Sample Category Title

Markets turned their focus on China on Wednesday, as China's President Xi Jinping welcomed the biggest political event in the country, the Communist Party Congress, which plays a key role in the global economy. Meanwhile, the announcement of NAFTA talks extending to next year gave room for improvement to the Canadian dollar and to the Mexican peso.

The Chinese President XI Jinping opened the twice-in-a-decade and closed-door Communist Party Congress in Beijing on Wednesday, with investors expecting the leaders of the world's second-largest economy to announce any policy updates involving political, economic and defense reforms for the next five years. Jinping, giving a three-hour speech, pledged to turn China into a leading global power in 2050 despite 'severe challenges' lingering in the economy. Moreover, he advised the government not to copy any foreign political strategies, mentioning that the country has entered 'a new era of socialism with Chinese characteristics' while regarding global provocations, he argued that a 'Cold war mentality should be avoided'.

The aussie, which is highly correlated with developments in China, reacted little to the data, rebounding to $0.7845 and remaining mainly steady on the day after the MI Leading index which predicts the direction of the economy jumped from -0.1% m/m to 0.1% in October. Its New Zealand cousin declined by 0.28% to $0.7149 despite the kingmaker First Party saying it will make an announcement on government formation on Thursday.

With the fourth round of NAFTA talks failing to make progress ahead of an expiration date in December, the US Trade Representative Robert Lighthizer, the Mexican Economy Minister Ildefonso Guajardo and the Canadian Foreign Minister Chrystia Freeland decided on Tuesday to extend negotiations to the end of March 2018 as well as to give more time between rounds for representatives to examine suggestions.

Following the news, the loonie gained approximately 0.40% against the greenback, with dollar/loonie retreating from 1.2554 prior to the announcement on Tuesday to last trade around 1.2505 in the Asian session. The Mexican peso posted the largest gains in 4 ½ -months, surging by 1.5%. Dollar/peso changed hands at a four-day low of 18.75.

The dollar index bounced by 0.10% to 93.57, gaining on speculations that the US president might select a hawkish candidate as the next Fed chair after the term of the current chairwoman, Janet Yellen, expires in February. Recall that Yellen will hold an interview with Trump on Thursday. Besides that, Senators Lamar Alexander and Patty Murray reached a deal on health care which would allow states to adopt Obamacare according to their needs. However, the deal does not loosen any of the Obamacare regulations which has been the main target of the Trump administration.

Dollar/yen moved up by 0.20% to 112.39 ahead of the Japanese snap elections on October 22.

The pound was down by 0.16% following dovish comments by BOE members yesterday at the Parliament, including the BOE chief, Mark Carney. Today, employment data will be due out of the UK during the European trading hours, while the British Prime Minister, Theresa May, will give a pitch to EU leaders on Thursday ahead of the EU summit on Friday to initiate momentum in Brexit negotiations.

The euro was moving sideways around $1.1764 pressured by political risks in the Eurozone, with traders eagerly anticipating whether the Catalan leader, Charles Puigdemont, would step back from independence on Thursday after missing the first deadline on Monday. A speech by the ECB chief, Mario Draghi will be also in focus later today.

In commodities, oil prices were in an uptrend after the API weekly report on US inventories showed a larger fall in crude oil stocks of 7.130 million barrels, while projections were for a reduction of 4.200 million barrels. WTI crude was up by 0.52% at 52.15 per barrel and Brent climbed by 0.78% to $58.22 per barrel. Gold slipped by 0.12% to $1,2830 per ounce.

Weekly




 




•   Last Candlesticks pattern: N/A


  





•    Time of formation: N/A


 





•    Trend bias: Up
 

 
 


 
 

Daily




 





•    Last Candlesticks pattern: Shooting star


 





•    Time of formation: 20 Sep 2017








•    Trend bias: Up


 






 

NZD/USD – 0.7135
 



 

Although kiwi extended recent decline to as low as 0.7056 (with a doji star on the daily chart) earlier this month, the subsequent rebound suggests a minor low has been formed there and consolidation with initial mild upside bias would be seen for another corrective bounce to 0.7244-46 (previous resistance and current level of the Kijun-Sen), however, reckon upside would be limited to 0.7270-75 and bring another decline later. A daily close below 0.7120-25 would suggest the rebound from 0.7056 has possibly ended, bring retest of this level later, break there would extend recent fall from 0.7558 top to 0.7000-10 (psychological support and 100% projection of 0.7558-0.7132 measuring from 0.7435) and possibly 0.6950 but reckon 0.6890-00 would hold from here.

On the upside, whilst initial recovery to 0.7210 cannot be ruled out, reckon upside would be limited to the Kijun-Sen (now at 0.7246) and bring another decline. Only a break of resistance at 0.7344 would abort and signal low has been formed at 0.7056, bring a stronger rebound to 0.7400 and then test of key resistance at 0.7435. Only a breach above there would shift risk back to upside and signal the corrective decline from 0.7558 has ended, bring further gain to 0.7500. then towards said resistance at 0.7558.

Recommendation: Sell again at 0.7250 for 0.7050 with stop above 0.7350.

On the weekly chart, although kiwi extended recent fall to as low as 0.7056 last week, the subsequent rebound formed a white candlestick, hence consolidation above this level would be seen and recovery towards the Tenkan-Sen (now at 0.7246) cannot be ruled out, however, reckon 0.7280-75 would limit upside and bring another decline later. Below 0.7120-25 would bring retest of 0.7056 but break there is needed to signal the fall from 0.7558 top is still in progress for further decline to 0.7000-10 (psychological support and 100% projection of 0.7558-0.7132 measuring from 0.7435), having said that, near term oversold condition should limit downside to 0.6950 and reckon 0.6880 would hold from here.

On the upside, expect recovery to be limited to the Tenkan-Sen (now at 0.7246) and 0.7300 should hold, bring another decline. Only above indicated resistance at 0.7435 would abort and shift risk back to upside, this would also suggest the pullback from 0.7558 has ended instead, bring further gain to 0.7500. Only a break of 0.7558 would extend medium term erratic upmove from 0.6074 (2015 low) to 0.7690-00 (61.8% projection of 0.6074-0.7485 measuring from 0.6818) and later towards 0.7780-85 (61.8% Fibonacci retracement of 0.8836-0.6074), however, reckon upside would be limited to 0.7890 and price should falter well below resistance at 0.8035.

XAUUSD (1287.16): Gold prices fell sharply yesterday with little to no retracement. However, the doji candlestick formed on the 4-hour chart and the subsequent bullish close could suggest some upside. Further declines, if any could send gold prices down to the lower support established at 175 - 1274 level. At the initial test of support, gold prices could see a short term bounce. To the upside, any gains are limited to the resistance level and potentially the breakout level from the rising wedge pattern.

AUDUSD (0.7854): The Australian dollar has been attempting to recover some of the losses from a previous couple of weeks. Price action is seen initially slipping earlier this week before currently attempting to push to the upside. The breakout from the falling median line suggests a near term rally towards the price level of 0.7957. This price level previously served as support and is now likely to be tested for resistance. However, ahead of the gains, AUDUSD could be seen sliding towards the lower support at 0.7799. Establishing support here will validate the upside move towards 0.7957.

EURUSD (1.1770): The EURUSD extended the declines yesterday on a strong US dollar. However, the declines now see price retesting the breakout level of the descending wedge pattern. This could suggest some near term gains on the horizon. The Stochastics is also oversold and could signal a near term bounce. Any gains in price will be limited to the resistance level which has been established at 1.1822. Support is seen at 1.1720. The EURUSD is expected to maintain trading within the range into next week's ECB meeting. However if support at 1.1720 breaks, then EURUSD could post further declines towards 1.1704 - 1.1672 where the major neckline support exists.

Weekly
    •    Last Candlesticks pattern: Long white candlestick
    •    Time of formation: 10 Jul 2017
    •    Trend bias: Up

Daily
    •    Last Candlesticks pattern: Long white candlestick
    •    Time of formation: 18 Jul 2017
    •    Trend bias: Up



Although aussie rebounded to as high as 0.7897 late last week, as the pair met renewed selling interest there and has retreated again, retaining our bearishness and weakness to 0.7770-75 is likely, however, break there i needed to signal the rebound from 0.7733 and bring retest of this level later, break there would signal the fall from 0.8125 top is still in progress for retracement of early upmove to previous resistance at 0.7712, break there would extend weakness to 0.7660-70 and then 0.7620-30 but support at 0.7535-40 should remain intact due to oversold condition.

On the upside, expect recovery to be limited to 0.7870-75 and price should falter below said resistance at 0.7897, bring another decline later. Above said resistance at 0.7897 would risk test of the Kijun-Sen (now at 0.7918) but a daily close above there is needed to signal the fall from 0.8125 has ended instead, bring a stronger rebound to 0.7970-75, however, still reckon upside would be limited to 0.8000 and price should falter below resistance at 0.8103, bring another decline later. 


Recommendation: Hold short entered at 0.7880 for 0.7680 with stop above 0.7900



On the weekly chart, although last week’s rebound formed a white candlestick, if our view that top has been formed at 0.8125 is correct, upside should be limited to last week’s high at 0.7897, bring another retreat later, below 0.7770 would bring test of 0.7727-33 (50% Fibonacci retracement of 0.7329-0.8125 and this month’s low), break there would add credence to this view and extend weakness to 0.7675-80 and possibly 0.7630-35 (61.8% Fibonacci retracement) but reckon support at 0.7535 would hold from here.

On the upside, price should falter below said resistance at 0.7897 and bring another retreat. Above said resistance would risk a stronger rebound to the Tenkan-Sen (now at 0.7929) but only a weekly close above there would defer and bring further gain to 0.8020-30, however, price should falter below resistance at 0.8103 and bring another decline later. A break of 0.8103 resistance would signal the retreat from 0.8125 top has ended instead, bring retest of this level. Looking ahead, only above there would extend the erratic rise from 0.6827 low to previous resistance at 0.8163, then 0.8200 but loss of upward momentum should limit upside to previous resistance at 0.8295.

The US dollar was seen trading stronger on Tuesday as data showed that industrial production rose 0.3% on the month. This came after the previous month's data was revised to show a 0.7% decline. Import prices also increased, rising 0.7% on the month marking the largest increase since June 2016. Besides the economic data, the markets were also seen reacting to potential rumors that President Trump might nominate John Taylor, an economist from Stanford as the next chair of the Federal Reserve.

In the UK, inflation data showed a 3.0% increase for the month of September. The data sent the British pound pushing lower on the day. In the Eurozone, inflation data confirmed that the headline CPI rose 1.5% and core CPI was up 1.1% in September.

Looking ahead, the ECB President Draghi is expected to speak earlier in the day today. The UK's monthly jobs report data will be coming out which will bring some additional risk to the GBP. In the US trading session, the monthly building permits and housing starts will be released.

Investors itching for another opportunity to offload Sterling, were given thethumbsup on Tuesday, after BoE officials sounded more cautious than anticipated during their testimony to Parliament.

Although BoE Governor Mark Carney said the MPC believed a rate hike may be needed in the “coming months”, his refusal to offer any clear signs on whether the central bank will take action in November, simply punished Sterling. Dovish signals radiating from the newest members of the bank's Monetary Policy Committee also played a role in the Pound's selloff, as investors started to question the prospect of an interest rate hike in November.

With Bank of England's new deputy governor Dave Ramsden believing that a hike is not needed “in the coming months” and Silvana Tenreyro suggesting that any move is “very contingent on data”, November's MPC meeting could be dominated by doves. While markets still widely expect that the central bank will proceed with raising rates by +25 basis points in November to quell inflation, the move may be considered as a dovish hike. With Britain's macroeconomic landscape still fragile amid Brexit, investors may not consider the hike as the beginning of a tightening cycle but simply, a “once-off”.

While Carney maintained a safe distance from monetary policy discussion during the testimony to Parliament, he used the opportunity to express concerns over Brexit. With the Bank of England Governor warning that a “no deal” Brexit would have a negative impact on the economy, the British pound is likely to become even more sensitive to the Brexit negotiations.

The main risk event for Sterling this morning will be the UK employment report, which will be closely watched for any signs of Brexit having a negative impact on wage growth. While Britain's unemployment rate is currently at a 42-year low, subdued wage growth continues to weigh on sentiment and is a headache for BoE policymakers. If average earnings fail to pick up, consumers are likely to feel the pinch further, especially after inflation hit a five and a half year high at 3% in September.

Taking a look at the technical picture, the GBPUSD is under pressure on the daily charts. Prices failed to break above the 1.3300 resistance, resulting in a decline back towards 1.3150. Technical lagging indicators such as the MACD have crossed to the downside while prices are approaching the 50 SMA. A breakdown below 1.3150 may encourage a further decline lower towards 1.3050.

USD/CHF - 0.9791

Most recent candlesticks pattern : N/A

Trend                                    : Sideways

Tenkan-Sen level                  : 0.9787

Kijun-Sen level                    : 0.9786

Ichimoku cloud top                 : 0.9766

Ichimoku cloud bottom              : 0.9749

Original strategy :

Buy at 0.9770, Target: 0.9870, Stop: 0.9735

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9770, Target: 0.9870, Stop: 0.9735

Position : -

Target :  -

Stop : -

Dollar’s rally after finding renewed buying interest at 0.9730 signals low has been formed at 0.9705 late last week and mild upside bias remains for test of 0.9808-10, however, break there is needed to add credence to our view that the fall from 0.9837 has ended at 0.9705, bring retest of this level later, break there would confirm recent rise from 0.9421 low has resumed and extend headway to 0.9870 and possibly 0.9900.

In view of this, would not chase this rise here and would be prudent to buy dollar on pullback as 0.9760-70 should limit downside. Only a break below support at 0.9730 would abort and signal the rebound from 0.9705 has ended, bring retest of this level. Once this support is penetrated, this would revive bearishness and extend the fall from 0.9837 to 0.9669-70 (61.8% Fibonacci retracement of 0.9565-0.9837 and previous support) but previous support at 0.9642 should remain intact.

GBP/USD - 1.3187

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3181

Kijun-Sen level                    : 1.3221

Ichimoku cloud top              : 1.3282

Ichimoku cloud bottom        : 1.3259

Original strategy :

Sell at 1.3225, Target: 1.3125, Stop: 1.3260

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.3225, Target: 1.3125, Stop: 1.3260

Position : -

Target :  -

Stop : -

Yesterday’s selloff after meeting renewed selling interest at 1.3287 adds credence to our view that top has been formed at 1.3338 late last week and consolidation with downside bias remains for this move to extend further weakness to 1.3150, then towards support at 1.3121, however, break of latter level is needed to retain bearishness and bring further subsequent decline to 1.3090-00.

In view of this, wee are looking to sell cable on recovery as previous support at 1.3225 should turn into resistance and limit upside, bring another decline later. Above 1.3250-60 would risk another test of said resistance at 1.3287 but only break there would signal low is formed instead, bring rebound to 1.3300 and possibly test of resistance at 1.3312.