HotForex Forex News

11:32 United Kingdom BBA Mortgage Approvals registered at 40.35K above expectations (40.3K) in May


11:27 Gold plunges to fresh multi-week lows near 200-DMA and rebounds sharply

Gold came under intense selling pressure during early European session on Monday and tumbled to fresh multi-week lows near $1235 region. 

The latest leg of sharp fall over the past half an hour lacked any fundamental driver and could be attributed to a fresh leg of sharp up-surge in the US Treasury bond yields, which tends to weigh on the non-yielding precious metal.

Adding to this, possibilities of some big stops being triggered on a sustained break below $1250 level might have also collaborated to the yellow metal's sudden plunge to the lowest level since May 17.

The metal, however, seems to have found some buying interest near the very important 200-day SMA support and has quickly recovered around $10 from lower levels to currently trade around $1245 region.

It would now be interesting to see if the rebound is led by any genuine buying or was solely driver by some short-covering from an important support. 

Technical levels to watch

The 200-day SMA near $1236-35 region remains immediate strong support to defend, which if broken is likely to accelerate the slide towards $1228 support area. On the upside, any recovery beyond $1246-47 region now seems to confront resistance near $1250 level, above which a fresh bout of short-covering could lift the commodity back towards $1260 strong resistance.


11:15 EUR/USD fades the spike above 1.1200 on IFO

The single currency keeps hovering over the 1.1200 handle vs. the buck on Monday, with EUR/USD briefly testing highs around 1.1210 before deflating.

EUR/USD unchanged on upbeat IFO

The pair is holding on to its daily gains in the 1.1200 neighbourhood after the German IFO surprised markets to the upside today, with business expectations, current assessment and business climate all coming in above initial estimates for the current month.

The better tone in the pair is initially deriving support from the lack of a clear direction in the buck, although the upbeat momentum in US yields prompted sellers to cash up earlier gains.

On the other hand, recent performance from traders in EUR futures markets could hint at the likeliness of further gains in the near term. Initial and tough resistance still lies in the low-1.1200s, however.

From the positioning view, EUR speculative net longs have retreated to 5-week lows in the week ended on June 20, according to the latest CFTC report.

In the data universe, May’s durable goods orders are only due in the US docket later today.

EUR/USD levels to watch

At the moment, the pair is gaining 0.04% at 1.1199 facing the next up barrier at 1.1208 (high Jun.26) seconded by 1.1296 (2017 high Jun.14) and finally 1.1300 (high Nov.9). On the other hand, a breakdown of 1.1130 (low Jun.15) would target 1.1108 (low May 30) en route to 1.1073 (76.4% Fibo of 1.1300-1.0339).


11:05 EUR/JPY surges closer to 125.00 mark post upbeat German Ifo

The EUR/JPY cross built on previous session's strong up-move and surged closer to the key 125.00 psychological mark during early European session on Monday. 

The spot continued gaining traction for the second consecutive session and the up-move got an additional boost from today's upbeat German Ifo Business Climate Index, coming-in at 115.1 for June as compared to 114.6 previous and 114.4 expected. Meanwhile, the current assessment index ticked higher to 124.1 (123.2 previous) while Ifo expectations also rose by more-than-expected to 106.8 for June. 

Adding to this, the prevalent risk-on environment, as depicted by positive trading sentiment around European equity markets, was seen weighing on the Japanese Yen's safe-haven appeal and further collaborated to the pair's strong up-move to the highest level since June 2.

With the only EZ data out of the way, broader market risk sentiment would continue to be an exclusive driver of the pair's movement and a follow through up-move now seems a distinct possibility.

Technical levels to watch

From current levels, 125.30-35 region is likely to act as immediate resistance, above which the cross is likely to aim towards testing yearly tops resistance near 125.75-80 area en-route the 126.00 handle.

On the downside, any retracement from higher levels now seems to find immediate support near 124.50-40 region, which if broken could drag the cross back towards the 124.00 handle.


11:03 German June IFO business climate surprises positively

The headline German Ifo business climate surprised to the upside, coming in at 115.1 points in June versus 114.6 recorded last month and expectations of 114.4. Meanwhile, the current economic assessment also improved to 124.1 points in the reported month, as compared to last month's 123.2 and 123.3 anticipated.

The Ifo Expectations Index – indicating firms’ projections for the next six months bettered expectations, arriving at 106.8 in June versus expectations to 106.4 and 106.5 seen last.


11:02 Germany IFO - Expectations above expectations (106.4) in June: Actual (106.8)


11:02 WTI rallies to $43.60, session tops

Crude oil prices are extending the rebound seen during the second half of last week, now lifting the barrel of West Texas Intermediate to the $43.60 region, up more than 1%.

WTI keeps the bear market intact

Despite the ongoing rebound from 7-month lows in the $42.00 neighbourhood (Wednesday), crude oil prices remain under heavy pressure as concerns over the supply glut appear everything but abated.

Adding to the already deteriorated panorama around crude oil, US active oil rigs kept increasing during the last week according to Friday’s report by driller Baker Hughes. This time, US oil rig count went up by 11 to 758 US active oil rigs, advancing for the 23rd consecutive week.

Traders remain wary of the rising US oil production and other oil-producer countries such as Iraq and Libya (not included in the OPEC deal), while skepticism around the effectiveness of the OPEC agreement to re-balance the oil market keeps running high.

Later in the week, report on US crude supplies by the API (Tuesday) and the EIA (Wednesday) are expected.

From the positioning front, crude oil speculative net longs have retreated to 6-week lows in the week to June 20, according to the latest CFTC report.

WTI levels to consider

At the moment the barrel of WTI is up 1.33% at $43.58 and a break above $44.40 (23.6% Fibo of the May-June drop) would aim for $45.06 (high Jun.19) and then $45.63 (20-day sma). On the flip side, the support aligns at $42.05 (2017 low Jun.21) followed by $41.10 (low Aug.11 2016) and finally $39.19 (low Aug.3 2016).


11:01 Germany IFO - Current Assessment registered at 124.1 above expectations (123.3) in June


11:01 Germany IFO - Business Climate registered at 115.1 above expectations (114.4) in June


10:59 EUR: Italian banking woes unlikely to affect much - ING

A modest improvement in German IFO (likely due to the relief after the French parliamentary elections) should be modestly EUR supportive, though EUR/USD is unlikely to move materially above the 1.1200 the level as investors await EZ and US inflation data later this week, according to the research team at ING.

Key Quotes

“The news over the weekend about the Italian government EUR 17bn rescue package (immediate EUR 5bn injection + EUR12bn guarantees) to shore up failing Veneto Banca and Banca Popolare di Vicenza should have a very limited negative impact on EUR (as was the case during 4Q16 Italian banking woes). With investors well aware of this risk, the ECB floating a credible threat to do “whatever it takes” to save the euro and EUR looking meaningfully undervalued, the bar for a risk premium driven EUR decline is set very high at this stage.”


10:49 NZD/GBP: Potential to extend rise to 0.5800 - Westpac

NZD/GBP has potential to extend its rise to 0.5800, although Westpac cautions the move is getting ripe, explains Imre Speizer, Analyst at Westpac.

Key Quotes

“A catalyst for GBP selling last week was Bank of England Governor Carney saying that “now is not the time to hike rates” (although his chief economist said the opposite later on). Turnover in consumer services and faltering retail sales suggest that the household is under pressure.”

“This week we have CBI retail trends (27th), Brexit negotiations, and possibly a post election budget.”

3 months ahead: Brexit negotiations, which begin in earnest on 19 June, remain a major risk for GBP. We stick with our view that NZD/GBP could rise further by year end, our current target 0.59.”


10:46 USD: Limited room for rally, focus on EM FX carry ING

US domestic data is unlikely to bring much good news to USD this week and it should struggle to record much gain particularly against the EM currencies, where the previous weeks’ correction makes fresh long EM FX positions attractive, according to the analysts at ING.

Key Quotes

“With US May PCE Core Inflation (Fri) likely to see another correction lower (from 1.5% YoY to expected 1.4%) and today’s US May durable goods orders being soft given the weakest Boeing aircraft order number for six months, USD should struggle to record much gain. This should be particularly the case vs EM currencies, where the previous weeks’ correction makes fresh long EM FX positions attractive. Moreover, as long as the oil price stabilizes/modest rise after the sharp drop in June, this should provide additional support to commodity high yielders, such as RUB. USD/RUB to stay below 60.00, while USD/TRY should test 3.4800 on the basis of the supportive EM carry environment.”


10:43 Chinas Xi: China will strengthen supervision of overseas investment - Xinhua

The official Xinhua News Agency posted comments from the Chinese President Xi Jinping, during a top-level meeting on Monday.

Key Points via Reuters:

Will improve quality of statistics to accurately reflect regional economic growth

Will strengthen the supervision of overseas investment

Will push forward debt-to-equity swap programme, gradually lower corporate leverage ratio

Will steadily push forward destocking in property market


10:41 NZD/EUR could rise further to 0.6575 - Westpac

NZD/EUR’s could rise further to 0.6575 during the week ahead, although the cross is looking technically stretched and European data flow has been ok, warning of a reversal not too far away, suggests Imre Speizer, Analyst at Westpac.

Key Quotes

“The data highlights are EU June cons. conf. and ECB Econ Bulletin (22nd), flash June PMIs (23rd), and IFO June survey (26th). Also worth watching are Italian local 2nd round elections (25th June), and of course the Brexit negotiations.”

3 months ahead: European economic data is improving, witness sentiment surveys at six year highs. However, after easing recently, political tensions in the EU could still resurface, with Austria calling early elections in 4Q, and a chance of early elections in Italy. Adverse developments could push NZD/EUR beyond 0.66.”


10:38 German Elections: What is at stake? - Natixis

The German elections do not seem to attract the same interest as the French elections and yet they ought to, since if the conservatives of the CDU/CSU were to keep the Chancellery and the Ministry of Finance, their choice of government alliance will be decisive for European markets, suggests Sylvain Broyer, Research Analyst at Natixis.

Key Quotes

“Germany will be more open to the idea of a eurozone minister of finance and budget if the grand coalition remains in power.”

“In the event of an alliance of the conservative and the liberals it could, on the contrary, make a push towards a multi-speed Europe and towards adopting measures on country defaults.”

“At present, German voters would prefer to see another coalition with the liberals rather than a continuation of the grand coalition.”

“On the other hand, whatever coalition is formed, Germany is likely to change the direction of its fiscal policy somewhat, as most parties suggest tax cuts for households (around 1% of GDP) and an increase in public investment (0.5% to 1% of GDP). However, this will not result in a sharp reduction in the current-account surplus.”

“Unlike the debate in France, Europe is not a very divisive issue in these German elections:

  • The electorate’s main concerns are the risk of poverty, a consequence of the reforms of the labour market and welfare regimes despite the full employment situation, the low return on savings and immigration control, the only issues on which they really expect actions from Europe. 
  • The Chancellor’s concerns partly overlap those of the new French President. She seems to be focusing on tasks that go beyond the Eurozone’s institutional organisation: the G20 presidency, the defence of climate change agreements and the integration of refugees. The idea of a European minister of finance is conceivable under certain conditions, while debt mutualisation remains a taboo. 
  • The German view of Europe still differs from the French. The first are systematically less convinced than their neighbours of the need of pooling financial resources.”  

10:34 NZD/JPY: Scope for risk to be sustained towards the 82.50 area - Westpac

Global risk sentiment remains elevated, supporting the NZD and hurting the safe-haven yen and there is scope for the risk to be sustained towards the 82.50 area for NZD/JPY cross, according to Imre Speizer, Analyst at Westpac.

Key Quotes

“The end of the month is nigh, and with it what is likely to be a more pronounced weakening in the inflation pulse in Japan. Thus CPI will likely dominate next week’s event risk in Japan though we do also have retail sales on Thursday and jobs data plus IP next Friday.”

3 months ahead: The BOJ’s defacto tapering of its asset purchases should be yen supportive. In addition, the Japanese economy is seeing a pickup in consumer activity, mitigating any slippage in external demand. The early signs are promising although more evidence is required before markets fully buy into the emerging Japanese story. We see NZD/JPY gains thus limited to the 83 area.”


10:30 Brexit: First Round won by the EU? - Natixis

UK gave in quickly to the demand of the EU in the first round of formal Brexit talks which started on 19th June in Brussels, suggests Sylwia Hubar, Analyst at Natixis.

Key Quotes

“Formal Brexit talks started on Monday June 19 in Brussels where the UK and the EU agreed on the dates for five rounds of negotiations stretching into October. The first phase of negotiations will cover three issues: 1/ rights of the EU and British citizens, 2/ financial settlement and 3/ Northern Ireland border. This agenda is at odds with Theresa May’s earlier demand to simultaneously discuss the terms of UK’s future relationship with the EU alongside those of UK’s withdrawal. The Prime minister attended the EU27 meeting where she presented her plan for securing the EU citizens living in the UK. Those who have been living in the UK for five years at the time of a yet to be specifies cut-off date would be granted similar rights as full British citizens, a “fair” offer according to the British government yet “not sufficient” for some EU officials.”

“What did we learn from the first meeting on Monday?

  • The UK and the EU agreed on the negotiations schedule throughout October 2017. The initial stages of negotiations will see three working groups focusing on citizens’ rights, financial settlement and “other separation issues”, along with “a dialogue” on Ireland / Northern Ireland border issue launched between the two sides.
  • Until recently, the UK has underlined its determination to negotiate the terms of UK’s future relationship alongside those of UK’s withdrawal. The fact that previous agenda set up phased talks suggested the UK gave in quickly to the demand of the EU. 
  • Since the disaster of the General Election, Theresa May’s position as Prime Minister is weakened, which implies she cannot afford to lose the chance to negotiate UK’s post-Brexit relations with the EU by jeopardizing negotiations from early on. May made it clear in her letter to Tusk she wanted the Brexit process to be “as smooth and successful as possible”.”

“What do we know so far about each side strategy?

  • The EU already sent two formal positions papers to the UK prior to the face-to-face meeting. The first EU document introduces a clear account on how the UK should handle the rights of the EU expats. The other outlines the bloc’s financial demands, without revealing any estimation of the final bill.
  • Theresa May announced her plan for securing the EU citizens living in the UK during the EU27 meeting. The proposal points to a less combative approach from the British, knowing that the PM has repeatedly refused to guarantee EU citizens rights in the past.
  • Although there was a positive anticipation of a “softer” Brexit following the outcome of the election, there is no sign the British government has changed its position. The Queen’s Speech, which took place on Wednesday, set out the government’s plan for the two next years and It included new legislation related to trade, customs and immigration following the UK departure.”

“What we should expect next

  • The agreement on citizens’ rights should be relatively straightforward. Yet, risk of conflict regarding the role of the European Court of Justice cannot be ruled out.
  • The exit bill and its calculation are expected to be a source of disagreement. The EU has not released a detailed bill yet, but the figure of EU 60 billion has been mentioned in a study conducted by the Center of European Reform (February 2017). If this is the case, the financial settlement represents only 2.5% of UK’s 2016 GDP and although reassuring should be taken with caution. The adverse impact of Brexit on the economy is likely to become more apparent throughout the negotiation period, curbing the UK’s flexibility. 
  • We expect the Ireland / Northern Ireland border issue to be the most challenging subject of negotiations. Both sides wish to prevent a hard border between the Republic and Northern Ireland but it appears somewhat infeasible when the UK is determined to leave both the Single Market and Custom Union. To quote the words of Michel Barnier, EU top negotiator, they will need “imaginative and concrete solutions” to resolve this matter.”

10:25 USD/JPY jumps to session tops near mid-111.00s

The greenback regained traction against its Japanese counterpart, helping the USD/JPY pair to snap four consecutive days of losing streak and jumped to a three day high level near mid-111.00s.

Following a weekly bearish gap, the major caught some fresh bids and managed to rebound from the 111.00 neighborhood despite of BOJ’s Summary of Opinions' for the June 15th and 16th meeting, which suggested that the Japanese economy has been turning toward a moderate expansion.

A modest up-tick in the US Treasury bond yields, which although has failed to extend any support to the US Dollar was seen driving the pair higher. This coupled with a improvement in investors' risk appetite, as depicted by a positive trading sentiment around equity markets, further weighed on the Japanese Yen's safe-haven appeal and collaborated to the pair's up-move at the start of a new trading week. 

   •  USD will struggle to make much headway - Westpac

Moving ahead, traders now look forward to the release of durable goods orders data from the US for some fresh impetus. In the meantime, broader market risk sentiment and the US bond yield dynamics should continue to act as key determinants of the pair's movement through European session on Monday. 

   •  Market movers for the week ahead – Rabobank

Technical levels to watch

A strong follow through buying interest has the potential to continue boosting the pair further towards 111.75-80 resistance area en-route the 112.00 handle. On the downside, 111.15-10 area now becomes immediate support to defend, which if broken is likely to accelerate the slide towards 110.70-65 horizontal support ahead of 111.30 support.


10:24 FX option expires for June 26 NY cut

FX option expires for June 26 NY cut at 10:00 Easter Time, via DTCC, can be found below.

- EUR/USD: $1.1100(E309mn), $1.1185(E395mn), $1.1200(E525mn) 

- GBP/USD: $1.2700(Gbp325mn), $1.2760(Gbp321mn) 

- USD/CAD: C$1.3340($504mn) 


10:24 GBP futures: rally running out of steam?

Traders have scaled back their opening positions by more than 2.6K contracts on Friday to 191,605 contracts, according to preliminary figures from CME Group. The move represents the third day of contracting volume, in tandem with rising prices.

Short covering persists

The current scenario signals that GBP/USD's recent upside has been fuelled largely by short covering instead of fundamental demand, opening the door for a resumption of a leg lower once short covering ends. It is worth mentioning that Cable rebounded from sub-1.2600 levels on Wednesday to the current mid-1.2700s.

 


10:19 NZD/AUD cross could press on to the 0.9700 area - Westpac

The NZD/AUD cross made a five-month high at 0.9652 on Friday, and could press on to the 0.9700 area, according to Imre Speizer, Analyst at Westpac.

Key Quotes

“The main catalyst last week was the RBNZ’s less-dovish-than-feared statement, which boosted the NZ-AU interest rate spread.”

“Prices of Australia’s key commodities are showing signs of at least stabilising. Our daily commodity price index (WCFIAECI on Bloomberg) is about flat so far in June after a startling -13.8% in May. Oil prices are less helpful, though; if the declines are sustained they could affect LNG prices.”

“There are no local calendar items that could move AUD until early July.”

3 months ahead: Fair value for the cross has risen to around 0.92, following this year’s sharp decline in iron ore prices. We see that as a fair target for the remainder of 2017.”

“Potential supports for the AUD include the Chinese authorities’ eagerness to counter the negative headlines over Moody’s sovereign downgrade. In addition, the strength of steel reinforcing bar (rebar) prices suggests iron ore should eventually play catch-up.”


10:19 EUs Moscovic: Europe has found new momentum

EU Commission financial head Moscovici crossed the wires last minutes, speaking on air with Radio Classique.

Key Headlines:

Deal on Europe's detached workers not far away

Reforms in France necessary

France could meet 3% deficit target

2017 deficit under or at 3% possible in France

Paris needs to be attractive to lure Brexit business


10:16 US Treasury auction preview: 2y note auction will likely need some price concession - SocGen

The Treasury is scheduled to auction $26bn in 2y notes on 26 June, $34bn in 5y notes on 27 June, and $28bn in 7y notes on 28 June and the upcoming 2y note auction will likely need some price concession to be underwritten smoothly, according to the research team at Societe Generale.

Key Quotes

“The 2y note does not appear to have a clear set-up from a relative value perspective. Primary dealer positioning in the sector, with net longs near the highest level since June 2014, is another negative. However, the current 2y benchmark note’s yield is trading above the stop-out rate of the last auction, making the sector cheap on an outright level and an auction at current levels would take it higher than any stop-out rate since the October 2008 auction, which would be a positive. The auction may see an unscheduled reopening of an old 5y note (T 1.625% 6/19) if the high yield is in the range of 1.625% through and including 1.749%. Alternatively, the auction might see an unscheduled reopening of an old 7y note (T 1% 6/19) if the high yield is in the range of 1% through and including 1.124%.”

“We hold a slight negative bias on the upcoming 5y note auction, which will likely need some price concession to be underwritten smoothly. The current 5y note yield is well below the stop-out rates of the previous six 5y note auctions, making it rich on an outright basis. Other negatives include: the 5y note has tailed in four of the past six auctions and there is a lack of any clear set-up from the relative value perspective. A pick-up in demand in the last 5y note auction is a positive for the upcoming auction which might see an unscheduled reopening of an old 7y note (T 2.125% 6/22) if the high yield is in the range of 2.125% through and including 2.249%.”

“The upcoming 7y note auction will likely require some price concession due to the lack of a clear set-up from the relative value perspective and rich outright levels, with the 7y note yield below the stop-out rates of the previous seven 7y note auctions. The dealer positioning in the sector, which is highest since October, is another negative.”


10:09 USD will struggle to make much headway - Westpac

The USD will struggle to make much headway as growth and inflation do not warrant a hawkish Fed, Republican consensus on tax cuts and infrastructure is still absent, and Russia-gate will slow the Republicans’ agenda and a debt ceiling showdown is on the horizon, explains Imre Speizer, Analyst at Westpac.

Key Quotes

“By year end though, if these risks dissipate (admittedly a big if), the US dollar should resume the trend rise witnessed in 2016.”

“This week’s data calendar picks up the pace: durable goods orders, Conf. Board and Michigan confidence, Richmond and Chicago PMIs, plus the highlight May PCE inflation along with plenty of Fedspeak (including Yellen).”

“May CPI inflation was indisputably soft at 0.1%, weakness broadbased. The 3mth ann. core CPI is a paltry 0.0%, down from 3.0% in Feb. While Fed Chair Yellen won’t have any of it, seeing the weakness as transitory, markets are skeptical, pushing interest rates lower, and in turn the US dollar.”


10:08 When are German IFO surveys and how they could affect EUR/USD?

German IFO Business Climate Overview

The German Ifo surveys for June are lined up for release later today at 8GMT. The headline Ifo Business Climate Index is expected to tick slightly lower to 114.4 in June versus 114.6 seen last month. The Current Assessment sub-index is seen a tad firmer at 123.3 this month, while the Ifo Expectations Index – indicating firms’ projections for the next six months – is expected to edge soften a bit to 106.4 in June, as compared to May’s 106.5 reading.

Deviation impact on EUR/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 3 and 40 pips in deviations up to 2.4 to -3.2, although in some cases, if notable enough, a deviation can fuel movements of up to 60 pips.

 How could affect EUR/USD?

The German IFO Surveys are expected to show mixed results across all indicators, which could keep the EUR/USD pair around 1.12 handle, while a better-than expected headline data could send the rate towards mid-1.12s.

Technically, “EUR/USD outlook is neutral to negative: The Euro is seeing a very minor rebound from the 1.1110 end of May low. So far this has been extremely tepid and while capped by the 20 day ma at 1.12014/20 will maintain a negative bias. Rallies will need to regain the 20 day ma at 1.1204 on a closing basis to re-focus attention on the topside and 1.1300. Below 1.1110 should trigger further losses to the 1.1070/23.6% retracement of the move higher this year and then the 55 day ma at 1.1026,” explains Commerzbank Analysts, Karen Jones.

Key notes

Germany: IFO expectations to decline to 106.1 in June – Danske Bank

In the euro area, the German ifo expectation is due for release today and analysts at Danske Bank expect this figure to decline to 106.1 in June.

About German IFO Business Climate

This German business sentiment index released by the CESifo Group is closely watched as an early indicator of current conditions and business expectations in Germany. The Institute surveys more than 7,000 enterprises on their assessment of the business situation and their short-term planning. The positive economic growth anticipates bullish movements for the EUR, while a low reading is seen as negative (or bearish).


10:06 US Dollar flirting with tops around 97.00

The greenback – in terms of the US Dollar Index (DXY) – is looking to extend the rebound from last Friday’s lows in the 96.90/85 band and is now attempting to retake the critical 97.00 handle.

US Dollar eyes on data

The index stays within the recent range around 97.00 the figure, struggling for direction and mildly supported by earlier comments from San Francisco Fed J.Williams (2018 voter, centrist), who now expects the Fed’s balance sheet to start shrinking later in the year.

DXY has been navigating between 97.00 and 97.50 for the last two weeks despite the Fed rose its Fed Funds target range to 1.00%-1.25% at its last meeting and signalled that further tightening remains on the cards later in the year. However, the lack of conviction among investors and softer-than-expected results from the US docket seem to have alleviated some upside potential around the buck.

Furthermore, yields of the US 10-year benchmark appear to have found some decent support around 2.14% for the time being, lending some oxygen to the ongoing bounce in USD.

News from the speculative community saw USD net longs retreating to levels last seen in mid-June 2016 during the week ended on June 20, as shown by the latest CFTC report.

In the US data space, durable good orders for the month of May are due next, while Fedspeak should take centre stage later in the week.

US Dollar relevant levels

The index is up 0.01% at 96.98 facing the next hurdle at 97.04 (20-day sma) followed by 97.13 (23.6% Fibo of the May-June drop) and then 97.56 (high Jun.15). On the other hand, a breach of 96.86 (low Jun.23) would open the door to 96.31 (2017 low Jun.14) and finally 95.91 (low Nov.9 2016).


09:49 Market movers for the week ahead Rabobank

Michael Every, Senior Asia-Pacific Strategist at Rabobank lists down the most important market moving events and economic releases for the week ahead, which are likely to have significant impact on investors’ appetite globally.

Key Quotes

“Today we already saw that even with the current upturn, the BOJ sees no sign of when they can exit QQE and its YCC policies. Perhaps never, the BIS seem to be saying…we also get to hear from the Fed’s Williams later in Sydney. Data-wise, it’s the German IFO survey, expected to be absolutely wűnderbar, and then US durable goods, which are expected to be far more run of the mill.”

“Over the course of the next three days we also have the ECB Forum running in Sintra, where lots of central bankers will pop up to try to tell the BIS that they are completely wrong. (As one would fully expect to be the case.)”

“Apart from that, tomorrow we get NZ trade data, Chinese Premier Li Keqiang speaks, so does Williams again, the BOE has its financial stability report, and then it’s US consumer confidence ahead of Harker, Yellen, and Kashkari – so lots of central bankers that day again.”

“Wednesday has Williams again (he has to cover the cost of a business-class flight to Oz, after all), Eurozone M3, and US wholesale inventories; Thursday sees German CPI and Us Q1 GDP, then Bullard speaking on monetary policy; and Friday has a flood of key Japanese data (CPI, unemployment, industrial production), ahead of German unemployment, Eurozone June CPI, and US personal income/spending and the Chicago PMI.”


09:49 Forex Today: GBP outperforms in Asia, IFO, US durable goods, ECB Draghi - Key

Another great start for the British currency this Monday, replicating Friday’s outperformance in Asia, as risk-off returned to the markets amid oil-price recovery and renewed hopes of a deal to be reached between the UK PM May and DUP, when the DUP leader Foster meets Theresa May later in  the European morning.

The Antipodeans too remained better bid amid broad based US dollar softness, although gains were limited by renewed demand for the US yields, which dampened the demand for the Emerging Market currencies as alternative higher-yielding assets.

Looking ahead, we have plenty of risk events on the cards this week, with a mix of central banking speech from across the globe and key macro news in terms of the GDP figures from the US and UK. The immediate focus, however, now remains on the German IFO surveys, US durable goods data and ECB President Draghi’s speech slated for release in the day ahead.

Main topics in Asia

BoJ 'Summary of Opinions'

The BoJ has just released the Summary of Opinions' for the June 15th and 16th meeting. Within them, the BoJ states that the Japan's economy has been turning toward a moderate expansion.

Brexit: I would be prepared “to walk away” if given a “punishment deal” - Brexit Secretary David Davis

Brexit Secretary David Davis, while talking to BBC’s Andrew Marr on Sunday said, “I would be prepared "to walk away" if the UK was given a "punishment deal”. We have to plan for that."

Italy to bail out two more banks after ECB warning

Italy’s government will be bailing out Banca Popolare di Vicenza and Veneto Banca at a cost of EUR 5.2 billion.

Goldman Sachs assesses a 1/4 chance of US recession over the next two years

Goldman Sachs’ economists out with a latest note on Monday, assessing the risk of a recession for the US.

Key Focus ahead

Germany: IFO expectations to decline to 106.1 in June – Danske Bank

In the euro area, the German Ifo expectation is due for release today and analysts at Danske Bank expect this figure to decline to 106.1 in June.

DUP leader Foster to meet with UK PM May Monday morning

Sky News correspondent, as cited by Reuters, noted that the Democratic Unionist Party’s (DUP) leader Arlene Foster is arriving in London this Monday morning to meet the UK PM May.

Eurozone: German IFO and ECB conference in focus - TDS

Analysts at TDS point out that German IFO data and the start of ECB’s Sintra conference will be the most watched event for today’s economic calendar as far as Eurozone is concerned.

The week ahead: United States - Nomura

Analysts at Nomura explained that for the week ahead in the US, the relevant elements of the May PPI and CPI inflation reports point to subdued core PCE inflation in May. 

The week ahead: Europe - Nomura

"German Ifo (Monday): We expect the German Ifo business climate index to increase to 115.2 in June from 114.6 in May.”

 


09:44 EUR/TRY: Rebounds should be of limited amplitude - Natixis

Rebounds in EUR/TRY cross cannot be ruled out over the next few trading sessions but, given the weak daily volatility, they should be of limited amplitude, according to the research team at Natixis.

Key Quotes

“A recovery back above the resistance around 4-4.0070 (upper band of daily Bollinger) is unlikely. Keep an eye rather on the support at 3.9020 (lower band of daily Bollinger).”

“A break below this last level would release significant downside, opening the way for a more pronounced decline of the EUR/TRY over the next few trading sessions towards the support around 3.8130-3.8250 (lower band of weekly Bollinger).”

“Resistance levels are located at 3.9560, around 4-4.0070, at 4.0640 and at 4.1375.”


09:43 Gold snaps three days of winning streak, comes down below $1255

Gold snapped three consecutive days of winning streak and edged lower at the start of a new trading week, eroding part of Friday's strong gains to 6-day highs.

The precious metal stalled last week's recovery move from one month lows and came under some fresh selling pressure amid a modest pick-up in the US Treasury bond yields. The latest comments by San Francisco Fed President Williams, hinting towards normalization of the balance sheet this year remained supportive of the mildly positive tone around the US bond yields and was seen driving flows away from the non-yielding yellow metal.

This coupled with signs of stability in the global financial markets further weighed on traditional safe-haven assets and collaborated to the commodity's retracement from closer to $1260 level touched on Friday. 

Later during the NA session, the release of durable goods orders data from the US would influence the US Dollar price-action and provide some fresh impetus for dollar-denominated commodities - like gold. 

Investors’ focus, however, would remain glued to the Fed Chair Janet Yellen's remarks on Tuesday, for clues over the timing of next rate hike move and the central bank's plans to trim the balance sheet, which should help determine the next leg of directional move for the commodity. 

   •  The week ahead: United States - Nomura

Technical levels to watch

A follow through retracement below $1253 level could get extended towards $1250 support, which if broken might turn the metal vulnerable to head back towards testing its next strong horizontal support near $1243-42 region.

On the flip side, $1256-57 area now seems to act as immediate resistance, above which the commodity is likely to aim to surpass $1260 hurdle before eventually darting towards its next barrier near $1265-67 region.


09:37 EUR futures: uptrend renewed?

According to CME Group’s preliminary figures for Friday’s open interest in EUR futures markets, traders added more than 6K contracts to Thursday’s positions, ending two consecutive days of shrinking volume.

Gains beyond 1.12 appear likely

The short covering theme that prevailed at some point during last week now seems mitigated (over?), while more traders are now entering the market and pointing to a bullish scenario in the near term.

Hence, the low-1.1200s, coincident with the key 20-day sma, is now back on the radar. Market participants, in the meantime, should closely follow Draghi’s speeches during the first half of the week looking for any hints of the probable steps of the ECB later in the year.

 


09:23 NZ: GDP supported by robust population growth Westpac

New Zealand’s Q1 GDP result disappointed the expectations of the RBNZ and the market as headline growth remains strong, but this has been supported by robust population growth, explains the analysis team at Westpac.

Key Quotes

“This population growth and increased availability of labour has also restrained wage pressures. That said, consumer sentiment and agri outlook is supportive, although housing remains a risk.”

“RBNZ’s June MPS kept the OCR on hold at 1.75%, maintained a neutral bias, and repeated the message that the OCR is likely to remain on hold for a long time. RBNZ was less dovish than feared and while they acknowledge the fiscal stimulus, we forecast OCR on hold until early 2019. Markets remain too optimistic, with hikes factored mid-2018.”

“For the NZD, fundamentals are mostly supportive. Longer term, we are more bearish, contingent on US interest rate and US dollar uptrends resuming.”


09:19 Germany: IFO expectations to decline to 106.1 in June Danske Bank

In the euro area, the German ifo expectation is due for release today and analysts at Danske Bank expect this figure to decline to 106.1 in June.

Key Quotes

“The ifo expectation increased from 105.2 in April to 106.5 in May, which is its highest level since February 2014. We expect this figure to decline to 106.1 in June, as the German ZEW and Sentix have both declined in June, and the weakening business cycle indicators in the US and China could still weigh on the German business expectation.”


09:14 USD/CAD testing lows near 1.3250 as Oil jumps +1%

The USD/CAD pair extends its consolidative-mode into early Europe, although looks vulnerable below 1.3250 levels amid more-than 1% jump in oil prices seen so far this Monday.

USD/CAD stuck between 5-DMA and 10-DMA

The Loonie remains supported near mid-1.32s as oil prices jumped higher in Asia, reversing last week’s heavy sell-off.

Moreover, subdued trading activity seen in the US dollar against its major rivals also collaborated to downside bias in the CAD pair. The USD index trades modestly lower just below 97 handle.

On Friday, USD/CAD witnessed a volatile NA session, initially spiking above 1.33 handle on the release of worse-than expected Canadian CPI figures.

However, the spot failed to sustain the rally and dropped back to the familiar range near 1.3250 levels, after the greenback slumped across the board on dovish Fedspeaks.

Later today, the major will closely track oil-price action fur fresh incentives ahead of the US durable goods data due to be reported in the NA session.

USD/CAD Technical levels                

The next resistance can be seen at 1.3300/09 (round figure/ Friday’s high), 1.3336 (20-DMA) and 1.3363 (200-DMA). Next support to the downside can be found at 1.3200 (zero figure/ key support), 1.3165 (4-month lows) and 1.3150 (key psychological support).

 


09:12 AUD/USD gains some traction, up-little around 0.7580 level

Following a 10-pips weekly bearish gap, the AUD/USD pair regained traction and is currently placed at session tops near 0.7580 region.

The pair turned positive for the second consecutive day and built on Friday's sharp recovery move, led by dovish comments from FOMC's Bullard and Mester. A follow through recovery in oil prices further seems to have lifted sentiment surrounding commodity-linked currencies and provided an additional boost to the pair's recovery move from closer to the very important 200-day SMA support.

Meanwhile, traders seemed to have largely ignored upbeat comments by San Francisco Fed President Williams, hinting towards start normalizing balance sheet this year, with subdued US Dollar action supporting the mildly positive tone surrounding the major.

   •  Fed’s Williams: Likely to start normalizing balance sheet this year

It, however, remains to be seen if the pair is able to build on the up-move amid a modest pick-up in the US Treasury bond yields, which tends to weigh on higher-yielding currencies - like the Aussie. 

   •  AUD to remain on the back foot this week - ANZ

Today's US economic docket features the release of monthly durable goods orders data, which would now be looked upon for some fresh impetus later during the NA session.

Technical levels to watch

From current levels, 0.7590-0.7600 region is likely to act as immediate resistance, above which a fresh bout of short-covering could lift the pair back towards multi-month highs strong resistance near 0.7630-35 region.

On the downside, weakness below session lows support near 0.7560 level now seems to turn the pair vulnerable to head back towards testing the very important 200-day SMA support near 0.7530 region. 


09:10 GBP/USD firmer, approaches 1.2750

The British Pound has started the week on a firm note, prompting GBP/USD to extend gains to the mid-1.2700s ahead of the opening bell in the Old Continent.

GBP/USD focus on politics

The pair is advancing for the fourth session in a row today, flirting with 5-day tops and extending the bounce off last week’s lows in sub-1.2600 levels.

GBP stays bid ahead of the meeting between UK’s PM Theresa May and DUP’s Leader Foster later in the morning. Recall that both leaders aim to form a minority government after Conservatives lost majority at the latest elections.

Near term price action around the Sterling is then poised to gravitate within the UK’s political scenario and the developments from the Brexit talks that started last Monday.

Further news around GBP saw speculative net shorts retreating to 2-week lows in the week to June 20, as per the latest CFTC report.

Data wise today, BBA’s mortgage approvals are only due in the UK docket, while May’s durable goods orders are expected across the Atlantic.

GBP/USD levels to consider

As of writing the pair is up 0.22% at 1.2747 and a breakout of 1.2793 (20-day sma) would open the door to 1.2818 (high Jun.14) and then 1.2828 (55-day sma). On the other hand, the next support aligns at 1.2638 (100-day sma) followed by 1.2587 (low Jun.21) and finally 1.2550 (200-day sma).


08:51 EUR/USD down smalls below 1.1200, IFO eyed

The single currency has surrendered part of Friday’s gains vs. the buck, now sending EUR/USD to the area of 1.1190 ahead of the release of the German IFO.

EUR/USD attention to data

Spot has started the week on a negative fashion so far today amidst some tepid recovery in the demand for the greenback, while the US Dollar Index stays close to the critical 97.00 handle.

The upbeat tone around USD has been also supported by earlier comments by San Francisco Fed J.Williams (2018 voter, centrist), who advocated for a gradual tightening by the Federal Reserve while he believes the Fed will start reducing its balance sheet later in the year.

In the meantime, the pair is extending its sideline theme prevailing since late May between 1.1100 and (almost) 1.1300, although the low-1.1200s has been quite a tough barrier for EUR-bulls as of late.

From the positioning view, EUR speculative net longs have retreated to 5-week lows in the week ended on June 20, according to the latest CFTC report.

In the data space, the German IFO indicator is due next, while President Draghi is due to speak at the ‘ECB Forum on Central Banking’ in Portugal. Across the pond, May’s durable goods orders are only due.

EUR/USD levels to watch

At the moment, the pair is losing 0.02% at 1.1193 facing the next up barrier at 1.1205 (20-day sma) seconded by 1.1296 (2017 high Jun.14) and finally 1.1300 (high Nov.9). On the other hand, a breakdown of 1.1130 (low Jun.15) would target 1.1108 (low May 30) en route to 1.1073 (76.4% Fibo of 1.1300-1.0339).


08:48 DUP leader Foster to meet with UK PM May Monday morning

Sky News correspondent, as cited by Reuters, noted that the Democratic Unionist Party’s (DUP) leader Arlene Foster is arriving in London this Monday morning to meet the UK PM May.

 


08:42 Australia: Economy remains in a mix Westpac

Australia Q1 GDP was weak, with weather disruptions playing a part which is likely to pass and recent strengthening in employment growth will provide some support ahead, explains the analysis team at Westpac.

They further add that weakness in wages growth and lacklustre consumer confidence will continue to cast a cloud, suggesting that the economy remains in a mix of macro factors.

Key Quotes

“Business sentiment remains strong, although actual investment is muted, while a sizeable pipeline of public works will support growth.”

“Macroprudential and regulatory changes are exerting de facto tightening and also impacting sentiment. Lending rates continue to increase for certain borrowers and combined with weak sentiment, housing markets are expected to slow. The SA government announcing an (additional) bank levy as part of their state budget is yet another twist in this debate, and in our view continues the de facto tightening currently impacting sentiment.”

“Regulatory focus on housing and potential financial stability risk remains. This has seen (expected) ratings downgrade of the banks, with agencies pointing to economic imbalances driven by house price appreciation, high levels of household debt and low wage growth.”

“This mix means RBA moves remain a distant proposition.”

“For the currency, this should see a weaker AUD through 2H17 and into 2018 – underpinned by: RBA firmly on hold; the Fed will raise rates again this year and will commence balance sheet normalisation; commodity prices converge back to cost curves in 2018 and China to soften further in 2018.”

“Given this respective monetary policy outlook, a key question for bond markets is whether the AU-US 10 yr spread can move inverse. We believe it can, but probably not in the near term.”


08:34 NZD/USD consolidating in a narrow range below 0.7300 handle

Following last week's positive closing for the sixth consecutive week, the NZD/USD pair had a quiet start on Monday and consolidated in a 15-pips narrow trading range below the 0.7300 handle.

Last week, the pair regained traction after RBNZ held official cash rates at record lows but sounded less dovish than many investors had expected. This coupled with St. Louis Federal Reserve President James Bullard's remarks that the Fed should hold back from raising interest rates further and see how the economy is progressing, provided an additional boost to the major on Friday and lifted it back closer to the 0.7300 handle.

   •  NZD/USD: Bullish with potential for a retest of 0.7300 - Westpac

Investors now look forward to the Fed Chair Janet Yellen's scheduled speech on Tuesday for some fresh insights over the central bank's monetary policy outlook. Hence, a modest pick-up in the US Treasury bond yields, which tends to underpin the US Dollar demand, kept a lid on any further up-move for higher-yielding currencies - like the Kiwi.

   •  USD may struggle to sustain any positive momentum - ANZ

On the economic data front, today's release of durable goods orders from the US, due for release during early NA session, would now be looked upon for some fresh impetus ahead of NZ trade balance data during early Asian session on Tuesday.

Technical levels to watch

Bulls would be eyeing for a decisive break through the 0.7300 handle, above which the pair is likely to aim towards surpassing 4-month highs resistance near 0.7320 region and head towards testing its next resistance near mid-0.7300s.

On the downside, retracement back below 0.7265 level, leading to a subsequent drop below mid-0.7200s, might turn the pair vulnerable to head back towards retesting the 0.7200 handle en-route disappointing NZ GDP-led swing lows support near 0.7185 level.


08:27 AUD to remain on the back foot this week - ANZ

The less supportive backdrop for commodity prices along with increasing wariness in global financial markets suggests the AUD will remain on the back foot this week, according to the analysts at ANZ.

Key Quotes

“Locally, we will keep an eye on credit growth as slowing investors’ credit could make the RBA less reluctant to ease policy. That said, this data is second tier, and so US rate dynamics and developments in the commodity space will remain the main drivers of the AUD.”

“In Australia, the RBA’s Debelle is unlikely to make any comments on the economy or monetary policy.”

“In New Zealand, business confidence should remain resilient, and indicators of capacity utilisation tight – but they will not be a trigger for the RBNZ as it is not new information.”


08:25 Eurozone: German IFO and ECB conference in focus - TDS

Analysts at TDS point out that German IFO data and the start of ECB’s Sintra conference will be the most watched event for today’s economic calendar as far as Eurozone is concerned.

Key Quotes

“We’re not expecting any substantial moves in Germany’s IFO survey today. We look for the headline business climate as well the sub-indices to remain within a tenth or two of where they were in May.”

“What may be more interesting is that the ECB’s Sintra conference kicks off this evening, with opening remarks from President Draghi at 6:30pm BST, and a speech from former Fed Governor Bernanke. The conference runs through Wednesday, and we’ll be keeping an eye out for any chatter on the sidelines as well, especially with regard to the ECB’s eventual tapering strategy.”


08:21 USD may struggle to sustain any positive momentum - ANZ

The USD may struggle to sustain any positive momentum against the G3, as the market continues to debate whether the Fed really does have cause to be optimistic about growth (and inflation), according to the research team at ANZ.

Key Quotes

“This week’s data are unlikely to shift that view, as they are more likely to be on the soft side. While a weak PCE deflator and consumer spending are priced in; a solid business capex print and strength in sentiment data may be needed to allay the market’s concerns of weak Q2 GDP growth.”

“The USD is also unlikely to receive any support from this week’s Fed speakers, as both Kashkari (who objected to the most recent Fed hike) and Harker have both warned against rising rates in a low inflation environment. Chair Yellen is unlikely to add anything new to her post FOMC press debrief.”

“The USD rally that we have seen in the past week feels a bit different. While previously the fortunes of the dollar were dictated by data and the relative strength of the US economy, the recent strength feels more precautionary in nature and cyclical currencies are starting to under-perform. As such, the path of liquidity rather than data will become an increasing focus. Some emerging market central banks have used the inflation pulse to back away from more hawkish rhetoric. The key question for markets is whether some of the majors will follow suit. For now, we think not.”


08:12 Feds Williams: Likely to start normalizing balance sheet this year

San Francisco Fed President Williams is out on the wires now, via MNI, making a scheduled speech on the monetary policy program.

Key Points:

US economy has reached a turning point from recovery to expansion

Neutral interest rate somewhat below 3% 

Gradual rate hikes to sustain econ expansion 

Likely to start normalizing balance sheet this yr 

Have 'exceeded' full employment by 'fair amount' 

Risk of overheating econ with very strong labor mkt transitory factors pulling down inflation 'waning' 

Expect US unemployment rate to edge down and remain a little above 4pct through next year

Expect US inflation rate to hit fed 2pct goal sometime next year

US economy about as close to dual employment-price mandates as we've ever been

Fed balance sheet management will be widely telegraphed, gradual and boring

Fed will let b/sheet gradually shrink until holding no more securities than necessary, haven't settled on exact number

 


08:04 S&P 500 futures likely to consolidate further - Natixis

Micaella Feldstein, Research Analyst at Natixis, explains that the S&P 500 futures contract proved unable to hold gains above important technical threshold at 2447 (daily Bollinger upper band) and eventually reversed downside.

Key Quotes

“The daily indicators have turned around and as the weekly stochastic remains close to the overbought territory, it is likely that the contract will consolidate further.”

“We’ll keep a lookout at the support at 2420 (daily parabolic) whose break would lead to 2400-2410 (daily Bollinger lower band) even to the 2372-2380 area (weekly Bollinger moving average).”

“The resistances stand at 2447, at 2455, at 2462-2467, at 2478 and at 2493-2500.”


08:04 USD/JPY stuck in range around 111.30, eyes on US data

With the greenback extending its defensive mode into early Europe, the USD/JPY pair continues to keep its range-play intact around 111.30 levels.

USD/JPY ignores BOJ Summary of Opinions

The spot is stuck in tight trading ranges, although manages to find support from a better risk tone prevalent in the markets, as oil prices extend their recovery path. More so, positive Asian equities combined with renewed uptick seen in the US yields across the curve, also continue to keep the bulls somewhat in control.

Meanwhile, the yen markets paid little heed to the BOJ’s Summary of Opinions' for the June 15th and 16th meeting, which suggested that the Japanese economy has been turning toward a moderate expansion.

Looking ahead, the major eagerly awaits the release of the US durable goods orders data due later in the NA session. In the meantime, the USD dynamics and risk trends will continue to drive the USD/JPY price-action.

USD/JPY Technical levels                 

According to FXStreet Chief Analyst, Valeria Bednarik, “Shorter term, the 4 hours chart presents a neutral-to-bearish stance, with the price stuck around a modestly bearish 200 SMA, and technical indicators heading marginally lower around their mid-lines. A critical support comes at 110.90, the 38.2% retracement of the mentioned rally, with a break below it favoring a bearish extension towards the 110.00 region. Resistance levels: 111.60 112.00 112.45.”


08:00 Fed: Dovish plumage - ANZ

On Friday, Bullard and Mester rounded out a week of eight Fed speakers and following a hawkish Dudley on Monday, the tone softened suggesting a dovish angle on further rate hikes prospect, explains the analysis team at ANZ.

Key Quotes

“Bullard remained in the dovish camp, suggesting that there are few reasons to raise rates again. However, he did allude to September as a possible start date for unwinding the balance sheet. Mester said that she still sees a gradual path of rate hikes and that the recent bout of weaker inflation outcomes has not altered her forecasts.”


07:38 NZD/USD: Bullish with potential for a retest of 0.7300 - Westpac

Imre Speizer, Analyst at Westpac, explains that they remain bullish on NZD/USD pair for the week ahead, with potential for a retest of 0.7300 if the US dollar’s weakness persists.

Key Quotes

“The basing (for now) of oil prices and the resumption of US dollar weakness have given the NZD another lift. In addition, the RBNZ was less dovish than feared last week, causing a fresh wave of buying. Indeed, speculators have increased longs to a three-year high.”

“Data this week is second-tier for markets. We get May trade balance (Tue), ANZ business confidence (Thu), and May building permits (Fri).”

Three months ahead: Our year-end target of 0.68 is contingent on the US interest rate and US dollar uptrends, seen in 2016, resuming.”


07:32 USD long positions reduced, GBP shorts cut - ANZ

According to the CFTC positioning data for the week ending 20 June 2017, leveraged funds were net sellers of the USD for the fifth straight week despite the US Federal Reserve delivering a rate hike at its June meeting, notes the analysis team at ANZ.

Key Quotes

“Overall net long USD positions were reduced by USD2.5bn to USD6.7bn, the lowest since September 2016. Positioning on the ICE US Dollar Index, which is based off the DXY, fell by USD2.2bn to USD5.5bn, a 3-year low.”

“Dollar selling was mostly broad-based except against the EUR. The shift to being outright net long EUR the previous week did not last. Leveraged funds were heavy sellers of the single currency to the tune of USD3.3bn, resulting in an overall net short EUR position of USD2.4bn. The change in positioning could be due to profit taking, following eight consecutive weeks of net EUR buying and as EUR/USD failed to break above the 1.13 level.”

“GBP saw net buying after three straight weeks of selling. Leveraged funds reduced their net short GBP position by USD0.5bn to USD0.8bn. The surprise 5-3 decision to leave rates unchanged by the BoE at their 15 June meeting, raising the possibility that the BoE could be the next major central bank to follow the Fed in hiking rates, likely spurred the GBP buying. Funds also reduced their net short JPY positions for the second week running, this time by USD1.1bn to USD1.3bn.” 

“CHF positioning turned net long for the first time since December 2016.”

“Despite continued weakness in oil prices, commodity currencies experienced net buying for the fourth consecutive week. Leveraged funds have turned net long AUD again following net buying of USD1.5bn, while overall net long NZD positions rose to their highest level since February this year ahead of the 22 June RBNZ meeting.”

“Among EM currencies, MXN saw net selling of USD1.3bn to reduced leveraged funds’ overall net long position to USD1.0bn. RUB’s net long positions were marginally reduced while BRL positioning was largely unchanged.”

“Net long 10-year UST positions rose to their highest since December 2007. Meanwhile, net long positions in crude oil and gold were reduced in line with falling commodity prices during the week.”


07:29 Japan s Abe cabinet approval rating falls to 39% from 48% - Yomiuri Poll

According to the latest Yomiuri Shimbun survey conducted Saturday to Sunday, the cabinet reshuffle approval rating fo Japan's PM Shinzo Abe’s Cabinet stood at 39%, down 9 points from the previous survey’s 48%.


07:24 GBP: Technical condition significantly superior to fundamental backdrop - BBH

Analysts at BBH suggest that Sterling's technical condition appears significantly superior to its fundamental backdrop as MACDs and Slow Stochastics are poised to cross higher for sterling.  

Key Quotes

“The EU has the stronger hand in Brexit negotiations.  The loss of the Tory majority may cost the government GBP 2 bln of additional infrastructure and NHS spending to get the support of the DUP, with which it agrees with on very few issues.  The Lib-Dems and Labour are seeking to frustrate May's ability to govern as if the Tories had a majority.  On top of this, the central bank is as divided as it has been under Carney, though some may recall that Carney's predecessor was out-voted more than once.”

The MACDs and Slow Stochastics are poised to cross higher for sterling.  Initial resistance is seen in the $1.2800-$1.2815 area.  What looks like a resilient sterling is more a case of a weak dollar.  The euro has risen around 5.5% against the sterling since mid-May and near GBP0.8800 is within about 0.5% of the year's high.   On a trade-weighted basis, sterling is off 2% this month.  We remain bearish sterling on a medium-term view.”   


07:21 CFTC: Net bullish positions on WTI fall to lowest level in 10 months

The latest CFCT data showed on Friday, hedge funds cut bets on rising West Texas Intermediate (WTI) crude prices by 31% in the week ended June 20, pushing their net bullish position to the lowest in 10 months, re-enforcing view that the US oil has entered into a bear market, Bloomberg reports.

Money managers’ WTI net long positions fell by 60,556 to 134,742 contracts. Long positions fell by 5.7 percent to 301,476, the lowest in almost eight months, while short positions grew by 34 percent to 166,734, the most since August, the CFTC noted.

Bets on falling gasoline prices reached their highest level in six weeks while bearish positions on diesel were the largest in a year and a half, according to the CFTC.

 


06:55 Iron-ore prices to support AUD by end-2017 - UBS

Analysts at UBS published a latest outlook on the iron-ore prices and its impact on the AUD prices going forward.

Key Quotes:

“While market woes over a slowdown in China growth appear to have receded somewhat over the past month, iron ore remains fairly depressed at ~$56/t vs. $86/t in Q1-17.

However, few believed that iron ore prices >$80/t would be sustained for a prolonged period, and we would argue that such levels were far from being priced into the currency.

In fact, we estimate that our year-end AUD/USD forecast from a flow perspective is consistent with an average 2017 iron ore price of $65/t, which would be realised at steady spot prices around current levels until year-end.

Our commodity analysts expect iron ore prices to average $71/t in 2017 - which should facilitate a record-high trade surplus, over time supporting AUD - and end the year at $60/t.”

 


06:46 GBP/USD: Will the 5-day winning streak sustain ahead of US data?

The GBP/USD pair kicked-off a brand new week on a stronger footing, opening with a 20-pips bullish gap, as investors brace for the central banks’ speeches-dominated week ahead.

GBP/USD: Eyes on 20-DMA at 1.2774

The spot extends its bullish run into a fifth day today, and builds onto Friday’s gains above 1.2750 levels, as risk-off remains in vogue amid a recovery in oil prices and higher Treasury yields.

Moreover, the US dollar consolidates Friday’s sell-off so far this session, which also provide extra legs to the upmove. On Friday, the greenback fell sharply lower against its main competitors on the back of dovish comments from FOMC member Bullard and Mester.

Both the Fed officials suggested that there is no immediate need to tighten policy, given softening US inflation outlook and potential tax and regulatory reforms.

More so, the pound also benefits from a survey conducted by Lloyds, which showed that Business confidence in the UK jumped to an 18-month high of 24%, while comments by the UK’s Brexit Minister Davis also added to the ongoing strength in cable.

Focus now shifts towards the fundamentals, with plenty of macro news due on the cards from both the UK and US later this week, following a data-light economic calendar last week. Next of note for the major remains the UK BBA mortgage approvals \ and US durable goods data due later on Monday.

GBP/USD levels to consider             

Valeria Bednarik, Chief Analyst at FXStreet offers key technical levels for the spot: “The price remains below a strongly bearish 20 SMA now at 1.2785, whilst the Momentum indicator remains flat within negative territory and the RSI indicator heads marginally higher around 43. In the 4 hours chart, the price is above a modestly bullish 20 SMA, while technical indicators retreat within positive territory, not enough to confirm a bearish move ahead. Support levels: 1.2665 1.2635 1.2590 Resistance levels: 1.2750 1.2785 1.2830.”


06:21 Bubas Weidmann: ECB hasnt discussed possible extension to bond-buying program

Reuters reports comments from the German central bank, Bundesbank (Buba), President Jens Weidmann delivered over the weekend on the ECB’s monetary policy programme.

Key Quotes via Reuters:

“ If the solid economic development and price development continues, as expected, it would be time to take a look at an exit from the very easy monetary policies"

"As far as a possible extension of the bonds-buying program goes, this hasn't yet been discussed in the ECB Council"


06:15 EUR/USD - Indecision ahead of the IFO data, will it retake the rising trend line?

The pull back in the EUR/USD ran out of steam last week around 1.1124 (23.6% Fib R of Apr 10 low - June 14 high). The spot recovered losses to end on a flat note (at 1.1192) for the second consecutive week.

Consecutive Doji candles on the weekly chart

The back-to-back Doji candles on the weekly chart suggests indecision, especially on the part of the bears, given the repeated recovery from the 23.6% Fib support despite the bearish RSI divergence and the breach of the trend line sloping higher from the April 17 low and May 11 low. The trend line hurdle is seen today around 1.1260 levels.

Focus on the German IFO data & US Durable goods orders number

A better-than-expected IFO reading could yield a rally to the trend line hurdle of 1.1260. However, further gains depend on the quality of the US durable goods orders data.

Corporate spending as represented by the durable goods orders needs to pick up, else the market would start questioning the Fed’s belief that the Q1 slowdown was transitory.  A daily close above the trend line looks likely if the core durable goods number disappoints market expectations.  The trend line hurdle may remain intact if the US May durable goods orders see a sharp rebound. 

EUR/USD Technicals

Last week’s long legged Doji candle suggests that the rebound in the daily RSI from 50.00 levels does suggest a potential for a re-test of the recent highs around 1.13.

A break below 1.1174 (1-hour 200-MA + 4-hour 50-MA) could yield an intraday pull back to 1.1154 (4-hour 200-MA) and 1.1145 (Friday’s low). On the higher side, a break above 1.12 (zero levels) would open up upside towards 1.1268 (May 23 high) and 1.1285 (June 2 high).

On a larger scheme of things, we keep an eye on 1.1296 (June 2nd week - Doji candle’s high) and 1.1119 (last week’s Doji candle low) as major resistance and support levels.

 

 


06:08 Goldman Sachs assesses a 1/4 chance of US recession over the next two years

Goldman Sachs’ economists out with a latest note on Monday, assessing the risk of a recession for the US.

Key Points:

We find that many pre-WW2 recessions originated in the financial sector, many post-WW2 recessions were caused by oil shocks and monetary policy tightening, and sentiment-driven swings in borrowing and investment led to recessions in both eras.

Some common contributors to past recessions look less worrisome today.

The dominant cause of post-war US recessions-rapid rate hikes in response to high inflation, often boosted by oil shocks-is less threatening today due to the anchoring of inflation expectations and the rise of shale

GS assesses a 1/4 chance of recession over the next two years

Somewhat below the unconditional probability over two years of 1/3 since 1980


06:01 SMA cross injuring EUR/NOK

The bearish offensive in EUR/NOK has resulted in a cross of the 50-period below the 200-period SMA.

The signal emerged on 4-hour charts further deteriorating the near-term EUR/NOK price structure. While conservative sellers will wait for a close below recent support as a confirmation of a forthcoming lower low, more aggressive participants will expect a re-test of the crossover level to prove benevolent for continued downside.

05:46 GBP/JPY clocks 4-day high

GBP/JPY clocked a 4-day high of 141.93 in Asia as the Yen remained flat lined against the greenback, while the British Pound strengthened. At the time of writing, cross was up 0.25% at 141.90 levels. 

Golden cross on the 1-hour chart

On the 1-hour chart, the bullish crossover between the 50-MA and 100-MA has been confirmed. The chart also shows a rising bottom pattern, thus the spot could extend gains, especially if the European equity markets begin the week on a positive note. 

UK’s Brexit Secretary David Davis, while talking to BBC’s Andrew Marr on Sunday, said that he is pretty sure that UK will secure a good deal. Meanwhile, the latest Lloyds Survey showed the business confidence rose to 18-month high. The British Pound may find bids in response to the positive comments from Davis and on the back of upbeat survey data. 

GBP/JPY Technical Levels

The daily chart shows a rising bottom formation. A break above 142.00 (zero figure) would open doors for 142.54 (June 20 high) and 143.05 (50-DMA). On the other hand, a breach of support at 141.48 (support on 1-hour chart) would expose 141.11 (1-hour 200-MA) and 140.59 (June 20 low). 

 


05:15 BIS to central banks - Push on with the great unwinding

The Bank for International Settlements (BIS) said on Sunday that the major central banks should press ahead with interest rate increases and added that some turbulence in financial markets will have to be negotiated along the way.

As per Reuters report, the BIS has asked policymakers to take advantage of the improving economic outlook and it’s surprisingly negligible effect on inflation to accelerate the "great unwinding" of quantitative easing programs and record low interest rates.

Key quotes

If we leave it too late, it is going to be much more difficult to accomplish that unwinding. Even if there are some short-term bumps in the road it would be much more advisable to stay the course and begin that process of normalization

Since we are now emerging from a very long period of very accommodative monetary policy, whatever we do, we will have to do it in a very careful way


05:01 AUD/JPY: return to crossover level could be bought

The advance set in motion by the AUD/JPY pair lead to a cross between the 100 and 200-SMA on the 4hr charts.

Should bulls gain conviction on this signal, the 200-SMA could be defended on a price drop. The recent lows are at a relative narrow distance from the price level where the so-called “Golden Cross” occurred.

The bullish outlook should be reconsidered by a close below the 200-SMA.

04:58 AUD/JPY finds takers at 10-DMA, attempts break above 1-hour 100-MA

AUD/JPY found takers in early Asia at 10-DMA level of 84.03 and is now attempting a break above the 1-hour 100-MA level of 84.25 levels. 

The previous two attempts to break above the 1-hour 100-MA failed, although the dips were short lived, given the bullish crossover between 1-hour 50-MA and 1-hour 200-MA. 

Supported by 38.2% Fib retracement

The pull back from the June 20 high of 85.06 ran out of steam around 83.82 (38.2% Fib R of June 6 low - June 20 high). At the time of writing, the spot was trading around 84.30 (23.6% Fib R of June 6 low - June 20 high). It remains to be seen if the current hourly candle ends above the 100-MA. 

The Asian data docket is empty, thus focus remains on the broader market sentiment. The uptick in the S&P 500 futures could keep the AUD/JPY well bid. Aussie traders would also keep an eye on gold prices, which currency trade flat around $1256/Oz levels. 

AUD/JPY Technical Levels

A break above 84.30 (23.6% Fib R of June 6 low - June 20 high) would open up upside towards 84.54 (May 2 high) and 84.81 (June 16 high). On the downside, breach of support at 84..08 (1-hour 200-MA) could yield a pull back to 83.73 (June 22 low) and 83.41 (200-DMA). 

 


04:50 NZD/JPY: see gains thus limited to the 83 area - Westpac

Analysts at Westpac gave an analysis for NZD/JPY.

Key Quotes:

"Global risk sentiment remains elevated, supporting the NZD and hurting the safe-haven yen. There is scope for the ris to be sustained towards the 82.50 area. The end of the month is nigh, and with it what is likely to be a more pronounced weakening in the inflation pulse in Japan. Thus CPI will likely dominate next week’s event risk in Japan though we do also have retail sales on Thursday and jobs data plus IP next Friday. 

3 months ahead: The BOJ’s defacto tapering of its asset purchases should be yen supportive. In addition, the Japanese economy is seeing a pickup in consumer activity, mitigating any slippage in external demand. 

The early signs are promising although more evidence is required before markets fully buy into the emerging Japanese story. We see NZD/JPY gains thus limited to the 83 area."


04:36 Fed speak: the tone softens - ANZ

Analysts at ANZ explained that on Friday, Bullard and Mester rounded out a week of eight Fed speakers.

Key Quotes:

"Following a hawkish Dudley on Monday, the tone softened."

"Bullard remained in the dovish camp, suggesting that there are few reasons to raise rates again."

"However, he did allude to September as a possible start date for unwinding the balance sheet. Mester said that she still sees a gradual path of rate hikes and that the recent bout of weaker inflation outcomes has not altered her forecasts." 


04:24 AUD/USD: attempting to reestablish upward momentum?

AUD/USD is currently trading at 0.7568 with a high of 0.7573 and a low of 0.7562.

AUD/USD has been consolidated between 0.7560/80 within a reversal of the mid-June downside from the 0.7630/40 level while attempting to reestablish upward momentum. 

AUD/USD 1-3 month: 

Analysts at Westpac suggest that the resilience of US equity markets to the distractions of the Trump administration is a positive backdrop for risk-sensitive AUD, adding the following:

"Chinese markets are of course less helpful as the deleveraging push continues, but the uptrend in steel prices suggests a potential for a recovery in iron ore prices. The rebound in Australian job creation keeps RBA rate cut talk at bay. But multi-month, we expect the ongoing rise in US interest rates to chip away at AUD/USD, leaving it around 0.73 by Q3."

AUD/USD levels

Valeria Bednarik, chief analyst at FXStreet explained that whilst technical indicators have recovered from oversold readings, but pared gains right around their mid-lines , losing upward momentum, buying interest is limited. "Chances of further advances will depend on US self-weakness. US Markit preliminary June PMIs and May New Home Sales will likely define dollar's behavior during this last session of the week."

Resistance: 0.7586 June 21 high; 0.7624 June 20 high; 0.7663 March 31 high; 0.7680 March 30 high. Support: 0.7529 200-DMA; 0.7500 June 7 low; 0.7457 June 6 low; 0.7408 June 5 low; 0.7373 June 1/2 lows; 0.7336 May 11 low.

AUD/USD: headed to 0.7630? - BBH


04:16 PBOC sets the Yuan reference rate at 6.8220

People's Bank of China (PBOC) set the Yuan reference rate at 6.8220 vs. Friday's fix of 6.8238.


03:59 Italy to bail out two more banks after ECB warning

Italy’s government will be bailing out Banca Popolare di Vicenza and Veneto Banca at a cost of EUR 5.2 billion. The banks' "good" assets will be taken on by the Intesa Sanpaolo banking group.

The move comes two days after the European Central Bank (ECB) warned that the two banks were failing or likely to fail.


03:43 USD/CNY fix projection: 6.8365 - Nomura

Analysts at Nomura offered their projection for today's USD/CNY fix.

Key Quotes:

"Our model1 projects the fix to be 127 pips higher than the previous fix (6.8365 from 6.8238) and 22 pips lower than the previous official spot USD/CNY close of 6.8387. The basket implied change is 26 pips lower than the previous official spot USD/CNY close (6.8361 from 6.8387)."


03:42 Brexit: I would be prepared to walk away if given a punishment deal - Brexit Secretary David Davis

Brexit Secretary David Davis, while talking to BBC’s Andrew Marr on Sunday said, “I would be prepared "to walk away" if the UK was given a "punishment deal”. We have to plan for that."

Key quotes

Pretty sure, but not 100% certain that UK will secure a good deal

The deal I want is the free trade agreement, the customs agreement and so on

It will be turbulent… there will be difficulties, but at the end of the operation there is a point of common interest in both sides.


03:37 USD/JPY better bid in positive Tokyo open

The Nikkei 225 opened flat and headed -0.1% lower in the initial trade before reversing and making fresh high at 20198.50, lifting USD/JPY to 111.35 the high.

Japanese Yen futures: OI and Volumes drop as Yen struggles to break higher

USD/JPY has been supported near the 111.00 which limited its descent at the start of last week.  "However, without greater support from the Treasury market, the greenback looks vulnerable, with an initial target near JPY110.65, argued analysts at Brown Brothers Harriman, adding the following: "It spent a good part of the first half of June below the 200-day moving average, we would not ascribe much significance to it now, but note that it is found just below JPY111.00." 

USD/JPY levels

In the daily chart, Valeria Bednarik, chief analyst at FXStreet explained it shows that the price met selling interest on approaches to the 100 DMA, currently converging with the 50% retracement of the latest daily slide around 112.00, while technical indicators head nowhere, but remain within a positive territory.

USD/JPY 4hr chart

Bednarik adds, "Shorter term, the 4 hours chart presents a neutral-to-bearish stance, with the price stuck around a modestly bearish 200 SMA, and technical indicators heading marginally lower around their mid-lines. A critical support comes at 110.90, the 38.2% retracement of the mentioned rally, with a break below it favoring a bearish extension towards the 110.00 region."


03:30 UK business confidence jumps to 18-month high Lloyds Survey

Business confidence in the UK jumped to an 18-month high of 24%, reports Lloyds Bank. The reading is double of what was seen immediately following the last year’s EU referendum.

The survey also says that the number of companies struggling to find skilled workers in the past six months rose to a 10-year high of 52%.

 


03:23 Japanese Yen futures: OI and Volumes drop as Yen struggles to break higher

The demand for the Japanese Yen last week wasn’t strong enough to push the USD/JPY pair below 111.00 levels even though the treasury yield curve flattened and the inflation expectations slid to 8-month low of 1.61%.

Friday’s Doji candle on the USD/JPY pair suggests indecision in the markets. The lackluster sideways action of the last week has led to a drop in the JPY futures volume on the CME. The Open Interest has dropped as well, as traders await a convincing breakout on either side (below 111.00 or above 112.00).

The preliminary figures by the CME show the Open Interest dropped by 806 contracts on Friday. The Open Interest in the September contract (most active contract) fell by 760. Volumes topped out on June 14 and the Friday’s count of 77,528 was the lowest since May 29.

A jump in the OI and volumes following the range breakout would signal the bull/bear momentum is gathering pace.


03:01 BoJ Summary of Opinions

The BoJ has just released the Summary of Opinions' for the June 15th and 16th meeting. Within them, the BoJ states that the Japan's economy has been turning toward a moderate expansion:

  • Economic activity has been broadly in line with the projection. 
  • The government expects that the Bank will work steadily toward achieving the price stability target of 2 percent in light of developments in economic activity and prices, as well as financial conditions.
  • Increase in wages and prices have not been accelerating despite improvements incorporate profits, output gap.
  • Increasing number of small and medium-sized firms are raising their wages, which is significant for achieving higher inflation.
  • Remarkable improvement in CPI has yet to be seen, it would take some time for inflation to accelerate.
  • Private consumption appears to be gaining momentum recently.
  • Firms are concerned about the increase in fixed costs amid low growth expectations.
  • The government expects the Bank to continue to work toward achieving the price stability target under "QQE with Yield Curve Control" in light of developments in economic activity and prices, as well as financial conditions.



 


02:53 Japan Corporate Service Price (YoY) remains unchanged at 0.7% in April


02:49 AUD/USD: headed to 0.7630? - BBH

Analysts at Brown Brothers Harriman noted that the Australian dollar snapped a four-day slide ahead of the weekend. 

Key Quotes:

"It now looks poised to have a running start at the $0.7630 area that blocked it earlier this month."

"Speculative positioning is neutral, but the technical resistance near $0.7700 is formidable.  Raising hedge ratios into the rally may be preferable to increase exposure."


02:38 NZD/USD: can the bird s advance continue and target 2017 highs?

NZD/USD is currently trading at 0.7283 with a high of 0.7285 and low of 0.7276.

NZD/USD is consolidating in a quiet start to the week. There is a lot of focus is on the bird at the moment considering its recent performance and relentless advance. Against the US dollar, the bird is just shy of a five cent advance from the depths of the 0.68 handle with mid-May's strong uptrend to recent highs. At the same time, the bird has been in a strong uptrend vs the Aussie and the cross is now down to 1.0371 the low. 

The week ahead: United States - Nomura

However, the bird may be in for a correction on overbought territory and fundamentally, the economic developments since the RBNZ’s previous policy statement in May have been broadly neutral from a policy perspective. Analysts at Westpac suggested that the RBNZ is unlikely to find itself under pressure to raise rates by this time next year. Therefor, the weeks ahead will determine the underlying trend and all eyes will be on the US economy in respect to the recent conflicting realities in the US economy vs the Fed's objectives, determining the course of the dollar for the rest of the year. 

NZD/USD levels

NZD/USD managed a score through the 0.7280 mark and is anchored just below the psychological 0.73 handle having made a high last week at 0.7318 and strong resistance there. 0.7374 was the high for 2017. To the downside, 0.7250/80 area guards 0.7200 guards 0.7145 and a break back below 0.7080/90 are key near-term downside areas. On the wide, the 0.7375 YTD highs are a key target to the upside and to the downside, a break below 0.7080/00 opens 0.6970.
 


01:48 OCR to stay on hold for some time - Westpac

Analysts at Westpac explained that this week’s Official Cash Rate review from the Reserve Bank didn’t deliver any surprises. 

Key Quotes:

"As expected, the RBNZ keep the OCR on hold at the current record low of 1.75%. In addition, the bottom line of the press release was unchanged from the May Monetary Policy Statement, noting that “Monetary policy will remain accommodative for a considerable period.” Developments since the RBNZ’s previous policy statement in May have been broadly neutral from a policy perspective. While we’ve had lower than expected house price inflation and GDP growth in early 2017, these surprises have been balanced against stronger outlooks for both export earnings and fiscal policy. As a result, the RBNZ’s assessment of overall economic conditions appears to have remained largely unchanged. To generate the sustained rise in underlying inflation pressures that the RBNZ is targeting will require a protracted period of strong activity. And that will require ongoing support from low interest rates for some time yet.

We expect that the OCR will remain on hold through to early 2019. While that’s a little earlier than the RBNZ assumed in their May forecasts (which showed rates on hold until the latter half of 2019), we don’t think this is a big difference. The key point is that we are in for an extended period where the OCR remains very low. However, financial markets more generally expect to see rates rising sooner. In fact, current market pricing is consistent with at least two rate hikes before the end of 2018, with the first coming around June next year. We think this is far too early. It’s true that inflation has picked up.

The Q1 read of 2.2% was not only above the mid-point of the RBNZ’s target band, it was the highest read in five years. However, much of the rise in inflation over the past year has been due to temporary factors. That includes weather related increases in produce prices as well as earlier gains in fuel prices. These factors will reverse over the coming year, and the resulting downturn in inflation will be exacerbated by the recent downturn in oil prices. This means that mid-2018 will see headline inflation dropping back into the lower part of the RBNZ’s target band. The RBNZ does looks through temporary swings in inflation associated with volatility in the prices of items like food and fuel – both to the upside and the downside. Nevertheless, it is tough to make a case for raising rates at a time when inflation is likely to be falling and below the midpoint of the target band.

What’s more important for the OCR is the longer term trend in prices. Looking at measures of underlying inflation in the economy, we see that they have been rising over the past year, but they remain below the 2% target mid-point. Over the coming years, underlying inflation will pick up as the economy continues to expand. But as long as the pickup in underlying inflation remains gradual, and inflation expectations remain well anchored, the RBNZ is unlikely find itself under pressure to raise rates by this time next year. Reinforcing the case for continued stability in the OCR are changes in borrowing rates. Even though the OCR has remained low and on hold for most of the past year, borrowing rates have been creeping higher, and we expect that they will continue to rise gradually over the coming year. Global term interest rates have risen since last year in response to expectations of tightening by the Fed. At the same time, New Zealand's banks are facing higher funding costs as borrowing outpaces deposit growth. Both of these factors reinforce the need for the OCR to remain low in order to support activity."
 


01:37 Market wrap: treading water, dollar gives back - ANZ

Analysts at ANZ explained that Markets were relatively quiet on Friday with equities generally treading water, yields little changed, and the US dollar giving back some recent gains. 

Key Quotes:

"European and US data had minimal market impact, with most moves in the market mild."

"European bourses fell by 0.2- 0.5% while equities in the US were mixed with DJIA flat and S&P 500 up 0.2%. The US treasury curve moved less than 1bp, while Canadian yields fell after CPI figures disappointed. European yields rose a couple of bps."

"The dollar fell against most in the G10 with NOK outperforming. CAD fell 0.3% on weaker data as the market pared back central bank tightening speculation. Oil rose about 0.7%, although finished the week down 3.8%. Gold rallied to finish the week, rising to USD1256/oz."


 


01:22 The week ahead: United States - Nomura

Analysts at Nomura explained that for the week ahead in the US, the relevant elements of the May PPI and CPI inflation reports point to subdued core PCE inflation in May. 

Key Quotes:

"Durable goods orders (Monday): We expect a 0.1% m-o-m decline in total durable goods orders in May following a 0.8% decline in April. We expect the forecast decline to be driven by weakness in durable goods orders excluding transportation. The May industrial production report suggests the output of durable goods manufacturing excluding transportation fell sharply in the month, portending a sharp slowdown in orders. Considering these data, we forecast a 0.5% decline in durable goods orders excluding transportation. The orders of transportation goods likely increased May, driven by a sharp increase in defense-related aircraft and parts orders. Motor vehicle and parts orders, however, are likely to decline as inventories of light vehicles remain high in the face of weaker-than-expected vehicle sales thus far in 2017. Case-Shiller home price index (Tuesday): The Case-Shiller 20-city home price index increased 5.89% y-o-y in March, a slight uptick from the February increase of 5.85%. The recent increase has outpaced the average year-on-year rate in 2016 as the number of homes for sale on the market lags high demand. On a monthly basis, this index was up 0.87%. Strong job gains in 2017, increases in personal income, and an influx of younger new home buyers may have contributed to increased demand in a low-inventory housing market, pushing up prices. However, continued increases in income and a recent downtick in mortgage rates may alleviate the adverse impact of rising prices on home affordability, to a certain degree.

Conference Board’s Consumer Confidence (Tuesday): The Conference Board’s consumer confidence index fell to 117.9 in May from 119.4 in April. In June, consumer sentiment likely continued to deteriorate modestly, to 117.5. The preliminary estimate for June by the University of Michigan consumer survey suggests a moderation in optimism as consumers, particularly self-identified Republicans and independents, became more skeptical about the current administration’s ability to enact its agenda. Although the unemployment rate has fallen notably since January and income gains have been steady, it is possible that a downward shift in expectations regarding the administration’s policy promises may have outweighed healthy consumer fundamentals.

Advance goods trade balance (Wednesday): Goods trade data were weak in April with the second consecutive decline in nominal goods exports. At the same time, nominal goods imports increased steadily, widening the trade gap to $67.1bn. Based on incoming container data at major US ports, we expect weakness in goods exports continued in May. Moreover, export prices dropped notably in May, the first time since August 2016, lowering the nominal value of goods exports. Further, goods imports may have declined after two consecutive months of increases. Altogether, we expect a goods trade deficit of $67.3bn in May, widening further from April.

Pending home sales (Wednesday): Pending home sales fell for a second month in April, down 1.4% m-o-m from March. It is possible that a limited supply of homes for sale on the market dampened the number of contract signings. However, consumer fundamentals have remained supportive for housing demand. Although low inventories have contributed to rising home prices, continued income growth and a recent tick-down in mortgage rates may partially mitigate the worsening of home affordability. For May, consensus expects an increase of 1.1% m-o-m.Initial jobless claims (Thursday): For the week ending 17 June, initial jobless claims increased by 3k to 241k. Smoothing out weekly volatility, the 4-week moving average increased by 2k to 245k, but remained near lows not seen since the 1970s. Continuing claims ticked up slightly as well, but the insured unemployment rate was unchanged at 1.4%, its historical low. Despite this slight uptick in initial claims, continued low readings suggest that the labor market is still healthy. Moreover, anecdotal evidence from various surveys suggests businesses find it increasingly difficult to fill open positions, pointing to further tightening in labor market conditions. Against this backdrop, initial claims are likely to stay low in the medium term.

Q1 GDP, third estimate (Thursday): In the second estimate, the BEA revised up real GDP growth to 1.2% q-o-q saar (from 0.7%). Although incorporation of the annual revision to retail sales boosted personal consumption expenditure (PCE) modestly, PCE growth was relatively soft at 0.6%, compared to 3.5% in Q4. Incoming service spending data point to a modest upward revision to PCE in the final estimate of Q1 GDP. The Quarterly Services Survey for Q1 suggests healthy growth in service sector revenues and expenses, indicating that spending on services may have been greater than the BEA’s prior estimates. However, incoming data on other components of GDP have been lackluster. Despite upward revisions to manufacturers’ inventories in Q1, a subsequent upward revision to aggregate inventory investment is likely to be only modest. In its final print, Q1 inventory accumulation is likely to be subdued. Private structure investment contributed to real GDP growth notably, but downward revisions to nonresidential construction in February and March imply that private structure investment may be lowered in its final print. Last, trade data that came in after the BEA’s second estimate included revisions to February and March that widened the trade gap, resulting in a greater drag from net exports. Altogether, we expect a 0.9% increase in the final estimate of Q1 real GDP growth, 0.3pp lower than the BEA’s second estimate.

Personal income and spending (Friday): We expect a trend-like 0.3% m-o-m increase in personal income in May. Data from the BLS’s May employment report highlight a robust pace of job creation. Average hourly earnings of private production and nonsupervisory workers increased steadily in May, pointing to a steady increase in personal income. Personal consumption growth, on the other hand, appears to have been only moderate. Spending on durable goods likely slowed in May, as suggested by weak sales at motor vehicle and parts dealers and electronics and appliance stores, in particular. Moreover, we expect a sharp decline in spending on nondurable goods. Sales at gasoline stations dropped in the month and sales at other nondurable goods stores remained subdued. However, we think service spending likely increased steadily. Sales at dining and drinking venues remained weak, but elevated readings of the ISM nonmanufacturing survey index imply healthy activity in the service sector. Altogether, we expect a modest 0.1% m-o-m increase in personal spending.

PCE deflator (Friday): Relevant elements of the May PPI and CPI inflation reports point to a subdued increase in core PCE inflation in May. Core CPI has been disappointing in recent months with continued weakness in core goods price inflation. The inflation data on the relevant components within the PPI report were mixed. PPI inflation of scheduled passenger air transportation fares dropped 4.1% m-o-m in May, following a 0.9% rise in April. Portfolio management service fees continued to increase, but at a slower pace than in April. As for medical care-related items of PPI, hospital service prices were down 0.2% m-o-m and physician service prices were essentially unchanged. Overall, based on CPI and PPI data, the May core PCE price index is estimated to rise only moderately by 0.02% m-o-m. On a year-on-year basis, core PCE inflation is now likely to fall again to 1.4% (1.388%) in May from 1.5% (1.538%) in April. As energy prices plummeted in May, energy prices in the CPI report dropped sharply with aggregate energy CPI falling 2.3%. Based on these data, we expect a notable drag from the PCE energy price index. Although we expect a steady increase in the PCE food price index, given continued growth in CPI food prices, the growth in PCE food prices will not be enough to offset the drag from energy prices. Altogether, our forecast for headline PCE inflation is a decline of 0.08% m-o-m, which is equivalent to a 1.5% y-o-y increase.

Chicago PMI (Friday): In May, most of the excitement from the Chicago PMI report came after Market News International corrected the headline index to 59.4 (up 1.1pp from the previous month) after an initial report earlier in the morning of 57.0 (down 1.3pp from the previous month), which would have been the first decline since January. Correction aside, the headline reading of 59.4 marked the highest point since November 2014. The employment index jumped from 53.8 to 57.1, indicating a modest pick-up in the pace of employment growth. The production index increased by 3.7pp to 63.2 and continues the uptrend seen since February 2016. While the new orders index decreased by 4.5pp to 61.4 (a still-elevated reading), the order backlog index jumped by 8.8pp to 51.8, indicating steady demand. Similar to the ISM, Philly Fed, and Empire State manufacturing surveys, Chicago PMI has seen some softness in the prices paid index over the past two months. Given elevated readings in both headline indexes of the Philly Fed and Empire State manufacturing surveys earlier this month, we expect continued improvement in the Chicago PMI and forecast a reading of 60.0 for June.

University of Michigan consumer sentiment (Friday): In the preliminary reading for the University of Michigan consumer survey in June, the headline index dropped 2.6pp to 94.5, the lowest reading since November 2016. The survey director noted a sharp decline in sentiment, particularly among self-identified Republicans and independents, after 8 June, likely reflecting diminished expectations for the Trump administration’s agenda. The survey jumped sharply after the election in November 2016 while a sharp partisan divide emerged among respondents: Republicans consistently had more positive responses for current conditions and expectations, while Democrats experienced a noticeable drop in sentiment. Recent events, including ongoing Russia investigations, may have dampened sentiment among self-identified Republicans, and some independents, and could put more downward pressure on this survey. Whether or not this decline appears in other measures of consumer sentiment, such as the Conference Board’s consumer confidence index, remains to be seen. Regarding inflation expectations, while the one-year ahead expected inflation rate remained unchanged at 2.6%, the five- to 10-year ahead rate increased 0.2pp to 2.6% after three months at 2.4%. Inflation expectations have been trending steadily lower over the past three years but have leveled off somewhat recently, slightly easing policymaker concerns."


01:07 The week ahead: Japan - Nomura

Analysts at Nomura explained that for the week ahead, they forecast May all-Japan core CPI inflation to come in at 0.5% y-o-y as the rise in import costs stemming from JPY depreciation through end-2016 starts to have an impact.

Key Quotes:

"May all-Japan CPI (Friday): We forecast May all-Japan core CPI inflation (ex-fresh food) to come in at 0.5% y-o-y, stronger than the April reading of 0.3%. We think the main factor will be a boost to growth from the core core CPI component. We forecast May all-Japan core core CPI inflation (ex-energy and food, except alcoholic beverages) to come in at -0.1%, less than the 0.3% decline seen in April. May core core CPI inflation for the Tokyo area (already released) rose from April and we believe the all-Japan figure will follow this pattern. We also forecast all-Japan CPI inflation ex-fresh food and energy, commonly known as the BOJ's version of core core CPI, to come in at 0.1% y-o-y in May, versus 0.0% in April. We forecast Tokyo area core CPI inflation to come in at 0.2% y-o-y, up from 0.1% in May. We expect the rebound in energy prices to again boost the core CPI. Meanwhile, we forecast core core CPI inflation for June to be -0.1%, the same as in May. Looking back at May, we believe the rise in import prices due to JPY depreciation through end- 2016 has started to have an impact on the core core inflation rate. However, the rise in the core core inflation rate in May was sharp, and in June we expect the boost from JPY depreciation to end. We forecast Tokyo area CPI inflation ex-fresh food and energy (the BOJ version of core core CPI inflation) for June to be 0.1%, higher than the May reading of 0.0% owing to a small boost from core foods.

May industrial production (Friday): We forecast industrial production in May to fall 3.0% m-o-m. The survey of manufacturers' production forecasts calls for a fall of 2.5% m-o-m in May. Actual production tends to be lower than production plans, and adjusting this figure using realization ratios over the past three months gives a decline of 3.5%. Meanwhile, favourable data stood out in related statistics in May. Japan's real exports, which have a strong correlation to industrial production, were up 2.3% m-o-m. In addition, corporate sentiment improved, with the Japanese manufacturing PMI output index up 0.6 points from the April figure at 54.0, exceeding the growth/contraction threshold of 50. The current conditions DI for manufacturers in the Economy Watchers Survey (seasonally adjusted) was up 2.8 points month-on-month at 51.0. Based on these mixed results, we do not believe the decline in production will be as large as indicated by applying the past realization rate to production plans. 

May Labour Force Survey (Friday): We forecast an unemployment rate of 2.8% for May, flat month-on-month. The job openings-to-applicants ratio, which tends to lead the unemployment rate, has risen consistently since February, but we assume the current economy is close to full employment. We forecast a job openings-to-applicants ratio of 1.49x, up 0.01 points month-on-month. The new job openings-to-applicants ratio, which tends to lead the job openings-to-applicants ratio, has been flat since the start of 2017, and corporate appetite for hiring may have lost some of its momentum recently. However, we believe labour supply-demand is continuing to tighten due to the boost from improvements in the economy, and forecast that the job openings-to-applicants ratio for May to maintain moderate growth.

May Family Income and Expenditure Survey (all households) (Friday): We estimate that real household consumption expenditure (per household) will fall 1.4% y-o-y in May, but rise 0.3% m-o-m. In the Economy Watchers Survey for May, the household activityrelated current conditions DI (seasonally adjusted) fell 0.3 points as household sentiment as seen from the vendors’ standpoint deteriorated. Meanwhile, the Consumer Confidence Index for May was high at 43.6, an improvement of 0.4 points m-o-m. Furthermore, department store sales rose 0.6% m-o-m in May, reflecting strong spending by foreign visitors to Japan and strong sales of big-ticket items owing to JPY depreciation and high equity prices; new auto sales (passenger cars) marked further strong growth in May with a rise of 3.6% m-o-m (seasonally adjusted by Nomura). As such, despite the mixed results in terms of sentiment among vendors and consumers, in view of growth in other sales statistics, we forecast spending in May to increase monthon-month."


01:06 EUR/USD: awaiting June CPI as next catalyst - BBH

Analysts at Brown Brothers Harriman explained that the euro was confined to a narrow trading ranges last week and finished little changed against the dollar.  

Key Quotes:

"Since the middle of May, the euro has traded in an $1.11-$1.13 trading range.  After starting the week in Asia above $1.12, it was confined to the lower half of the range in the past several sessions.  

The sideways trading has alleviated the extended technical condition we have been monitoring.  In our macro view, we are concerned that a great deal of good eurozone news has been discounted, and that the economic momentum slows and price pressures ease.  

The softening seen in the flash PMI is consistent with this.  The preliminary estimate for June CPI will be reported. The signal may be obscured by a decline in the headline and a small gain in the core."
 


00:51 The week ahead: Europe - Nomura

Nomura's The week ahead for Europe...

Key Quotes:

"German Ifo (Monday): We expect the German Ifo business climate index to increase to 115.2 in June from 114.6 in May. We forecast both the current situation and expectations indices to pick up to 106.8 (from 106.5) and 124.2 (from 123.2) respectively. 

UK CBI distributive trades survey (Tuesday): Rising inflation and falling real wage growth are having a negative impact on consumer spending in volume terms. The reported and expected balances of this survey (which are indicators of annual retail volumes growth) provide a useful addition to the other indicators of retail sales (official, BRC etc). 

BoE household borrowing (Thursday): Some members of the MPC and FPC have been particularly concerned about the strong growth rate of consumer credit in recent months, which forms part of this report. Net mortgage lending, however, fell to its lowest in April in over a year as the number of approvals slipped to under 65k during the month. This adds to the signs of a slowing housing market. 

UK GDP, final estimate (Friday): In the absence of any revisions to the headline rate of growth, the focus within this report will be on the saving ratio (at a record low in Q1 but expected to be revised higher going forward), household incomes (being buoyed relative to average earnings on account of rising employment) and the breakdown of consumer spending (the parts of spending which are likely to weaken most quickly are those with a large imported component and those that are more luxury than necessity). 

UK current account (Friday): The trade balance in goods and services deteriorated by almost £4.5bn between Q4 2016 and Q1 this year. A typical seasonal improvement in the transfers balance and a similar income balance to Q4 (where we saw the lowest deficit for three and a half years thanks to increased returns on overseas foreign direct investment) would raise the Q1 current account deficit to £16bn (around 3.25% of nominal GDP) from £12bn in Q4. 

 

Euro area, preliminary June inflation (Friday): We expect the flash reading of euro area HICP inflation to remain at 1.4% y-o-y in June. We forecast core inflation to increase to 1.0% from 0.9%. Although oil price declines will weigh on headline HICP inflation, core HICP inflation is likely to shift up as the recovery has strengthened and broadened. At the country level, we forecast the flash reading of German HICP inflation to climb 1.6% y-o-y in June after 1.4% in May."


00:29 US dollar edges higher but lacks conviction - BBH

Analysts at Westpac explained that the US dollar edged higher against most of the major currencies over the past week. 

Key Quotes:

"However, the fundamental backing is still not solid, and it makes as wary of these upticks, even though we think a bottom is being carved. Specifically, the US interest rates still not finding much traction, and President Trump's legislative agenda still is encountering significant resistance within the Republican Party.   

Since the end of April, the Dollar Index has alternated between advancing and declining weeks. We suspect the pattern will continue next week. After this week's upticks, it means a setback.  Over most of this period the Dollar Index has been confined to a roughly 96.50-98.00 range. The Dollar Index peaked in front of near 97.90 on June 20. It can drift toward the lower end of the range, which we expect to hold." 


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