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The U.S dollar is starting to recover upside momentum against the Japanese yen, hitting 112.81, as the U.S dollar index recovers after the U.S Republican party passed their tax reform package late Friday. The USDJPY pair has recovered all of Friday’s losses, after the pair touched 111.30, as reports surfaced that Michael Flynn had admitted to lying about Russian collusion to the FBI. Markets will be focused on any further details coming out about the Russian collusion case, and if any more members of the Trump administration were involved.

Should price action hold above the 112.70 technical level, intraday buyers may look to test towards the 113.10 level, with extended upside resistance at 113.80.

If USDJPY buyers fail to hold the 111.70 level again, a move back down towards the 112.20 level appears likely. The 111.30 level offers extended resistance.

The British pound has slipped lower against the U.S dollar, moving towards the 1.3430 level during the early Asian session. A stronger U.S dollar index and political jitters are weighing on the GBPUSD pair, as the UK today reaches its December 4th deadline to submit an enhanced Brexit proposal to the European Union. The British pound is likely to be increasingly volatile today, as markets awaits news of a potential deal between the UK and the EU. Traders also look to the release of the UK Construction PMI in the upcoming European trading session.

The GBPUSD pair remains intraday bearish while trading below the key 1.3450 level. Further downside towards the 1.3400 and 1.3360 levels seems possible.

Should price-action on the GBPUSD pair start to hold above the 1.3450 level, buyers are likely to push price-action back towards the 1.3520 and 1.3549 resistance levels.

EUR/USD – 1.1863

EUR/USD:   Wave (c) of 2 ended at 1.3993 and wave 3 of III has commenced for weakness to 1.0411 (1.236 of wave 1), then 1.0000.

As the single currency retreated after meeting resistance at 1.1961 early last week, suggesting consolidation below this level would be seen, however, reckon downside would be limited to 1.1800-10 and bring another rise later, above said resistance would signal the rise from 1.1554 is still in progress, bring further gain to 1.2000. Looking ahead, only a break above resistance at 1.2035 would retain bullishness and signal early upmove has resumed for retest of 1.2093 first. A break of this resistance would confirm resumption of recent upmove from 1.0340 low for headway to 1.2150-55 (61.8% projection of 1.1119-1.1910 measuring from 1.1662), then 1.2200-10.

Our preferred count on the daily chart remains that a wave (II) from 1.2329 ended at 1.5145 with A-leg ended at 1.4720, followed by wave B at 1.2457, the wave C from there was also a 3 legged move and is labeled as (a): 1.3739, (b): 1.2885, the wave iii of the 5-waver (c) from 1.2885 has ended at 1.4339 and wave iv is a triangle ended at 1.3878 and wave v formed a top at 1.5145. The decline from there is a 5-waver (C) with minor wave (i) of I of (C) ended at 1.4218 with wave (ii) ended at 1.4580, wave (iii) ended at 1.3267 and wave (iv) ended at 1.3692 and wave (v) ended at 1.1876, this is also the low of wave I of (C) and wave II ended at 1.4940, hence wave III is now in progress with a diagonal wave 1 ended at 1.2042, the breach of previous support at 1.1876 (wave I trough) adds credence to our view that the wave 2 has ended at 1.3993, wave 3 has commenced for further weakness to 1.0411, then towards 1.0000.

On the downside, expect downside to be limited to 1.1800-10 and bring rebound later. Below 1.1770-80 would risk weakness towards indicated support at 1.1713, however, only break there would abort and signal the rise from 1.1554 low has ended, bring weakness to 1.1650-60 but price should stay well above said support at 1.1554, bring another rebound later.

Recommendation: Hold long entered at 1.1880 for 1.2080 with stop below 1.1780.

Euro's long-term uptrend started from 0.8228 (26 Oct 2000) with an impulsive structure. The rise from 0.8228 to 0.9593 (5 Jan 2001) is labeled as wave I, the retreat to 0.8352 (6 Jul 2001) is wave II and the rally to 1.3670 (31 Dec 2004) is wave III. Wave IV from there ended at 1.1640 (15 Nov 2005), the subsequent upmove to 1.6040 (July 15, 2008) is treated as wave V, the major selloff from the record high of 1.6040 to 1.2329 (October 27, 2008) signals a reversal has taken place with (I) leg ended at 1.2329 and once (II) ended at 1.5145, wave (III) itself is an extended move with I: 1.1876 and complex wave II ended at 1.4902, wave III has commenced with wave 1 and 2 ended at 1.2042 and 1.3993 respectively, wave 3 of III is now unfolding for weakness towards parity.

Gold has seen some choppy trading recently and overall the bias is to the downside as the market remains below the key 1300 level. Prices dropped sharply after an attempt to break above 1290 was not sustained.

The near-term picture is less positive as the flow is back to the downside and the RSI is below 50 in bearish territory on the 4-hour chart. The market is also below the 50 and 200-period moving averages.

Immediate support is expected at 1270 – an area that has been tested already. Failure to hold would see prices extend lower to target the October 27 low of 1263.43 and then the key 1260 area.

Gold prices would need to break above resistance at 1290 and rise above the key psychological level of 1300 to shift the focus back to the upside. The continued upside would target the September 7 peak of 1357.47, a level not seen since August 2016.

For now, the corrective sell-off from 1290 is still in effect and the intra-day price action is soft. Risk is clearly tilted to the downside. In the bigger picture, the market remains in a neutral phase as the consolidation continues.

AUD/USD – 0.7597

Original strategy:

Exit short entered at 0.7620

Position: - Short at 0.7620
Target:  -
Stop:-

New strategy :

Sell at 0.7620, Target: 0.7470, Stop: 0.7660

Position: -
Target:  -
Stop:-

Although aussie rebounded after finding support at 0.7551 and further consolidation above recent low at 0.7532 would be seen, reckon last week’s high at 0.7645 would limit upside and bring another decline later, below 0.7551 support would signal the rebound from 0.7532 has ended, bring retest of this level, break there would confirm recent decline from 0.8125 top has resumed for further weakness to 0.7500, then 0.7470.

In view of this, we are looking to sell aussie on recovery as 0.7620-25 should limit upside. A firm break above said resistance at 0.7645 would suggest another leg of corrective rise from 0.7532 is underway and bring a stronger retracement of recent decline towards resistance at 0.7701 which is likely to hold from here.

On the 4-hour chart, recent upmove from 0.7329 is unfolding as an impulsive rise with wave 3 as well as smaller degree wave (iii) extending, only minor wave v of (iii) has ended at 0.8125, hence bullishness remains for this move to extend headway to 0.8200, then towards 0.8300, however, reckon upside would be limited to 0.8400 and the final wave 5 should falter below 0.8500, bring correction later.

Following the possibly most substantial US tax overhaul since the 1980s, the US Senate gave a significant boost to the USD last night. The corporate tax rate should be cut from 35 percent to 20 percent. The USD/JPY opened much higher than it closed on Friday, making a runaway gap that hasn't been closed as of yet. Previous analysis followed exactly as planned before the pair dropped due to out of the blue news that Flynn will testify against Trump.

At this point, the USD/JPY is barely retracing from the W H4/ ATR pivot confluence -113.05-20 zone. It could go for 112.65 retest, but the gap will be almost closed completely only if it gets to POC zone 112.20-45. There we could see a bounce towards the 113.60 zone. However, if we don't see a retracement, then pay attention to 113.20. The move above it might lead to 113.60.

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

Weekly

    •    Last Candlesticks pattern: Dark cloud cover
    •    Time of formation: 10 Jul 2017
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Evening doji
    •    Time of formation: 7 Aug 2017
    •    Trend bias: Down

USD/JPY – 112.87

Although the greenback retreated on Friday to 111.41, as dollar found decent demand there and has rallied (the pair opened higher this week), suggesting the rise from 110.84 is still in progress, hence mild upside bias is for this move to extend further gain to 113.30-35, then test of resistance at 113.91, however, a daily close above this level is needed to retain bullishness and confirm the fall from 114.74 has ended, bring further gain to 114.40-50 first. 

On the downside, whilst pullback to 112.40-50 cannot be ruled out, reckon the Tenkan-Sen (now at 111.96) would limit downside and bring another rise later. Only a drop below strong support at 111.37-41 would abort and suggest the rebound from 110.84 has ended instead, bring retest this level. In the unlikely event that dollar drops below 110.84, this would shift risk back to downside for the fall from 114.74 top to extend weakness to 110.00, then 109.50-60 but price should stay above 109.00-10.

Recommendation : Exit short entered at 112.90 and buy at 112.10 for 114.10 with stop below 111.30

On the weekly chart, this week’s gap-up opening suggests low has possibly been formed at 110.84 last week and consolidation with mild upside bias is seen for gain to resistance at 113.91, however, a sustained breach above this level is needed to retain bullishness and signal the pullback from 114.74 has ended, bring retest of this level. Once this resistance is penetrated, this would signal the rise from 107.32 low has resumed for headway to 115.51-62 resistance area, break there would add credence to our view that early erratic decline from 118.66 has ended at 107.32, then upmove to 116.50-60 and possibly 117.00-10 would follow.

On the downside, expect pullback to be limited to 112.00-10 and bring another rebound later to aforesaid upside targets. Below said support at 111.41 would abort and suggest the rebound from 110.84 has ended instead, bring retest of this level, break there would extend the fall from 114.74 to 110.00-10, then 109.50-60 but reckon downside would be limited to 109.00 and 108.10-15 should hold from her, bring rebound later.

The Aussie dollar is regaining traction and returns above 0.7600 handle, after dipping to 0.7579 low, following gap-lower opening on Monday. Last Friday's strong rally which broke and closed above falling trendline (tracked the downtrend since Mid-Sep) was strong bullish signal, as rally has nearly fully retraced last week's 0.7644/0.7551 fall. Fresh gains pressure cracked 20SMA barrier (currently at 0.7608) close above which is needed to generate fresh bullish signal for extension of recovery rally from 0.7551, towards strong barrier at 0.7691 (200SMA). Failure to clear 20SMA would keep the downside vulnerable of fresh attacks.

Res: 0.7608, 0.7635, 0.7644, 0.7691
Sup: 0.7579, 0.7551, 0.7530, 0.7500

Here are the latest developments in global markets:

FOREX: The dollar bounced to a 2-½ -week high against the yen during Asian trading following the approval of the tax overhaul bill by the Senate on Saturdaydespite persisting political noise in the country. Consequently, the dollar’s strength pushed other currencies lower, with the kiwi being the worst performer of the session.

STOCKS: The Nikkei 225 finished 0.5% lower and the Hang Seng was up by 0.5% minutes before the day’s close; Euro Stoxx 50 futures traded 1.2% up at 0747 GMT; Dow, S&P 500 and Nasdaq 100 futures were up by 0.9%, 0.6% and 0.45%, gaining on positive sentiment after the Senate’s approval of the tax-cut bill.

COMMODITIES: Oil prices opened weaker but close to two-year high levels. WTI crude was down 0.77%, trading at $57.91 per barrel and Brent retreated by 0.55% to $39.Gold fell back to three-week low levels, trading at $1,273.41 per ounce (-0.55%) as investors appeared to be in a risk-on mood.

Major movers: Dollar drifts higher on tax relief; pound holds strong

The Senate passage of the US tax legislation on Saturday brought Republicans closer to reach their goal of providing the biggest tax cut since the 1980s to both businesses and individuals. The news provided strong support to the dollar, erasing Friday’s sharp losses which emerged after the former US security advisor, Michael Flynn, admitted lying in relation to his discussions with the Russian Ambassador Sergey Kislyak during the 2016 presidential transition.

Dollar/yen jumped by 0.75% to 112.94, dollar/swissie bounced by 0.66% to 0.9827, while euro/dollar declined by 0.26% to 1.1858. The pound posted moderate losses versus the greenback as positive sentiment on Brexit developments underpinned the currency. Pound/dollar fell by 0.17% to 1.3439.

The aussie was moving sideways against the greenback as a rally in iron ore prices and better than expected data on Australian business inventories offset losses arising from a stronger dollar. Aussie/dollar was flat around $0.7601. Its New Zealand cousin pulled back by 0.40% to $0.6857.

Day ahead: UK construction PMI, eurozone producer prices & investor confidence and US factory orders to gather attention – May’s Brexit meeting also eyed

At 0930 GMT, the UK will see the release of November construction PMI figures. The index is expected to rise to 51.0 from October’s 50.8. A reading of 50 indicates zero sectoral growth. Pound/dollar has been one of the major gainers during the preceding week on the back of positive Brexit developments and it would be interesting to see if the data provide further bullish momentum for the pair.

Out of the eurozone, December’s Sentix investor confidence index will be made public at 0930 GMT and data on producer prices for the month of October are due at 1000 GMT. Both readings are expected to reflect a slowdown relative to their previous releases.

The US will see the release of October factory orders at 1500 GMT. These are anticipated to decline by 0.4% m/m after growing by 1.4% in September.

In politics, after the US Senate’s approval of the tax-cut bill, the Senate and the House would have to work on reconciling their respective versions of the bill – discussions are expected to get underway this week. Beyond this, developments on the probe relating to Russian interference in last year’s presidential elections could also prove dollar-moving, while on the Brexit front, UK PM Theresa May will today be having a meeting with European Commission President Jean-Claude Juncker and the EU’s chief Brexit negotiator Michel Barnier.

Technical Analysis: GBPUSD bullish bias still in place

GBPUSD remains bullish in the short-term, trading relatively close to two-month high levels as investors see positive Brexit developments on the horizon. Price action is taking place above the exponential moving average lines (EMA) as well as above the Ichimoku cloud, while the bullish cross between the 20-day and the 50-day EMA on November 16 also suggests positive movements in the near-term. The RSI has flattened out marginally below overbought levels, hinting that the pair might range for a while before a likely uptrend resumes.

Should the pair head up, immediate resistance is likely to occur at the two-month high of 1.3548. Further above, there is scope for a test of the one-year high of 1.3655. On the downside, strong support could be found at the 1.33 key-level which was recently an area of resistance. From here, corrective movement might target the 50-day EMA at 1.3242 before the focus shifts to a previous low of 1.3026.

USD/CHF - 0.9826

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9833

Kijun-Sen level                    : 0.9803

Ichimoku cloud top                 : 0.9849

Ichimoku cloud bottom              : 0.9841

Original strategy :

Exit short entered at 0.9860,

Position : - Short at 0.9860

Target :  -

Stop : -

New strategy  :

Buy at 0.9785, Target: 0.9885, Stop: 0.9750

Position : -

Target :  -

Stop : -

Although the greenback dropped sharply to as low as 0.9735 on Friday, the subsequent reversal on dollar’s broad-based strength suggests low is formed there and consolidation with upside bias is seen for gain to last week’s high at 0.9882, however, a sustained breach above this level is needed to confirm this view and bring at least a retracement of recent decline to 0.9900 and later towards resistance at 0.9947.

In view of this, we are looking to buy dollar on dips as 0.9775-85 should limit downside and bring another rebound. Below 0.9750 would risk a retest of said last week’s low at 0.9735 but only break there would signal the decline from 1.1038 top has resumed for weakness to 0.9705 support.