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Daily Pivots: (S1) 150.44; (P) 150.97; (R1) 151.49; More...

GBP/JPY's corrective fall from 153.39 is still in progress and intraday bias remains neutral. As long as 149.74 support holds, outlook remains bullish in the cross. Break of 153.39 will resume the medium term up trend and target 61.8% projection of 139.29 to 152.82 from 146.96 at 155.32. However, break of 149.74 will dampen our bullish view and turn bias back to the downside for 146.96 key support instead.

In the bigger picture, current development suggests that medium term rise from 122.36 is resuming. Sustained trading above 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. However, break of 146.96 support will indicate rejection from 150.43 key fibonacci level. And the three wave corrective structure of rebound from 122.36 will argue that larger down trend is resuming for a new low below 122.26.

Daily Pivots: (S1) 132.82; (P) 133.08; (R1) 133.35; More....

EUR/JPY is still bounded in range of 131.16/134.48 and intraday bias remains neutral. Further rise is expected as long as 131.16 support holds. Decisive break of 134.48 will resume medium term rise from 114.84 and target 141.04 resistance next. However, sustained break of 131.16 support will now indicate near term trend reversal and turn outlook bearish for 127.55 key support.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). Sustained break of 61.8% retracement of 149.76 to 109.03 at 134.20 will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will suggest medium term topping and will turn outlook bearish for deeper fall back to 114.84/124.08 support zone at least.

No change in QE and rates
We may get more info on specifics of tapering
Higher inflation forecast
Less dovish stance and possibility higher move in Euro

The big announcement was made during the European Central Bank's (ECB) last meeting but it would be naive to underestimate the power of the central bank. The European central bank will announce its monetary policy on Thursday and investors will get more flavour for the ECB's plan to scale back on it's asset purchase program. The market is widely expecting that there will be no change on their policy and the bank will remain dovish in their language. We reason this is where investors are largely underestimating the president of the European Central Bank, Mario Draghi. We do anticipate that Draghi is going to surprise the market on Thursday and his stance may actually rattle the forex market as the year ends. The ECB may not emphasize on the link of it's tapering process and inflation situation, and rather pay more attention to the stellar economic progress throughout this year in the eurozone. The bank may sound more optimistic towards it's inflation due to the improving labour and economic conditions.

The European Central bank is likely to sound less dovish on Thursday while the market is largely expecting that the bank would be rather dovish with it's approach. Thus, there is a clear scope for the euro to move higher as the market gets a surprise when Draghi takes the stage. The Euro-dollar pair has the potential to touch the 1.20 mark on Thursday and the bond yields could pop significantly. The euro currency without any doubt has been the best performer among major currencies this year and a surprise by the ECB could make the Christmas for the euro bulls even better. The currency has the potential to move well above the 1.20 mark in 2019, because the market hasn't priced in the prospects of the ECB increasing the interest rates. The option markets clearly shows that the risk reversals trading is skewed in favour of call contracts.

If something which is going to keep Draghi tamed on Thursday it will be the weakness in the wage growth. The bank's inflation forecast and the actual number has been out of sync. The monetary policy has failed to produce the kind of spark in inflation which the ECB was expecting. The ECB is closely monitoring the pay rise in the largest economy of the eurozone, Germany. The real wage growth index has grown at the slowest pace this year since 2014 and it is mainly due to the lack of rise in pay demand.

NZDUSD (0.7004): The New Zealand dollar managed to break past the 0.6891 level of resistance with price action maintaining the bullish momentum. Any retracements could be seen falling back to this level to establish support. To the upside, the next target for NZDUSD comes in at 0.7062 where the next main resistance level remains to be tested. In the event that NZDUSD slips back below the 0.6891 support level, we could expect to see the declines retesting the previous lower support at 0.6907.

USDJPY (112.62): The USDJPY posted strong declines yesterday as the U.S. dollar fell to a four day low. On the 4-hour chart, price closed below the support level of 113.00 - 112.90. Any short term retracement will see price retesting this level to establish support. To the downside, USDJPY could be seen pushing lower to test the next support formed at 112.04. Alternately, in the event that USDJPY manages to break past the 113.00 level, we can expect to see the bullish momentum resuming. However, it is unlikely as USDJPY could be seen maintaining a sideways range within 113.00 and 112.04.

EURUSD (1.1836): The EURUSD rallied to close at a five day high yesterday following the FOMC meeting. The reversal near the 1.1730 level of support could potentially point to a head and shoulders pattern that is currently forming. If we expect to see a reversal resulting in the right shoulder, then we can expect further declines in EURUSD on a break down below 1.1730 neckline support. On the 4-hour chart, price action has hit the resistance level area of 1.1843 - 1.1822. Further gains can be expected only on a close above this level.

USD/CHF - 0.9865

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9853

Kijun-Sen level                    : 0.9885

Ichimoku cloud top                 : 0.9913

Ichimoku cloud bottom              : 0.9909

Original strategy :

Bought at 0.9860, Target: 0.9970, Stop: 0.9825

Position : - Long at 0.9860

Target :  - 0.9970

Stop : - 0.9825

New strategy  :

Exit long entered at 0.9860,

Position : - Long at 0.9860

Target :  -

Stop : -

Dollar’s overnight post-Fed selloff dampened our bullishness and suggests near term downside risk remains for the fall from 0.9978 top to bring retracement of recent rise, below 0.9840 would extend weakness to 0.9820, then towards 0.9790-95, having said that, near term oversold condition should limit downside and price should stay above 0.9755-60, bring rebound later.

In view of this, would be prudent to exit long entered at 0.9860 and stand aside in the meantime. Above the Kijun-Sen (now at 0.9885) would bring rebound to 0.9910-15 but only break of resistance at 0.9936 would revive bullishness and signal low is formed instead, bring further gain to 0.9950-60 first. 

GBP/USD - 1.3433

Most recent candlesticks pattern   : N/A

Trend                                 : Sideways

Tenkan-Sen level                 : 1.3428

Kijun-Sen level                    : 1.3380

Ichimoku cloud top              : 1.3368

Ichimoku cloud bottom        : 1.3333

New strategy  :

Buy at 1.3350, Target: 1.3450, Stop: 1.3315

Position : -

Target :  -

Stop : -

As cable found good support at 1.3303 earlier this week and has staged a strong rebound, suggest low has been made there and consolidation with mild upside bias is seen for this rebound from 1.3303 to extend gain to 1.3475-80, then 1.3500, however, near term overbought condition would limit upside and price should falter below indicated resistance at 1.3432, bring another decline later.

In view of this, we are looking to buy cable on dips as 1.3345-50 should limit downside. Below 1.3320-25 would defer and suggest the rebound from 1.3303 has ended, bring retest of this level first, break there would extend the fall from 1.3550 top to 1.3280 and later 1.3250 but price should stay well above previous support at 1.3221.

Daily Pivots: (S1) 0.8785; (P) 0.8810; (R1) 0.8837; More...

Intraday bias in EUR/GBP stays neutral at this point. With 0.8866 resistance intact, near term outlook remains mildly bearish and deeper fall is expected. Break of 0.8688 will extend the fall from 0.9305 and target 61.8% projection of 0.9305 to 0.8745 from 0.8981 at 0.8468 first and then 100% projection at 0.8151 next. However, break of 0.8866 resistance will indicate near term reversal and turn bias back to the upside for 0.8981 resistance instead.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

The much anticipated FOMC meeting concluded yesterday with the Federal Reserve hiking interest rates by 25 basis points. At the meeting, the central bank's projection for rate hikes next year was in line with market expectations. The Fed projected three rate hikes for 2018 and two rate hikes for 2019. The rate hike yesterday saw two dissenting votes from Evans and Kashkari.

In the UK, the monthly labor market data showed that the UK's unemployment rate was unchanged at 4.1% but wage growth continued to remain weak in comparison to the the inflation.

Looking ahead, a busy day on the economic calendar is marked by central bank meetings from the Swiss National Bank, European Central Bank and the Bank of England. No monetary policy changes are expected from either of the central bank meetings making the forward guidance key in anticipation of future policy actions.

In the U.S. the monthly retail sales numbers will be released with forecasts pointing to a strong rebound in retail sales. The flash manufacturing and services PMI numbers are also expected today followed by BoC Gov. Poloz's speech.