eFXplus DATA

• +0.1% in Asia with USD gently lower across the board - E-mini S&P flat early
• Latest poll suggests ECB to raise rates in second half of 2019 nL4N1UE3GA
• Soft close validated Tuesday's bearish outside day, but familiar levels
• 1.1650 350M strikes a magnet if it's quiet & 1.1675 772M strikes likely cap
• Momentum studies slip, neutral 5, 10 & 20 DMAs provide little guidance
• Close below 1.1615, 61.8% June/July climb would put bears in charge

• Fraction firmer early after leading USD higher offshore, closing -0.35%
• Soft inflation nL8N1UE22I & political turmoil nL8N1UE52W weighed
• Momentum studies, 5, 10 & 20 DMAs edging lower - negative setup
• 1.3050 June low tested post CPI, but recovered to close above
• First significant support comes in at 1.2898, 61.8% 2017/18 rise
• London 1.3010/1.3105 range initial support/resistance - bias lower

• Fraction firmer pre Tokyo after closing -0.1%, but a higher low & high
• Horizontal Tenkan & Kijun lines, 5, 10 & 20 DMAs trend higher, mixed signals
• Major resistance at 113.26/27, 200 Week MA & 61.8% 2016/18 fall should cap
• Above this comes 113.40 2018 high & 113.75 December 2017 top
• NY 112.70 low then 112.50, 61.8% of this week's bounce initial support
• Japanese trades lead data - polls - Click here

Credit Agricole discusses AUD/JPY outlook and sees a scope for further gains on the back of the scheduled release of Australia's jobs report for the month of June.

"Crosses such as AUD/JPY continue to trade close to recent highs. Even though risk sentiment should stay carry pairs’ predominant driver, the shortterm focus is likely to turn back to fundamentals. This is due to the release of Australian June labour data on Thursday morning.

With speculative oriented investors continuing to run a sizeable AUD short positioning, upside risk from position squaring seems likely should incoming data make a case for it. Accordingly, we believe the AUD has further room to outperform low funding currencies such as the JPY,"CACIB argues. 

• 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