FXstreet.com (Barcelona) - USD has eased specially against Yen, on the back of better than expected Japan trade deficit based on fastest imports rise pace since Dec 2010, Japan Fin Min said. USD/JPY dipped to session lows at 95.17 after the news, while AUD/USD also fell to fresh weekly lows at 0.9433.

Australian leading index posted also better results than expected, lifting the Aussie from mentioned session lows to current 0.9480 level, while USD/JPY is at 95.37 last, off mentioned session lows. EUR/USD has been little changed slightly below the 1.34 handle, ahead of big event in the form of FOMC at 18:00 GMT.

Local share markets show mixed results as well with Nikkei index still in the positive up above +1%, while China Mainland indexes are below -1%. Gold and Oil eased a bit too, but also little moved, led by US equity futures that retraced a few points from SP500 yesterday's fresh weekly highs.

Main headlines in the Asian Session:

Japan PM Abe: Says he received strong support from G8 leaders for economic policies

Commodities Brief: Gold technical set up continues to deteriorate

Japan exports beat estimates

Australia Apr CB Leading Indicator increase to 0.3% vs 0.1%

Australia Apr Westpac Leading Index (MoM) improves to 0.6% vs 0.1%

AUD/USD stalls above 0.9450

Bank of Japan’s Kuroda to attend Japanese Parliament lower house fiscal committee today

EUR/USD consolidating gains near 1.3400

Flash: FOMC to announce taper at the end of Q3 - Nomura

Option expiries 10am NY cut

FXstreet.com (Barcelona) - The EUR/USD continued to add to its gains, climbing another 26 pips to close at 1.3391. Volatility is likely to increase as we progress throughout the day, with the FOMC Economic Projections due out at 18:00GMT, followed by the Fed Policy Statement and press conference at 18:30GMT.


Kathy Lien of BK Asset Management discussed some possibilities of what market participants can expect as we head into the conclusion of the FOMC Meeting. “The Federal Reserve will be making one of its special quarterly monetary policy announcements on Wednesday and based on the price action of the currency, equity and bond markets, there is very little consensus on what is expected from the central bank," Lien noted

In concluding her view, Lien went on to add price action for the pair will likely be dictated by how Bernanke will phrase his view of the tapering process. Lien added, “While there are a number of potential scenarios for tomorrow's event, we are focusing on 2 key possibilities. If Bernanke says tapering does not equal tightening but makes it unambiguously clear that they plan to vary the amount of bonds purchased under their Quantitative Easing program later this year, the dollar should rise. However if Bernanke straddles the fence and spends more time distinguishing the difference between tapering and tightening, the dollar should sell-off as this would suggest that the Fed's eagerness to adjust asset purchases has weakened.”

Analysts at NAB Global Markets were discussing the FOMC meeting as well, with a key focus what bond yields may face after the announcement, and the influence the move have on the USD. NAB commented, “FX is likely to take its cue from Treasuries. If a ‘QE taper’ signal takes 10-year yields up through 2.30%, the USD should rally, though beware historically the lags from higher US yields to the dollar have been both long and variable as offshore investors initially seek to avoid capital losses.”

In going on to discuss further details about the meeting, NAB commented that due to slightly improving economic data, Bernanke is unlikely to backtrack on his tapering comments from the April FOMC meeting. In conclusion NAB commented, “Bernanke is nevertheless likely to stress that any such move still remain dependent on the incoming economic news, and is unlikely to give an expected date at which the process may commence (unless of course, a decision is made today to start scaling back QE – unlikely in our view, since that would undoubtedly amount to a fresh shock for markets).”

Val Bednarik, Chief Analyst at FXstreet.com provided some details on the technical developments from the shorter term time frame charts. “The EUR/USD maintains a bullish tone according to the hourly chart, as price recovered from a short term ascendant trend line to quickly overcome its 20 SMA, while indicators hold in positive territory. The lack of volume at the time being helps indicators turn flat and lack momentum, but there are no signs the upside is not still favored,” Bednarik added. In conclusion, Bednarik went on comment technical developments on the 4 hour time frame also remain bullish, with momentum studies favoring a move towards the 1.3520 area.

From a longer term technical perspective, the set up on the EUR/USD daily chart also remains strong ahead of the FOMC. Price continues to remain firmly above both the 9 and 20 dma’s, which should continue to help limit pullbacks. Furthermore, the RSI (14) continues to consolidate above 60, maintain the bullish zone between 40 and 80. On a final note, the ADX (7) trend indicator is now upward sloping and building value above 25 on the weekly chart, indicating trend strength on the long term time frames is continuing to build.

FXstreet.com (Barcelona) - With the wild swing in speculation of QE tapering, first translated in broad-based USD gains through May, only to be reverted along June, Nomura economists think the FOMC will not announce a change it its asset purchases today.

Nomura thinks that Bernanke will announce such a move at the conclusion of today's meeting: "We think the most likely outcome is that the FOMC will announce a reduction in the pace of its asset purchases at end of the third quarter."

FXstreet.com (Barcelona) - The broader profile of range defining should return in EUR/USD, says Tim Riddell, Head of Global Markets Research at ANZ, suggesting that the impressive leg off 1.2795 lows is running out of steam.

According to Riddell, "Although potential for further gains to 1.3475-1.3500 should not be ignored, shorter term indicators suggest that the move off 1.2795 is virtually over, and slippage below 1.3325 could be enough (confirmed below 1.3250) to trigger a sharp slide to the 1.3025-1.3125 area if not a deep, position flipping decline to test 1.2700 within a broader 1.25-1.37 range."

FXstreet.com (Barcelona) - With MPC meeting minutes at 08:30 GMT, GBP/JPY is last trading at 148.82, near session lows, on the back of broad Yen strength. The cross has been trapped inside a 100 pips trading range 149.50/148.50 for last 48 hours, ahead of key risk event in the form of US FOMC at 18:00-18:30 GMT.

GBP/JPY is up +0.69% for the week so far, retracing from yesterday's weekly high at 149.70, shy of 38% Fibo retrace of 154.30/147.08 downleg at 149.80. Nikkei index has eased from session highs moments before the Tokyo lunch break, last still up +1.25% for the day, above the key 13000 points mark, helping the stronger Yen latter case.

Immediate support to the downside for GBP/JPY lies at yesterday's Asian session/June 07 lows 148.33/17, followed by Friday's lows at 147.40, and Thursday's fresh 2-month lows at 147.11/07. To the upside, closest resistance shows at recent session/yesterday's highs 149.53/68, followed by June 06 lows at 150.26, and June 14 highs at 150.65.

FXstreet.com (Barcelona) - Analysts at NAB Global Markets are of the opinion that as we head into the FOMC statement and press conference, Bernanke is not likely to backtrack on his previous comments of tapering asset purchases.

NAB commented, “We would agree is that given a generally respectable but hardly stellar set of incoming economic data since the April FOMC meeting, Mr. Bernanke is not going to push back hard against his May 20th Q&A comment to the JEC that, “We could in the next few meetings take a step down in our pace of purchases."

In going on to discuss the FOMC Meeting in greater detail, NAB added, “Bernanke is nevertheless likely to stress that any such move still remain dependent on the incoming economic news, and is unlikely to give an expected date at which the process may commence (unless of course, a decision is made today to start scaling back QE – unlikely in our view, since that would undoubtedly amount to a fresh shock for markets)” In conclusion, NAB went on to say Bernanke may mention that even if tapering is on the table, it doesn’t mean the actions can’t be reversed should economic conditions warrant further monetary accommodation from the Federal Reserve.

FXstreet.com (Barcelona) - While RBS FX Strategist Greg Gibbs argues the Fed may still be not in the mood to taper at all, he makes a good point by saying that even if it does, is still left with a very large rate of monthly asset purchase, not forgetting it is ready to ramp it up again. So Gibbs thinks "too much ink has been spilled on over-hyping this event already."

According to Gibbs, "the big risk factor for global markets now is China and how it deals with its financial bubble, with all the evidence is that the new government is now working on this problem." For the Strategist, the real question now is "can they let the air out without too much damage?" Gibbs wonders, responding that "it's really a matter of how much damage."

That realisation, in view og Gibbs, is probably the main reason for the sustained weakness in commodity and Asian emerging currencies this year: "It is a reason for their significant further decline than risk assets in the US and Europe" Gibbs said.

As a final note, Gibbs notes that we are entering a phase in which the market no longer ignores the Chinese shadow banking system, saying that "while the Taper and Abenomics smokescreens have distracted the market from developments in China somewhat, China has certainly entered the main-stream market analysis." We are seeing warning signals about the 'shadow banking' in China on a much more regular basis now.

FXstreet.com (Barcelona) - After finishing the previous day up 130 pips at 1.4118, the EUR/AUD is adding to gains during the Asia session up another 32 pips at 1.4150. The catalyst for the sharp gains the previous day appeared to be the release of the RBA minutes which seemed to help weaken the Aussie Dollar across the board.

RBA minutes keep Aussie on defensive

Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ shared some thoughts on the RBA minute release which seemed to help put the Aussie on the defensive across the majority of pairs. “The high yielding Australian dollar has come under further downward pressure overnight following the release of the latest RBA minutes from their meeting on the 4th June,” Hardman commented . In further discussing the release, Hardman went on to add, “The minutes revealed that the RBA gave an implicit green light to Australian dollar weakness observing that it had initially declined noticeably driven by Fed QE tapering expectations which had then been driven by domestic factors including RBA easing and heightened uncertainty regarding the China growth outlook.” In conclusion, Hardman noted the RBA mentioned further declines in the pair would help in re-balancing the economy overtime.

Path of least resistance remains higher

The FXstreet.com trend index remains in slightly bullish set up on the daily chart, while the ob/os index remains overbought. The RSI (14) also remains in bullish set up, consolidating above the 60 level and maintaining the bullish zone between 40 and 80. Short term moving averages are also bullish with price above both the 9 and 20dma’s. Initial resistance sits at 1.4237(high price from last week), while first support sits at 1.4017 (the 9dma).

FXstreet.com (Barcelona) - Today's FOMC is a big event risk for US stocks and risk markets in general, and according to Junya Tanase, Currency Analyst at JPMorgan, "the bias seems to be skewed towards a dovish tone in the statement and/or at Bernanke’s press conference, which would provide some lift to risk markets."

Amidst such pro-risk thinking, JPMorgan's Tanase recommends to nevertheless not lose the focus on a possible short in USD/CHF "as a hedge for the case where the assumption of a short-term relief for risk markets from a dovish FOMC proves wrong..."

"If market conditions remain fragile with firm volatility and poor liquidity even after the FOMC, we will likely see further unwinding of stretched CHF shorts" Tanase added.

FXstreet.com (Barcelona) - Following yet another push higher in US equity markets with SP500 adding +1.54% gains in the week so far, +0.74% for Tuesday alone, local share markets in the Asia-Pacific show mixed results. Nikkei index is back above the key 13k points mark, up +1.73% for the day, helped on Yen weakness and positive exports data in Japan, while Shanghai Composite index is down -1.06% for the day so far.

Australian ASX is higher by +0.4% on the back of better than expected leading indexes figures in Australia, while Korean Kospi is down -0.81%, and Hong-Kong's Hang Seng also down -0.32%, all of them ahead of later on key FOMC statement in the US.

FXstreet.com (Barcelona) - After trading as high as 1.3416 at one point in the day, the EUR/USD finished with solid gains up 33 pips at 1.3394.

German ZEW beats estimates

Analysts at Rabobank shared some thoughts on the latest German ZEW survey which was released during the previous European session and came out better than expected. “Germany’s ZEW survey, a timely snapshot of investor and analyst opinion in Europe’s largest economy, sent mixed signals. The Current Situation index eased lower to 8.6 in June from May’s 8.9. June’s reading is the lowest in four months. The forward-looking Sentiment index gained to 38.5 from May’s 36.4. June’s reading is the highest in three months.” In conclusion, Rabobank went on to mention while the report did likely not do much to settle market volatility in the short term, the longer term outlook appears to be improving.

Technicals maintain bullish bias

Val Bednarik, Chief Analyst at FXstreet.com provided some thoughts on the recent price action in EUR/USD, and then went on to discuss some technical developments on the shorter term time frame charts. “The EUR/USD managed to advance some this Tuesday, breaking and standing a few pips above the 1.3400 level. Market players had been pretty cautious ahead of tomorrow’s FED economic policy announcement, with the possibility of some tapering already priced in.”

In turning towards the charts, Bednarik went on to comment, “EUR/USD maintains a bullish tone according to the hourly chart, as price recovered from a short term ascendant trend line to quickly overcome its 20 SMA, while indicators hold in positive territory. The lack of volume at the time being helps indicators turn flat and lack momentum, but there are no signs the upside is not still favored. In the 4 hours chart technical readings present a strong upward momentum, favoring a continuation towards 1.3520, next strong midterm resistance level”

FXstreet.com (Barcelona) - The NZD/USD has been retracing part of its tantamount gains seen last week, when a knock-out technical blow reversal against sellers took the pair from 0.7760, lowest since June 14 2012, all the way to 0.8135, before current price at 0.7970 ahead of the FOMC later today.

NZD/USD, potential bottom in place - 2ndSkies

Last week, the NZD/USD ended, as 2ndSkies Founder Chris Capre describes, "with two days of buying (A) quite impulsive, and the follow through selling over the last three (B) days not taking out the low of the last bull close."

According to Capre, this suggests a potential bottom is in place, and if so, "the bulls will buy higher off the lows" Capre said.

Capre intends to reinstate a buying position at 0.7860 and 0.7818 targeting 0.8021. Capre finishes his analysis by saying that "if 0.7760 holds the 2nd attack, expect another rally by the bulls to reverse the trend."

FXstreet.com (Barcelona) - The AUD/JPY closed the session slightly higher, climbing 20 pips to finish the day at 90.32. Thus far in Asia, the pair is inching lower down 19 pips at 90.13.

Economic data not having much influence in current Asia session

Earlier in the session, we saw AUD CB Leading indicator which came in at 0.3% vs. 0.1% (previous), as well as Westpac Leading Index which printed 0.6% vs. 0.2% (previous. We also saw some Merchandise Trade Balance data from Japan which came in at -993.9B Yen vs. -1,200B Yen (forecast). However, neither the data from Australia or Japan had much influence on the pair so far in Asia trade.

Technical set up still points towards lower prices ahead

The FXstreet.com trend index on the AUD/JPY daily chart remains in slightly bearish set up, while the OB/OS index reads neutral. Furthermore, price remains below both the downward sloping 9 and 20 dma’s which may help limit advances over the next few days. On a final note, the RSI (14) remains in the bearish zone between 20 and 60, a sign sellers continue to have the upper hand on the momentum front. Initial resistance sits at 90.71 (previous day high), while first support sits at 89.81 (previous day low).

FXstreet.com (Barcelona) - AUD/USD is last trading at 0.9452, off recent fresh weekly lows at 0.9434, pushing slightly below yesterday's previous weekly lows at 0.9439. The pair is down -1.23% for the week, mostly on Aussie weakness, as the AUD is the weakest currency among all majors for last 2 trading days.

AUD remains heavy

“Immediate risk is seen of full retracement on return to 0.9324, as negative tone prevails on short-term studies and double-top formation is close to completion,” says analyst at Windsor Brokers and contributor at FXstreet.com Slobodan Drvenica. “Bearish resumption below 0.9324, would open psychological 0.9300 support, also 100% Fibonacci expansion of downleg from 0.9664,” Drevenica suggests.

Key technical levels

Immediate support to the downside for AUD/USD lies at mentioned fresh weekly lows 0.9434, followed by June 07/13 lows at 0.9428, and June 12 lows at 0.9415. To the upside, closest resistance shows at June 10 highs at 0.9481, followed by NY session highs at 0.9517, and Monday's lows at 0.9507.

FXstreet.com (Barcelona)

FXstreet.com (Barcelona)

FXstreet.com (Barcelona) - Japan's trade balance figures for the month of May came in at ¥-993.9 billion vs estimates of ¥-1200.0 billion and a previous trade balance of ¥-362.4 billion. Meanwhile, Japan's adjusted trade balance (May) stood at ¥-821.045 billion vs ¥-892.8 billion expected. May imports y/y came in at +10.0% vs +10.8% expected, with exports better than expected, up at +10.1% in May vs +6.5%% expected.

FXstreet.com (Barcelona)

FXstreet.com (Barcelona) - The precious metals suffered moderate declines today, with gold closing down 1.22% to finish at 1367 while silver gave back 0.73% to close at 21.60.

Oil continues to inch higher towards $100

Oil was able to finish the day with nice gains, closing up 0.65% at 98.81 (and well off the lows set early in the day down at 97.65). The pair continues to hold the previous resistance trend line (97.00 area) on the daily/weekly charts which is now acting as support. The technical set up on the daily oil chart remains strong, with price above both the upward sloping 9 and 20 dma’s, and the RSI (14) consolidating above 60. Initial resistance now sits at 99 (high of week), followed by 100 (psychological level). First support sits at 98.29 (the 20dma on 1 hour chart)

Gold closes below support trend line on daily chart

From a technical perspective, the close below the previous support trend line located at 1379 is a bearish development and could help lead to further selling over the next few days. Furthermore, the close below this trend line has actually led to the completion of a massive pennant pattern on the daily chart which has targets as low as 1211.. Initial resistance now sits at 1379 (close above would negate pennant pattern), while first support sits at 1355 (support on daily chart).

FXstreet.com (Barcelona)

FXstreet.com (Barcelona)

FXstreet.com (Barcelona)

FXstreet.com (Barcelona) - The USD/JPY continues to trade on a bid tone after the release of the latest Japanese trade figures, in which the trade deficit for May stood at -993.9 bln yen. The pair is presently around 95.65, 35 pips or 0.30% above its NY close.

Japan trade balance widens moderately

Japan’s trade deficit widened in May after both exports and imports grew at a 10.1% and 10%, respectively, on a yearly basis vs the 6.5% and 10.8% Reuters had been expecting. The rise in exports is an indication of solid domestic demand, especially after the weakening of the local currency.

USD/JPY technical levels

Despite the topside failure at 95.10/15 resistance last Monday, the USD/JPY picked up momentum through Tuesday, breaking and consolidating above the 20-day EMA. The next critical level to penetrate on the upside is supply at 95.80/96.20, a pre-requisite that would open the doors towards 97.00 June 12 swing high ahead of the FOMC, as pointed by Chris Capre, Founder at 2ndSkies. On the downside, 95.00 round number acts as key support.

FXstreet.com (Barcelona) - USD/JPY is trading near session highs at 95.55 last, off early NY session weekly highs at 95.76. The pair is up +0.96% since yesterday's Asia-Pacific open, and +1.57% for the week so far.

Waiting for FOMC

“Technical readings show a slightly short term bullish tone, as price stands above 100 SMA and indicators above their midlines, but buying interest remains quite limited,” said Valeria Bednarik, Chief Analyst at Fxstreet.com. “In the 4 hours chart technical readings remain neutral, which suggests market will remain ranging around 95.00 until FOMC announcement,” Benarick added.

Key technical levels

The analyst sees support levels at: 94.90, 94.50 and 94.10, while resistance levels at: 95.30, 95.75 and 96.05.

FXstreet.com (Barcelona)

FXstreet.com (Barcelona)

FXstreet.com (Barcelona) -After trading as high as 81.15 at one point in the day, the DXY was unable to hold onto early gains and finished flat for a second day in a row at 80.80. Thus far, the greenback has been able to find firm support near the 80.70 level on numerous occasions the past few trading days.

FOMC Meeting to influence price action

David Song, Currency Analyst at DailyFX went on to discuss the upcoming FOMC meeting, and how it might influence the greenback as we progress throughout the rest of the week. "As the Federal Open Market Committee interest rate decision takes center stage, the major currencies may consolidate ahead of the key event, but the fresh batch of central bank rhetoric along with the updated forecast is likely to heighten the appeal of the USD should we see a growing argument to taper the asset-purchase program.”

In further discussing the FOMC Meeting Song commented, “Indeed, it seems as though the FOMC is slowly moving away from its easing cycle as the U.S. economy gets on a more sustainable path, and the central bank may start to lay out a more detailed exit strategy as the committee sees a stronger recovery in the second-half of the year.” Song concluded by mentioning the shift in Fed policy should help to provide a firm bid to the USD as we progress throughout the remainder of the year.

Technical picture on DXY still bearish

The current technical set up on the DXY daily chart remains in bearish set up. Price remains below both the 9 and 20dma’s on the daily chart, while the RSI (14) continues to consolidate below the 40 level and maintain the bearish zone between 20 and 60. Initial support sits at 80.70 (noted above), followed by 80.40 (support on daily chart). Initial resistance remains at 81.25 (the 9dma), followed by 81.50 (the 200dma).

FXstreet.com (Barcelona) - The odds remain very much in favor of a major decline in GBP/USD, based on the down-breakout of a multiyear triangle in February, says Thomas Anthonj, FX Strategist at JPMorgan.

If the assumption from Anthonj is fullfiled, "we'd have to classify the 1.6379 to 1.4823 decline as wave 1 down so that the
recovery since would classically form a zigzag countertrend rally (wave 2) which is already clearly visible" the Strategist notes.

Given the negative implications from the triangle breakout, Anthonj, in his own words, "would be very surprised if the market would find the inner strength to exceed 1.5784/88 (C = A/61.8 %) which would be the only way to delay acceleration lower in favor of an extension up to the highest T-junction at 1.6014 (65.4 %)."

Anthonj is looking for a break below 1.5498/88 (minor 38.2 %/pivot) to indicate "the countertrend rally top (wave 2) is in place, receiving its final confirmations via breaks below 1.5181 (minor 76.4 %) and below 1.5046 (daily trend)" the Strategist added.

Lastly, if the latter scenario is accomplished, it would free the way towards 1.4339/1.4228 (76.4 % on big scale/pivot), "before the 2009 low at 1.3504 and the projected wave 3 target at 1.3266 would come into focus" Anthinj concludes.

FXstreet.com (Barcelona) - The AUD/USD suffered its third day of declines in a row, losing another 53 pips to close at 0.9484.

RBA minutes provide scope for further easing

Jacqui Douglas, Senior Global Strategist at TD Securities went on to share some thoughts on the details of the latest RBA Minutes which were released in yesterday’s session. “The minutes of the RBA’s June Board meeting, when it left the cash rate unchanged at 2.75% (in line with expectations), provided few clues on the outlook for near term policy.”

In further discussing her views, Douglas went on to comment, “There were many word-for-word reproduction of the key statements from the June post-meeting communique, including: (1) the stance of policy was appropriate for the time being, (2) the outlook for inflation provided some scope for further easing, should that be required, and finally, (3) the AUD had depreciated noticeably but remained at a high level considering the decline in export prices.” In conclusion, Douglas mentioned there is no doubt the RBA maintains an easing bias but the lack of details in the release makes it difficult to determine what the time line for further action might be going forward.

AUD/USD technical set up still provides bearish tilt

The FXstreet.com trend index remains in slightly bearish set up on the daily chart, while the ob/os index reads oversold. Price is also back below both the downward sloping 9 and 20 dma’s which is another sign the bears may have the upper hand as we progress throughout the week. On a final note, the RSI (14) has still been able to build any value above the 45 level which is a sign momentum sellers remain in control. Initial resistance now sits at 0.9522 (the 9dma), while first support is at 0.9439 (previous day low)

FXstreet.com (Barcelona) - EUR/JPY is last trading at 127.80, off early NY session fresh weekly highs at 128.08. The cross is up +1.10% from previous Asia-Pacific open yesterday, and +1.78% higher for the week so far.

Yen showing sings of weakness

According to Valeria Bednarik, Chief Analyst at Fxstreet.com: “The hourly chart shows price well above a still bearish 100 SMA and limited by the 200 one, while indicators stand in positive territory,” adding: “Overall, steady gains above 128.10 may favor an advance towards 128.80 area, that probe strong in the past. Only steady gains above it will put the pair closer to the bullish path,” Bednarick concludes.

Key technical levels

The analyst finds support levels at: 127.40, 126.90 and 126.30, while resistance levels at: 128.10, 128.40 and 128.80.