Sample Category Title

USDJPY (111.18): The USDJPY continued to extend it’s declines. Price action weakened after a brief attempt to rally. As a result, USDJPY was seen falling back to retest the support level at 111.00 - 110.88. We expect to see USDJPY consolidating near this level with the potential to briefly dip lower. The bias remains flat at the moment, but further weakness could come in on a break down below this support level. On the upside, USDJPY will need to post gains above the recent local pivot high near 111.30. A close above this level will send USDJPY posting a correction towards 112.04 resistance.

EURUSD (1.1906): The EURUSD rallied to test the level above 1.1950 yesterday. However, price action was bearish as the common currency gave up the gains, closing on a bearish notice. In the near term, we expect price action to consolidate near this level. Although the euro fell sharply by late yesterday, we expect to see another short-term attempt to retest the 1.1950 level. On the downside, the risks are increasing as price could be seen testing the support level at 1.1843 - 1.1822. Establishing support at this previous resistance level will pave way for further gains.

The markets were seen trading rather mixed with the U.S. dollar identified as weakening. The euro briefly rallied to 1.1950 levels while gold prices rose close to the 1299 handle. On the economic front, the new home sales data was the only major economic release yesterday. Data showed that sales of single family units rose 6.2% in October, marking the highest increase in a decade.

Looking ahead, the Fed nominee, Jerome Powell's confirmation hearing is scheduled to begin today. On the economic front, the markets will be looking to the speech by BoE's Carney. In the U.S. the goods trade balance and wholesale inventories report is due. Later in the evening, the BoC governor Poloz is scheduled to speak.

USD/CHF - 0.9815

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9820

Kijun-Sen level                    : 0.9808

Ichimoku cloud top                 : 0.9806

Ichimoku cloud bottom              : 0.9802

Original strategy :

Sell at 0.9845, Target: 0.9735, Stop: 0.9880

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9855, Target: 0.9745, Stop: 0.9890

Position : -

Target :  -

Stop : -

As dollar has rebounded after falling to 0.9778 yesterday, suggesting consolidation above this level would be seen, however, reckon upside would be limited to 0.9846 (previous support) and bring another decline later, below said support at 0.9778 would extend recent decline from 1.1038 top towards 0.9730-37 support area but near term oversold condition should limit downside and reckon support at 0.9705 would hold from here, bring rebound later.

In view of this, we are looking to sell dollar again on recovery as previous support at 0.9846 should turn into resistance and limit upside. Only break of 0.9875-80 would defer and signal a temporary low is formed instead, bring test of 0.9899 but price should falter well below resistance at 0.9947.

GBP/USD - 1.3333

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3334

Kijun-Sen level                    : 1.3346

Ichimoku cloud top              : 1.3321

Ichimoku cloud bottom        : 1.3320

Original strategy :

Buy at 1.3280, Target: 1.3380, Stop: 1.3245

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.3280, Target: 1.3380, Stop: 1.3245

Position : -

Target :  -

Stop : -

As cable has retreated after rising to 1.3383, suggesting consolidation below this level would be seen and pullback to 1.3300-02 (38.2% Fibonacci retracement of 1.3170-1.3383) is likely, however, reckon 1.3276-79 (50% Fibonacci retracement and previous support) would limit downside and bring rebound later, above 1.3360 would signal the pullback from 1.3383 has ended, bring retest of this level later, break there would extend recent rise from 1.3027 low to 1.3400 but reckon upside would be limited to 1.3417-20 (61.8% Fibonacci retracement of 1.3658-1.3027) would hold from here. 

In view of this, we are looking to buy sterling on pullback as 1.3270-80 should limit downside. Below 1.3250 would defer and risk correction to 1.3230 but only break of support at 1.3209-13 would abort and signal a temporary top is formed instead, bring further weakness towards support at 1.3170. 

Daily Pivots: (S1) 147.57; (P) 148.21; (R1) 148.59; More...

GBP/JPY is still bounded in the corrective pattern from 152.82 and outlook is unchanged. As long as 149.45 minor resistance holds, deeper fall is mildly in favor through 146.92 support. But we'd expect strong support from 61.8% retracement of 139.29 to 152.82 at 144.45 to contain downside and bring rebound. On the upside, break of 149.45 resistance will turn bias back to the upside for 151.92/152.82 resistance zone instead.

In the bigger picture, medium term rebound from 122.36 is still expected to resume after corrective pull back from 152.82 completes. Firm break of 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 139.29 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.

EUR/USD - 1.1895

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1898

Kijun-Sen level                  : 1.1923

Ichimoku cloud top             : 1.1907

Ichimoku cloud bottom      : 1.1884

Original strategy  :

Buy at 1.1870, Target: 1.1990, Stop: 1.1835

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1845, Target: 1.1945, Stop: 1.1810

Position : -

Target :  -

Stop : -

As the single currency has retreated after rising to 1.1961, suggesting consolidation below this level would be seen and pullback to 1.1865-70 (38.2% Fibonacci retracement of 1.1713-1.1961) cannot be ruled out, however reckon support at 1.1837 (also 50% Fibonacci retracement of 1.1713-1.1961) would limit downside and bring rebound later. Only break of said resistance at 1.1961 would confirm recent upmove has resumed and extend gain towards psychological level at 1.2000.

In view of this, we are looking to buy euro on pullback as said support at 1.1837 should contain downside, bring another rise later. Below this support would defer and suggest a temporary top is possibly formed, bring correction of recent rise to 1.1800-05 first.

Daily Pivots: (S1) 131.76; (P) 132.48; (R1) 132.91; More....

EUR/JPY is still bounded in the corrective pattern from 134.48 and outlook is unchanged. As long as 134.48 key resistance holds, risk remains on the downside for deeper pull back. Break of 131.16 will target 38.2% retracement of 114.84 to 134.48 at 126.97, which is close to 127.55 support. We'll look for support from there to bring rebound on first attempt.

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). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will argue that the medium term trend has reversed and will turn outlook bearish for deeper fall back to 114.84/124.08 support zone at least.

Sunrise Market Commentary

• Rates: Sensitive to progress on US tax reforms?
  Today’s eco calendar heats up in the US. Risks are tilted to the downside of consensus, but we don’t expect them to impact trading with this week’s back loaded calendar in mind. Progress on Thursday’s potential vote on the tax reform plan in US Senate will probably trigger most intraday volatility. Good news is negative for the US Note future and vice versa.
• Currencies: Dollar decline slows, but no sign of a trend reversal yet
  The dollar set now correction lows against the euro and the yen yesterday, but closed off the lows. Eco data probably won’t change fortunes for the US currency today. Powell confirming Yellen’s approach on monetary policy might be slightly supportive for the dollar. The tax reform bill remains a wildcard for USD trading

The Sunrise Headlines

• US stock markets ended near opening levels yesterday. Asian equity indices trade with small losses overnight with China underperforming.
• A US Senate Republican tax bill strongly backed by President Trump faced potential opposition from two Republican lawmakers who could prevent the sweeping legislation from reaching the Senate floor.
• The ECB has received another setback in its bid to get tough on EMU banks’ problem loans, after a EC opinion found that its plans to require banks to hold more cash against their non-performing exposures overstepped the bank’s mandate.
• Japan received radio signals suggesting that North Korea may be preparing for a missile launch test, Kyodo News reported, citing multiple government officials.
• Powell will set the stage for further increases in interest rates while stressing the need to respond flexibly to unexpected events when Trump’s nominee to take over the chairmanship of the Fed faces his confirmation hearing.
• NY Fed Dudley said he still expects that a very strong employment sector will help push inflation up over time. Dallas Fed Kaplan believes it will likely be appropriate to hike rates in the near future.
• Today’s eco calendar contains US trade balance, S&P house prices, consumer confidence and Richmond Fed manufacturing index. The OECD publishes its economic outlook, Fed Harker speaks, the US Treasury sells 7-yr Notes and the Senate Banking Committee holds a hearing on Fed chair nominee Powell

Currencies: Dollar Decline Slows, But No Sign Of A Trend Reversal Yet

USD decline slows?

Yesterday, a softer equity sentiment initially kept the dollar in the defensive. USD/JPY dropped below 111. EUR/USD set a minor new correction top north of 1.1950. During the US session, the dollar regained ground on headlines that the odds for a Senate tax proposal were rising. EUR/USD closed the session at 1.1898 (from 1.1933). USD/JPY finished the day at 111.09 (from 111.53).

Overnight, the correction on Asian equity markets that started last week slowed. The correction remains very orderly, but, there are tentative signs of fall-out on other markets (e.g. some commodities). There are rumours that North Korea could prepare a new missile launch. The headlines on the US Senate tax plan were less constructive than yesterday evening. USD/JPY trades stable in the low 111 area. EUR/USD trades in the 1.19 area.

Today, the EMU calendar only contains second tier releases, which shouldn’t question the current buoyant economic expansion. In the US, the trade deficit is expected slightly wider in October (65B from $64.1B). Consumer confidence is expected to have eased to 124 from 125.9, which was the highest since the end of 2000. We see a slight downward risk. Fed chair nominee Powell will appear for the Senate Banking Committee. His written statement is already published. He confirms the Yellen approach on gradual easing (see Fixed Income part). The focus remains on the eco data and events later this week. If anything, the data might be neutral for the euro and slightly negative for dollar. Powell comments might be a marginally dollar supportive. The fate of the Senate tax bill remains a wildcard and so is the global equity performance. Yesterday, we advocated not to row against the USD correction as long as there was no clear trigger to change fortunes in favour of the US currency. The dollar is in the defensive as markets question the Fed’s rate hike intentions beyond December. We still see a good chance that the Fed will realize its 2018 intentions, but data or other events (tax cuts) are needed for markets to reconsider a more USD positive scenario. Yesterday’s, price action was a bit more USD constructive, but not good enough to qualify it as a U-turn. We want more convincing signs that the USD correction has run its course

From a technical point of view, EUR/USD set a post-ECB low mid-November, but regained on Friday the 1.1880 MT correction top. This break opens the way for a full retracement to the 1.2092 top. A return below 1.1713 would signal that the rebound in EUR/USD is aborted. The USD/JPY momentum was positive in October, but deteriorated this month. Last week, USD/JPY dropped below the 111.65 neckline. There was no aggressive follow-through selling, but the break makes the picture outright USD negative

EUR/USD: no follow-through gains, but holds above 1.1880 range top

EUR/GBP

Sterling awaits more concrete news on Brexit

In technical trade, sterling (re)gained yesterday a few ticks against the euro and the dollar. EUR/GBP closed the session at 0.8935. Cable broke temporary above the 1.3348 intermediate resistance but finished the session at 1.3318 as the dollar rebounded later in the session. There were no UK data ad no new info on the Brexit negotiations.

There are again no eco data in the UK today. BoE’s Carney gives a press conference after the publication of the Financial stability report. We don’t expect him to bring high profile news on monetary policy. The Brexit countdown continues, but we don’t expect a break-through right now. A further escalation of the Irish political crisis complicates further progress on Brexit. However, there is no one-to-one link with the performance of sterling. More erratic, technical sterling trading might be on the cards as long as this issue is pending.

MT view/technical picture. A BoE driven sterling rebound ran into resistance early this month. Sterling declined again as markets anticipated that the rate cycle would be very gradual and limited. Brexit headlines cause day-to-day gyrations. EUR/GBP trades in a 0.8733/0.9033 consolidation range. We changed our ST bias on EUR/GBP from positive to neutral two weeks ago. The 0.9015/33 area might be tough to break short-term

EUR/GBP: moving higher in the consolidation pattern

Download entire Sunrise Market Commentary

USD/JPY - 111.28

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 111.13

Kijun-Sen level                  : 111.15

Ichimoku cloud top             : 111.50

Ichimoku cloud bottom      : 111.40

Original strategy  :

Sell at 111.65, Target: 110.55, Stop: 112.00

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 111.00, Target: 112.00, Stop: 110.65

Position :  -

Target :  -

Stop : -

As the greenback recovered after falling to 110.84, suggesting consolidation above this level would be seen and corrective bounce to 111.60, then test of previous support at 111.88, however, reckon upside would be limited to 112.00 and price should falter below 112.35-40 and bring another decline later this week.

In view of this, we are looking to turn long on dips. Below said support at 110.84 would signal recent decline is still in progress and may extend weakness to 110.70 and possibly towards 110.50 but loss of momentum should limit downside to 110.20-25 and reckon 110.00 would hold from here.