eFXplus DATA

• 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. 

• Cable elicited support near 1.2705 after dropping from 1.2761 (early NY top)
• 1.2705 = 23.6% Fibo of 1.2507 (June 18, 23-week low) to 1.2766 (1-mth high)
• Drop followed 3rd failure to break 1.2768 Fibo resistance level
• Fed expectations and Brexit are key influences over USD and GBP respectively
• Trump says Fed "blew it" . Key Brexit crisis dates nL8N23V3UF
• Pound gets closer to its recent 22-week low versus the euro

Societe Generale Research discusses GBP/USD technical outlook, and flags a scope for further gains after forming a bullish engulfing pattern last week.

" GBP/USD  recently flirted with the up-sloping trend drawn since 2016 and approached December lows of 1.2505/1.2477. It has staged an initial recovery from those levels forming a Bullish Engulfing last week. The pair has now crossed above an hourly descending channel and is now testing recent peak of 1.2758/1.2815. Daily RSI has been posting positive divergence which denotes signs of stabilization are slowly becoming visible however a breakout is awaited," SocGen notes. 

"A move beyond 1.2758/1.2815 will mean possibility of a larger rebound towards the 200-DMA near 1.2950, also the 50% retracement of recent correction with next hurdle at the down sloping trend from April 2018 at 1.3025/48. 1.2698/60 is immediate support," SocGen adds. 

MUFG Research discusses the USD outlook and flags a scope for further weakness in the near-term.

"The US dollar has continued to trade at weaker levels during the Asian trading session after breaking lower at the end of last week. The dollar index finally broke below its 200-day moving average on Friday at 96.600 which opens the door to further weakness in the near-term.

Last week’s clear signal form the Fed that it is planning to cut rates as soon as at their next FOMC meeting in July is beginning to weigh more heavily on the US dollar especially given there is a material risk that the Fed could deliver a 0.50 basis point cut," MUFG notes. 

"Even if there is positive outcome from talks between Presidents Trump and Xi at this week’s G20 Summit, which are unlikely to be sufficient on their own to prompt the Fed to shelve plans for rate cuts in the near-term," MUFG adds. 

• Cable met fresh headwind pre-1.2768 after rising from 1.2724 (intra-day low)
• 1.2768 is 38.2% Fibo of 1.3190 (last month's high, May 6) to 1.2507
• 1.2766 was early Europe one-month high
• 1.2507 = 23-week low last week (June 18), before dovish Fed hurt USD
• New deal or no deal: How will Britain's next PM deliver Brexit? nL8N23O5EO
• GBP will rise if Hunt unexpectedly beats Johnson in PM race

• Strong wkly close but price struggles to make headway abv 1.2693 range high
• Daily RSI warned of demand fade and early Monday a pullback from 1.2766
• Daily momentum just positive but close to the zero line
• 30DMA support at 1.2689 then converged 10 and 21DMAs at 1.2665
• Narrowing Bolli bands hint at a fall in volatility and a possible big move
• Will look for signs of reversal risk against the recent four-day rally

• Close above long-term trend line and 200DMA Friday
• Four-day rally extends to 1.1389, previous key resistance now support
• Trend at 1.1326 and 200DMA at 1.1361
• 14-Day positive momentum readings strong but bear divergence on RSI
• Early Monday giving a long upper wick, hints at demand fatigue
• We have a bid by 1.1320 for 1.1450-60, stop below daily cloud top, 1.1279

• EUR/USD breaks higher but fuel for the rally is already lacking IMM/FX
• Traders pared net shorts significantly ahead the Fed and surely more since
• By Jun 18 EUR shorts trimmed to just 6.5 billion, rough 40% reduction
• Since Jun 19 EUR/USD 1.1188-1.1389 today, Almost certain shorts pared again
• Top current range 1.11-1.14 unchallenged. Mar high 1.1448. Feb high 1.1488
• Area of greater volume in 2019 1.12-1.15. vols remain low. Break unlikely

• +0.4%, sparked by RBA Gov Lowe comments - short covering, market oversold
• Lowe said rate cuts at low yield levels may not be enough to boost economy
• Puts pressure on gov't to increase infrastructure investment for growth
• This is not a change in the RBA's position, nS9N21I020 and nL4N23R1AM
• OIS confident of another cut in July - priced at 85.71% on RBAWATCH
• Charts - momentum studies climb, 5, 10 & 21 DMAs conflict at neutral levels
• Little bias - Asian 0.6921/0.6961 range is initial support/resistance

EUR/USD: 

24-HOUR VIEW Rally has scope to extend above 1.1400 but for today, the major 1.1450 level is not expected to come into the picture. We woefully underestimated EUR strength as instead of “edging above 1.1320”, it blew past this level and rocketed to 1.1377. While overbought, the rally has scope to extend above 1.1400. For today, the next major resistance at 1.1450 is not expected to come into the picture. On the downside, 1.1320 is deemed as strong enough to hold any intraday pull-back (minor support is at 1.1345).

1-3 WEEKS VIEW Scope for rally to extend further but EUR is expected to face solid resistance at 1.1450. While our expectation from last Friday (21 Jun, spot at 1.1290) that “EUR is likely to move into a ‘positive phase’ soon” was not wrong, the timeliness of the call could be ‘earlier’. EUR not only eclipsed several strong resistance levels with ease but also hit a 3-month high of 1.1377 before ending the week higher by a whopping 1.41% (NY close of 1.1366). The strong and impulsive rally suggests there is scope for the current ‘positive phase’ to extend further even though March’s peak near 1.1450 is expected to offer solid

GBP/USD:  

24-HOUR VIEW GBP could move above the month-to-date high of 1.2763 but 1.2800 is unlikely to yield so easily. Last Friday, we were of the view the “advance in GBP could edge above 1.2730 but the month-to-date high of 1.2763 is likely out of reach”. GBP subsequently rose to 1.2748 before closing right at the high. Upward momentum has improved and for today, a move above 1.2763 would not be surprising but the next resistance at 1.2800 may not yield so easily. Support is at 1.2715 followed by 1.2685.

1-3 WEEKS VIEW A NY closing above 1.2763 would indicate start of a ‘positive phase’. Our narrative from last Thursday (20 Jun, spot at 1.2655) wherein the “uptick in momentum suggests GBP could test the month-to-date high at 1.2763” appears to be on track as GBP touched 1.2748 last Friday (21 Jun). While it is early days yet, there are some nascent signs that GBP could have made a short-term at 1.2507 last week. Meanwhile, GBP has to register a NY closing above 1.2763 in order to indicate the start of a ‘positive phase’ that could potentially lead to a rise towards 1.2850. On the downside, only a move below 1.2650 would indicate that the current upward pressure has eased.

AUD/USD: 

24-HOUR VIEW AUD could move higher but 0.6980 could be just out of reach for now. While AUD “edged higher” as expected, it didn’t quite reach the level indicated at 0.6950 (high of 0.6938). The underlying tone has improved and for today, we see chance for AUD to move above 0.6950. However, the next resistance at 0.6980 could be just out of reach for now. Support is at 0.6920 followed by 0.6900.

1-3 WEEKS VIEW AUD has moved into a sideway-trading phase, likely to probe the top of the range first. There is not much to add to the update from last Friday (21 Jun, spot at 0.6920). As indicated, AUD has moved into a ‘sideway-trading phase’. However, the improved underlying tone suggests AUD is likely to probe the top of the expected 0.6860/0.6980 range first. For now, the prospect for a sustained rise above 0.6980 is not high but it would continue to increase as long as AUD does not move below 0.6860.

NZD/USD: 

24-HOUR VIEW NZD could probe the 0.6620 resistance but any gain is viewed as part of 0.6570/0.6620 sideway trading range. Instead of trading sideways, NZD dropped to 0.6555 before rebounding quickly to end day just below the high of 0.6605. Despite the rapid bounce, upward momentum has not improved by much. That said, it could probe the 0.6620 resistance even though any gain is viewed as part of a 0.6570/0.6620 range.


1-3 WEEKS VIEW Recovery in NZD could test 0.6620. No change in view from last Friday, see reproduced update below.

While we indicated yesterday (20 Jun, spot at 0.6555) that “the recovery in NZD could test 0.6620”, the rapid advance of +0.70% (NY close of 0.6585) was not exactly expected. Upward momentum has improved further and from here, a break of 0.6620 would indicate the start of ‘positive phase’ that could challenge the month-to-date high near 0.6680. The prospect for such a scenario is not very high for now but it would continue to increase as long as NZD does not move back below 0.6540 (level was at 0.6515 yesterday).

USD/JPY:  

24-HOUR VIEW USD could continue to trade sideways, likely not moving much out of last Friday’s 107.04/107.73 range. We highlighted last Friday that USD is “deep in oversold territory and the next support at 107.00 is unlikely to come under serious threat”. We added, USD is “more likely to consolidate its loss and trade sideways between 107.00 and 107.65”. The subsequent price action was close to our narrative as USD rebounded from 107.04 to 107.73 before dropping back to end the day little changed at 107.30. Indicators are still unwinding from oversold conditions and USD could continue to trade sideways for now, likely not moving much out of last Friday’s 107.04/107.73 range.

1-3 WEEKS VIEW Break of 107.00 would shift focus to 106.60. 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.

• EUR/USD clearing a path twd 1.1500 after break of 200 DMA on EBS
• Also broke above downward trendline extended from January
• Long-term resistance now supports at 1.1349; dips to be bought
• Base of daily Bollinger uptrend channel reinforces at 1.1322
• Looking ahead, German IFO later today is next data cue for EUR
• But G20 summit on Fri will be highlight for gauge of risk appetite

• +0.4% as Asia open on less dovish RBA Lowe comments - likely short lived
• He said rate cuts at low yield levels may not be enough to boost economy
• Puts pressure on gov't to increase infrastructure investment for growth
• This is not a change in the RBA's position, nS9N21I020 and nL4N23R1AM
• Charts - momentum studies climb, 5, 10 & 21 DMAs conflict at neutral levels
• Little bias, earlier 0.6921 low & 0.6976 June fall support/resistance

• Flat early, just below significant 1.2768 resistance, 38.2% May June fall
• Johnson's domestic dispute fuels debate on his PM credentials nL8N23U0EH
• Johnson reiterated desire for Oct 31 Brexit, deal or no deal nL8N23T0KQ
• Domestic dispute reminds conservatives of his past - likely modest impact
• Momentum studies head north, 5, 10 & 21 DMAs base/rise - positive setup
• Sustained 1.2770 break would initially target 1.2849, 50% May/June fall
• London 1.2643 low and 1.2763 June high are initial support/resistance