.6424 could be out of reach. While we expected NZD to ‘trade sideways’ since last Wednesday (12 Jun, spot at 0.6585), we held the view the soft underlying tone could “lead to a probe of the bottom of sideway trading range of 0.6530/0.6630”. Instead of ‘probing’ 0.6530, NZD crashed through this strong support during last Friday NY session and plunged to 0.6488 (the subsequent outsized 1-day decline of 1.08% is the largest since late March). In view of the vastly improved downward momentum, a break of year the year-to-date low of 0.6482 would not be surprising. However, last year’s low of 0.6424 could be out of reach for the current ‘negative phase’. On the upside, the 0.6570 ‘key resistance’ is expected to cap any NZD recovery, at least for the next one week or so.

• AUD/USD is trading in close proximity to 0.6862 ahead of the NY open
• 0.6862 = Friday's 23-week low after strong US retail sales data
• Stops may be sheltering sub-0.6860/50: 0.6852 = 76.4% Fibo of 0.6715-0.7295
• Mooted offers at 0.69 are an appreciation obstacle beyond 0.6884 (Asia high)
• This week's key event risk is the Fed monetary policy announcement Wednesday
• See: . Next RBA meeting July 2: rate cut now seen as 50/50 bet

• Slow progress and lack of positive momentum does not bode well for bulls
• Friday rebound failed to batter recent highs
• A real danger price settles back in its 107.81-108.80 June range
• Daily RSI neutral and short-term averages flattening out
• Wkly action hints at a bear continuation: must overcome 107.57 30WMA Bolli
• Weekly momentum remains negative and RSI falling

• EUR/USD drops back below mid-point current 1.1100-1.1400 range
• Option barriers define support @ 1.1100, 200-DMA 1.1400 barriers resistance
• EUR 2.2 bln pared off net short position since mid-May IMM/FX
• USD 6bln trimmed from total net dollar longs in same period
• Eurozone inflation expectations plunge to all-time lows
• ECB adds stimulus. Vols sink. Risk appetite resilient. Fuels EUR sales

• EUR/USD traded to 1.1205 early Asia before striking a bid tone
• Small EUR/JPY buying helped to underpin EUR/USD through the morning
• EUR/USD traded to 1.1224 and was around 1.l1220 into the afternoon
• Talk of option strikes around 1.1200 is discouraging attempts lower
• Support now at 1.1200/05 with break targeting lows between 1.1105/20
• Resistance is found around 1.1270 where the 100-day & 10-day MAs converge
• EUR/USD likely to range trade ahead of FOMC event on Wednesday

• Touch firmer in a 108.45/108.71 range with JPY crosses higher, AUD/JPY +0.2%
• E-Mini S&P +0.3% supports local markets, Nikkei +0.1% and AsiaxJP flat
• Close 108.25 675M and 108.40-45 400M are the close strikes today
• Horizontal Tenkan & Kijun lines suggest further consolidation
• Double bottom at 107.77/107.81 - Jan 10 and June 4 lows, provides a base
• Primary trend lower since April - 109.24 Kijun line is the topside pivot
• Earlier 108.45 low and last week's 108.80 high initial support/resistance

• Tokyo demand for AUD/JPY has pushed cross up 0.20% and underpins AUD/USD
• AUD/JPY made fresh trend low around 74.40 this morning before bids emerged
• AUD/USD short covering evident after support at 0.6860/70 held on Friday
• Talk of selling at 0.6900 where option strikes eyed will likely cap rally

• Flat, closed +0.2%, JPY strengthened on the crosses as the USD climbed
• No data or BoJ speakers today, focus on the Nikkei - trades -0.2%
• 108.25 675M and 108.40-45 400M are the modest close strikes today
• Horizontal Tenkan & Kijun lines suggest further consolidation
• 107.77/107.81 - Jan 10 and June 4 lows - a double bottom provides a base
• Primary trend lower since April - 109.24 Kijun line is pivotal resistance
• Earlier 108.45 low and last week's 108.80 high initial support/resistance

• Flat after opening 0.9% lower on broad USD strength after US retail sales
• PM contest all about how to undermine the hot favourite Boris nL8N23N0PP
• Meanwhile Boris pledges to "end the digital divide" by 2025 nL8N23N0TU
• Dip turned techs bearish - daily and weekly 5, 10 & 21 DMAs track south
• Initial target is the 1.2560 May trend low with 1.2409 2019 base below
• 1.2580 earlier and NY low and NY 2.2652 high initial support/resistance

• Flat after opening 0.6% lower on broad US data led strength
• Nowotny looks for flexibility on the ECB inflation target nL8N23N06J
• De Guidos, ECB will only act if inflation expectations change nL8N23M0P6
• 1.1200 1BLN, 1.1215-25 640M, 1.1250 411M and 1.1260-65 500M close strikes
• Dip leaves negative momentum studies, 5, 10 & 21 DMAs conflict
• Neutral setup, close below 1.1198, 61.8% March/May fall would be bearish
• NY 1.1203/1.1270 range is initial support/resistance

• AUD/USD threatens break lower from month long 0.6850-0.7000 consolidation
• Weighed down by expectations of larger and earlier RBA rate cuts
• Undermined by robust U.S. retail sales, Fed rate cut expectations pared back
• Lackluster China data Fri, acrimonious U.S-China ties take toll
• Australian treasurer hints at fiscal easing -newspaper nL4N23L2O7
• Support 0.6865 triple low, 0.6852, 76.4% of Jan rally; resistance 0.6900-05

NAB Research discusses its latest change for the RBA cash rate call which now see the central bank cutting to 0.75% in November.

"We have changed our view on the cash rate, to include an extra cut in late 2019 – while heavily data dependent we have tentatively placed the cut in November. We also think that lower interest rates will be supported by fiscal stimulus later this year. We would not rule out the possibility of alternative monetary action in early 2020, in addition to further rate cuts, if the economy remains very subdued, but have not put it into our projections.  

On the question of a July or August cut that is very hard – and to a large extent is less relevant for the economic outlook. On balance we have opted to stay with our August cut forecast – but would not at all be surprised by a July move. It is in short a very finely balanced judgement. And it will probably be the case that Governor Lowe will talk about the need for more action when he speaks on “The labour market and spare capacity” on 20 June," NAB projects. 

"Beyond August, we have pencilled in a third rate cut to 0.75% in November and fiscal stimulus by late this year. Alternative monetary policy options might be considered next year if these measures fail to have much effect," NAB adds. 

• AUD/USD hit first overnight by poor Chinese data nL4N23L1WS
• 0.6892 low on that broken by strong US retail sales, IP data
• AUD and AUD yields still under pressure due to weak jobs report nL4N23J47A
• NY sales cracks the May lows at 0.6865, nears 76.4% of '19 range at 0.6852
• Only scant flash-crash trades below there until 0.6715 January 3 low
• RBA June policy meeting minutes are out Tuesday, but FOMC is the key event

EUR=

Today's rally in the dollar may include a fair amount of position adjustment ahead of the FOMC's June 19 meeting, particularly in EUR/USD.
As of last Friday's release, EUR/USD specs held a net short of 87,551 contracts -- which included 155,771 longs and 243,322 shorts. Some of those EUR longs probably viewed the EUR/USD rise over the most recent reporting period as an opportunity to reduce those positions.
True, the Fed could be edging toward a round of rate cuts, which should weaken the dollar.
However, the near-term rate view also shows a slight reduction in Euribor rates.
Even though the market foresees deeper cuts in the U.S. than in Europe, to the detriment of the dollar, today's U.S. retail sales beat has reduced Fed easing odds, which is USD-positive.
Further, Euribor rates hint at euro zone rates remaining negative until Q2 2023, when markets project U.S. rates to stand at 1.85% even after dropping from current levels by 2.40%. Support by the recent EUR/USD low at 1.1105 should be strong.
In the other direction, expect the 200-DMA at 1.1360 and Jan.
10's 2019 high 1.1570 to provide resistance, even as the Fed adjusts rates lower.