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Key Highlights

• The US Dollar remained elevated above the 113.50 pivot against the Japanese Yen.
• There is a crucial bullish trend line in place with support at 113.60 on the 4-hours chart of USD/JPY.
• The US Non-farm Productivity in Q3 2017 (Preliminary) rose 3%, compared with the +2.4% forecast.
• Today, the US nonfarm payrolls report for Oct 2017 will be released, which is forecasted to register +312K versus the -33K previous.

USDJPY Technical Analysis

The US Dollar remains in a solid uptrend and recently moved above the 113.60 resistance against the Japanese Yen. However, the USD/JPY pair is facing many hurdles near 114.30, 114.50 and 115.00.

The 4-hours chart of USD/JPY suggests that the pair is struggling to break the 114.30-114.50 resistance zone. There were at least five failures near the mentioned levels. Above 114.50, there is another crucial barrier for buyers near 115.00.

A close above 115.00 is required for sustained gains towards 118.00 in the near term. On the flip side, if the pair fails to move above 114.50 and 115.00, there can be a fresh downside wave. An initial support is near a crucial bullish trend line with support at 113.60 on the same chart.

The stated 113.60 support is also near the 50% Fib retracement level of the last wave from the 112.95 low to 114.26 high. A close below 113.60 should spark further declines toward 113.00.

US Non-farm Productivity

Recently in the US, the Non-farm Productivity for Q3 2017 (Preliminary) was released by the Bureau of Labor Statistics of the US Department of Labor. The forecast was slated for an increase of 2.4% in the Non-farm Productivity compared with the previous quarter.

However, the actual result was better since there was a rise of 3%, which is double compared with the last increase of 1.5%. The output increased by 3.8% and hours worked rose by 0.8%.

The report added:

From the third quarter of 2016 to the third quarter of 2017, productivity increased 1.5 percent, reflecting a 2.9-percent increase in output and a 1.4-percent increase in hours worked.

Overall, the USD/JPY pair remains in the bullish region, waiting for Oct's nonfarm payrolls report for the next move. An increase in the US NFP by more than 250K could be a great bullish signal for USD/JPY to break the 114.50 resistance and test 115.00.

Economic Releases to Watch Today

UK's Services PMI for Oct 2017 – Forecast 53.3, versus 53.6 previous.

US nonfarm payrolls Oct 2017 – Forecast 312K, versus -33K previous.

US Unemployment Rate Oct 2017 – Forecast 4.2%, versus 4.2% previous.

US Average Hourly Earnings (MoM) Oct 2017 – Forecast 0.3%, versus 0.5% previous.

US Services PMI for Oct 2017 – Forecast 55.9, versus 55.9 previous.

Canada's employment Change payrolls Oct 2017 – Forecast 15K, versus 10K previous.

Canada's Unemployment Rate Oct 2017 – Forecast 6.2%, versus 6.2% previous.

DAX rally from 8/29 low is unfolding as a double three Elliott Wave structure where Intermediate wave (W) ended at 13089 and Intermediate wave (X) ended at 12903. Up from there, the rally from 12903 low appears to be unfolding as an impulse. Minute wave ((i)) ended at 13066, and Minute wave ((ii)) ended at 12906.5. Minute wave ((iii)) ended at 13481.5 and pullback to 13401 ended Minute wave ((iv)). While pullbacks stay above 13401, but more importantly above 12906.5, expect 1 more leg higher towards 13657.69 – 17836.55 to complete Minor wave A. Pair should then pullback in Minor wave B in 3, 7, or 11 swing before the rally resumes. We don’t like selling the proposed pullback.

DAX 1 Hour Elliott Wave Analysis

Double three ( 7 swings) is one of the most important patterns in Elliott wave’s new theory. It is also one of the most common patterns in the market these days. Double three is also called a 7-swing structure. It is a very reliable pattern and it gives traders a good opportunity to trade with a well-defined level of risk and target areas. The image below shows what Elliott Wave Double Three looks like. It has labels (W), (X), (Y) and an internal structure of 3-3-3. This means that all 3 legs has corrective sequences. Each (W) and (Y) is formed by 3 wave oscillations and has a structure of A, B, C or W, X, Y of smaller degrees.

USD/CHF - 0.9985

Most recent candlesticks pattern : N/A

Trend                                    : Up

Tenkan-Sen level                  : 0.9988

Kijun-Sen level                    : 0.9978

Ichimoku cloud top                 : 1.0009

Ichimoku cloud bottom              : 0.9994

Original strategy :

Bought at 0.9950, Target: 1.0050, Stop: 0.9915

Position : - Long at 0.9950

Target :  - 1.0050

Stop : - 0.9915

New strategy  :

Hold long entered at 0.9950, Target: 1.0050, Stop: 0.9930

Position : - Long at 0.9950

Target :  - 1.0050

Stop : - 0.9930

Dollar’s retreat after faltering below indicated resistance at 1.0038 has retained our view that further consolidation below this level would be seen, however, still reckon downside would be limited to 0.9945-50 and bring another rise later. Above 1.0005-10 would bring retest of 1.0038 but break there is needed to confirm recent upmove from 0.9421 low has resumed and may extend further gain to 1.0050-55, then towards 1.0075-80 but price should falter below 1.0100 resistance.

In view of this, we are holding on to our long position entered at 0.9950. Below said support at 0.9938 would abort and signal top is formed instead, risk correction to 0.9920-23 (38.2% Fibonacci retracement of 0.9737-1.0038) but 0.9885-90 (50% Fibonacci retracement) should limit downside and support at 0.9869 would remain intact. 

GBP/USD - 1.3072

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.3062

Kijun-Sen level                    : 1.3166

Ichimoku cloud top              : 1.3276

Ichimoku cloud bottom        : 1.3257

Original strategy :

Sell at 1.3170, Target: 1.3040, Stop: 1.3205

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.3150, Target: 1.3030, Stop: 1.3185

Position : -

Target :  -

Stop : -

Yesterday’s selloff together with the breach of support at 1.3070 signals early erratic rise from 1.3027 has ended and bearishness remains for further fall, however, break of said support at 1.3027 is needed to signal early downtrend has resumed for weakness to psychological support at 1.3000, then towards 1.2970-75 which is likely to hold from here due to near term oversold condition.  

In view of this, would not chase this fall here and would be prudent to sell cable on recovery as the Kijun-Sen (now at 1.3166) should limit upside and bring another decline later. Above 1.3200 would defer and prolong choppy trading, risk rebound to 1.3235-40 first.

EUR/USD - 1.1662

Most recent candlesticks pattern   : N/A

Trend                      : Down

Tenkan-Sen level              : 1.1661

Kijun-Sen level                  : 1.1657

Ichimoku cloud top             : 1.1657

Ichimoku cloud bottom      : 1.1639

Original strategy  :

Sell at 1.1705, Target: 1.1605, Stop: 1.1740

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1705, Target: 1.1605, Stop: 1.1740

Position : -

Target :  -

Stop : -

Although near term sideways trading is likely to continue and another corrective bounce to 1.1685-90, reckon upside would be limited to 1.1700-05 (50% Fibonacci retracement of 1.1837-1.1574) and bring retreat later, below 1.1600-05 would signal the rebound from 1.1574 low has ended, bring retest of this level first. A drop below said support at 1.1574 would extend recent decline from 1.2093 top to 1.1550-55 but loss of downward momentum should prevent sharp fall below 1.1520-25 and reckon 1.1500 would hold.

In view of this, we are looking to sell euro on further subsequent recovery as 1.1700-05 should limit upside and bring another decline. Only above previous support at 1.1725 (now resistance) would signal low is formed instead, bring retracement of recent decline to 1.1750-55 first. 

USD/JPY - 114.01

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 113.99

Kijun-Sen level                  : 113.88

Ichimoku cloud top             : 113.99

Ichimoku cloud bottom      : 113.62

Original strategy  :

Buy at 113.20, Target: 114.20, Stop: 112.85

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 113.40, Target: 114.30, Stop: 113.05

Position :  -

Target :  -

Stop : -

Although the greenback rebounded after finding support at 113.54 and gain to 114.20-25 cannot be ruled out, however, break of indicated strong resistance at 114.45-50 is needed to retain bullishness and confirm early upmove has resumed for headway to 114.75-80 and later towards 115.00 but overbought condition should limit upside. If said resistance continues to hold, then further consolidation would take place and another retreat to 113.40-45 cannot be ruled out but 113.15-20 should hold, bring another rise.

In view of this, we are looking to buy dollar on pullback as 113.40 should limit downside and bring another rise later. Only a break below said support at 112.96 would abort and suggest top has been formed at 114.45, bring retracement of recent rise to 112.70-75 (61.8% Fibonacci retracement of 111.65 to 114.45) but previous resistance at 112.48 should hold.

For the 24 hours to 23:00 GMT, the AUD rose 0.47% against the USD and closed at 0.7711.

LME Copper prices declined 0.9% or $63.0/MT to $6855.0/MT. Aluminium prices declined 1.6% or $36.0/MT to $2152.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7685, with the AUD trading 0.34% lower from yesterday's close, following the release of disappointing macroeconomic indicators from the Australian economy.

Overnight data showed that Australia's AiG performance of service index declined to 51.4 in October from a reading of 52.1 in the last month, diminishing chances of a rate hike by the Reserve Bank of Australia (RBA) next week. Also, the nation's retail sales remained flat on a monthly basis in September, missing market expectations for a gain of 0.4%. In the previous month, retail sales had fallen by 0.6%.

Elsewhere in China, Australia's largest trading partner, the Caixin services PMI rose more than expected to 51.2 in October, compared to a reading of 50.6 in the prior month.

The pair is expected to find support at 0.7668, and a fall through could take it to the next support level of 0.7651. The pair is expected to find its first resistance at 0.7716, and a rise through could take it to the next resistance level of 0.7747.

In the week ahead, RBA interest rate decision and its monetary policy statement along with the AiG performance of construction index, would be closely watched by traders.

Trading trends in the pair today are expected to be determined by global macroeconomic indicators.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR rose 0.32% against the USD and closed at 1.1656, after Eurozone manufacturing activity expanded at the fastest pace in more than six years to 58.5 in October, but missed preliminary reading for an advance to a level of 58.6. The manufacturing PMI had registered a level of 58.1 in the previous month.

In Germany, the final manufacturing PMI remained unchanged at a level of 60.6 in October from the prior month. Markets were expecting to ease to a level of 60.5. Additionally, the seasonally adjusted unemployment rate in Germany remained flat at 5.6% in October, meeting expectations.

The US Dollar ended lower against its peers, despite the House of Representatives unveiling a much awaited tax plan and Donald Trump’s nomination of Federal Reserve (Fed) Governor, Jerome Powell, as the next Fed Chairman. In the tax reform bill, Republicans called for slashing the corporate tax rate to 20.0% from 35.0%, cutting tax rates on companies’ profits from overseas operations and on individuals and families.

Macroeconomic releases showed that US initial jobless claims unexpectedly declined to a level of 229.0K in the week ended 28 October 2017, compared to a revised reading of 234.0K in the prior week. Market anticipation was for initial jobless claims to rise to 235.0K. Moreover, the number of planned layoffs by US companies slid 3.0% on an annual basis in October from a drop of 27.0% in the previous month.

In the Asian session, at GMT0400, the pair is trading at 1.1658, with the EUR trading a tad higher from yesterday’s close.

The pair is expected to find support at 1.1627, and a fall through could take it to the next support level of 1.1596. The pair is expected to find its first resistance at 1.1688, and a rise through could take it to the next resistance level of 1.1718.

With no major economic releases in the Eurozone today, investors will keep a tab on US non-farm payrolls report for October, along with unemployment rate and the ISM non-manufacturing PMI, all due later in the day for further direction. Also, US factory orders and durable goods orders, both for September, and the final Markit services PMI data for October, all due today would be on investors’ radar.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

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For the 24 hours to 23:00 GMT, the GBP declined 1.48% against the USD and closed at 1.3053, following a dovish statement by the Bank of England (BoE).

The BoE's Monetary Policy Committee (MPC) increased its key interest rate to 0.50% from 0.25% by a majority vote of 7-2, its first hike since July 2007, in an effort to combat rising inflation and bring it back to its 2.0% targeted level. However, the central bank added that future interest rate hikes would be 'very gradual' and to a limited extent. BoE Governor, Mark Carney, stated that the Brexit talks would be the most important factor for the next move on interest rates, which could either go up or down.

On the data front, UK's construction PMI rose to 50.8 in October, more than market expectations of an advance to a level of 48.5. In the previous month, the construction PMI had recorded a level of 48.1.

In the Asian session, at GMT0400, the pair is trading at 1.3069, with the GBP trading 0.12% higher from yesterday's close.

The pair is expected to find support at 1.2978, and a fall through could take it to the next support level of 1.2888. The pair is expected to find its first resistance at 1.3224, and a rise through could take it to the next resistance level of 1.3380.

Moving ahead, UK Markit services PMI data for October, set to release in a few hours, would be closely assessed by market participants.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.09% against the JPY and closed at 114.05.

In the Asian session, at GMT0400, the pair is trading at 114.02, with the USD trading marginally lower from yesterday’s close.

The pair is expected to find support at 113.63, and a fall through could take it to the next support level of 113.25. The pair is expected to find its first resistance at 114.31, and a rise through could take it to the next resistance level of 114.61.

Going forward, investors would focus on the minutes from the Bank of Japan’s (BoJ) September meeting, a speech by the BoJ Governor Kuroda, Japan’s Nikkei services PMI data and trade balance figures, all due next week.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.