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EUR/USD - 1.1771

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1756

Kijun-Sen level                  : 1.1756

Ichimoku cloud top             : 1.1809

Ichimoku cloud bottom      : 1.1772

Original strategy  :

Buy at 1.1745, Target: 1.1820, Stop: 1.1725

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1745, Target: 1.1820, Stop: 1.1725

Position : -

Target :  -

Stop : -

Although the single currency fell briefly to 1.1730, lack of follow through selling and current rebound suggest an intra-day low is possibly formed and consolidation with mild upside bias is seen for gain to 1.1790-00, however, reckon upside would be limited to 1.1820-25 and as top has been made at 1.1880, price should falter below 1.1850-55 and bring another decline later this week.

In view of this, we are looking to turn long on dips and one should exit on such rebound. Below said support at 1.1730 would signal the fall from 1.1880 top is still in progress and may extend weakness to support at 1.1719, however, break there is needed to retain bearishness and signal the rebound from 1.1669 has ended, then further decline to 1.1700 would follow.

The currency pair increased sharply today and reached fresh new highs as the Yen was punished by the Nikkei's further increase and because the USD is supported by the USDX's rally. The dollar index resumed the upside momentum and reached the 93.81 static resistance again. Is very important to see what will really happen on the USDX because another rejection from here or a false breakout will send the rate down again and will force the USD to drop versus its rivals on the short term.

The USDX needs a bullish spark to be able to climb above the 93.81 static resistance. The US Building Permits are expected to drop from 1.27M to 1.25M, while the Housing Starts could remain the same at 1.18M. The Federal Budget Balance and the Beige Book will be released as well, but I don't think that will have any impact.

Price increased after the yesterday's indecision and climbed above the 112.80 level. The next upside target will be at the median line (ml) of the minor blue ascending pitchfork. Technically, it should climb much higher after the failure to retest the 38.2% retracement level and after the today's aggressive rally.

USD/JPY moves in range on the Daily chart, is trapped between the 23.6% retracement level and the 108.12 level, only a valid breakout will bring us a clear direction.

Price rallied and resumed the upside movement as the USD was pushed higher by the USDX's rally. USD/CHF jumped much above the 0.9787 static resistance and could reach the median line (ml) of the ascending pitchfork in the upcoming days.

The rate reached the 0.9835 previous high, but failed to pass above it, I've said in the previous reports that we may have a minor consolidation above the 0.9787 level before the rate will jump much higher.

The EUR/CHF increases and climbs above the upper media line (uml) of the descending pitchfork and above the fifth warning line (wl5) of the former descending pitchfork. A valid breakout will signal a further increase, the near term target will be at the 1.1621 previous high.

USD/JPY - 113.00

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 112.71

Kijun-Sen level                  : 112.59

Ichimoku cloud top             : 112.17

Ichimoku cloud bottom      : 112.06

Original strategy  :

Buy at 112.50, Target: 113.50, Stop: 112.15

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 112.50, Target: 113.50, Stop: 112.15

Position :  -

Target :  -

Stop : -

As dollar has surged again after finding renewed buying interest at 112.13 and just broke above resistance at 112.83, adding credence to our view that low has been formed at 111.65 and consolidation with mild upside bias remains for the rise from 111.65 low to extend gain towards 113.30, however, near term overbought condition should limit upside to resistance at 113.44 and reckon 113.75-80 would hold on first testing.

In view of this, we are looking to buy dollar on pullback as previous resistance at 112.48 (now support) should contain downside and bring another rise later. Below 112.25-30 would risk test of support area at 112.03-13 but price should stay well above said low at 111.65, bring another rise later.

The British pound is showing losses for a third straight day. In Wednesday's North American session, GBP/USD is trading at 1.3174, down 0.11% on the day. On the release front, British employment numbers were mixed. Wage growth improved to 2.2%, above the forecast of 2.1%. However, unemployment claims increased by 1.7 thousand, above the estimate of 1.3 thousand. The unemployment rate remained pegged at 4.3 percent. In the US, the focus was on housing data, and the September numbers were soft. Building Permits slowed to 1.22 million, shy of the estimate of 1.25 million. Housing Starts dropped to 1.13 million, missing the forecast of 1.18 million. On Thursday, the UK releases retail sales, and the US will publish unemployment claims and the Philly Fed Manufacturing Index.

The British labor market remains tight, as underscored by an unemployment rate of just 4.3%, the lowest since 1975. However, much like the situation in the US, a strong employment picture has failed to translate into strong wage growth. This is even more perplexing in the case of the UK, where inflation is running at clip of 3 percent. When inflation is taken into account, wages actually declined 0.4% compared to a year ago. The lack of wage growth has squeezed consumers, and has complicated the Bank of England's plans to raise interest rates.

British inflation continues to accelerate, as CPI, the primary gauge of consumer spending, showed that inflation in September was 3.0% higher than a year ago. This marked the fastest rise in inflation since April 2012. The continuing rise in inflation is primarily due to the weak British pound, which has dropped 12 percent since the Brexit vote in June 2016. The CPI release likely means that the Bank of England remains on track to raise interest rates at its November policy meeting. Inflation was on the mind of lawmakers on Tuesday, who grilled BoE Governor Mark Carney when he testified before a parliamentary committee. Carney said that he expected inflation would peak in October or November, and that the bank had refrained from acting earlier to raise rates in order to lower inflation, saying that high inflation was a "trade-off" in order to protect economic growth.

Are the Brexit talks dead in the water? The two sides have little progress to show after several rounds of negotiations. Prime Minister Theresa May is keen to talk trade with the Europeans, but the latter have conditioned trade talks on progress being reached on a number of issues, such as Britain's payment when it leaves the European Union, the status of the border with Northern Ireland and the jurisdiction of the European Court of Justice on European citizens living in the UK. The two sides remain far apart on all of these issues, and each party has criticized the other for lack of flexibility. The EU holds a summit on Thursday, and could announce that they won't talk trade with Britain until 2018. The lack of progress means that the possibility of a 'hard Brexit', in which Britain would leave with no deal being reached, is growing. BoE Governor Mark Carney acknowledged on Tuesday that the Bank has made contingency plans in case there is no agreement. However, British businesses are lobbying hard for an agreement, and want a 2-year interim period, such as a temporary customs union with the EU, in order to soften the blow of leaving the EU.

Good day traders! Today, let's look at EURUSD.

EURUSD made a sharp and overlapping drop in the last couple of trading sessions, which we identified it as a complex correction. We can see that price may be ending this complex seven leg correction around the 1.1739 region, from where a new intra-day rally is already seen. A five-wave recovery and a breach above the 1.1820 level would indicate a bullish reversal.

EURUSD, 1H

Highlights:

• Manufacturing sales bounced back 1.6% in August. That was much stronger than the 0.3% decline expected by markets largely reflecting an unexpected bounce-back in motor vehicle sales after a July drop.
• The auto sale gain entirely accounted for a 1.2% increase in overall sale volumes although machinery sales also posted an encouraging gain of 4.2.

Our Take:

Canadian manufacturing sales unexpectedly jumped 1.6% in August after declining sharply in each of the two prior months. Most of the upward surprise came from a rebound in the motor vehicle component where sales rebounded 12.9% after an almost 20% drop in July. The auto component is notoriously volatile over the traditional July-August 'retooling' period in the industry but earlier reports had suggested a risk another significant sales decline in August. The auto increase accounted for almost three-quarters of the total sales gain in nominal terms and all of a 1.2% increase excluding the impact of prices. This did mask, though, some encouraging elements outside of the auto sector, perhaps most notably a 4.2% jump in machinery sale volumes that more-than-retraced a 2.0% drop in July. Industrial equipment exports declined in August, so that increase would seem to have been driven by stronger domestic Canadian business investment.

The monthly GDP calculation uses a slightly different methodology for measuring motor vehicle production, so not all of the rebound in motor vehicle sales reported today will ultimately flow through to the motor vehicle component of GDP. Nonetheless, the data is broadly consistent with our view that GDP returned to a positive growth rate in August after a pause in July that followed 8 consecutive increases.

EUR/GBP - 0.8939

Original strategy  :

Sell at 0.8965, Target: 0.8825, Stop: 0.9005

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.8975, Target: 0.8855, Stop: 0.9015

Position : -

Target :  -

Stop : -

 
Although the single currency rebounded after holding above support at 0.8856 and further consolidation above this level would be seen, if our view that top has been formed at 0.9033 last week is correct, reckon upside would be limited to 0.8965-75 and bring another decline later, below said support at 0.8850-56 would add credence to this view and signal the rebound from 0.8746 low has ended, bring further fall to 0.8800-10 later. 

In view of this, would be prudent to sell euro on recovery as 0.8965-75 should limit upside. Above 0.8985-90 would defer and risk a stronger rebound to 0.9000 but price should falter well below said resistance at 0.9033, bring another selloff.

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.2490

Trend:  Down

 
Original strategy       :

Bought at 1.2515, Target: 1.2675, Stop: 1.2465

Position: - Long at 1.2515

Target:  - 1.2675

Stop: - 1.2465

 
New strategy             :

Exit long entered at 1.2515

Position: - Long at 1.2515

Target:  -

Stop:-

Despite rising to 1.2591, as the greenback has retreated after faltering below indicated previous resistance at 1.2599, dampening our bullishness and further consolidation below said resistance would be seen, hence downside risk remains for weakness to 1.2452 but break of support at 1.2433 is needed to signal top has been formed at 1.2599, bring further fall to 1.2400 and later towards 1.2350-55 but indicated previous support at 1.2313 would hold from here.

In view of this, would be prudent to exit long entered at 1.2515 and stand aside for now. Above 1.2530-35 would bring another bounce towards 1.2591-99 but only break there would revive bullishness and signal the rise from 1.2061 low (wave iii trough) has resumed for further gain towards previous resistance at 1.2663, however, upside should be limited to 1.2700 and price should falter well below another previous resistance at 1.2778. We are keeping our count that wave v as well as wave (C) ended at 1.3794 and impulsive wave (i ii, i ii) is now unfolding with minor wave iii ended at 1.2414, followed by wave iv correction ended at 1.2778, wave v has reached our indicated downside target at 1.2100 and may extend to 1.2000.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.