Sample Category Title

EUR/USD - 1.1844

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1847

Kijun-Sen level                  : 1.1854

Ichimoku cloud top             : 1.1828

Ichimoku cloud bottom      : 1.1792

Original strategy  :

Buy at 1.1805, Target: 1.1905, Stop: 1.1770

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1805, Target: 1.1905, Stop: 1.1770

Position : -

Target :  -

Stop : -

As the single currency has retreated after rising to 1.1880 earlier today, suggesting minor consolidation below this level would be seen and pullback to 1.1815-20 (38.2% Fibonacci retracement of 1.1719-1.1880) is likely, however, reckon 1.1800-01 (50% Fibonacci retracement and previous support) would contain downside and bring another rise later, above said resistance at 1.1880 would signal the rise from 1.1669 low is still in progress for gain to 1.1895-00 (61.8% Fibonacci retracement of 1.2035-1.1669) but overbought condition should prevent sharp move beyond 1.1930-35 (61.8% Fibonacci retracement of 1.2093-1.1669) and 1.1970 should remain intact.

In view of this, would not chase this rise here and we are still looking to buy euro on subsequent pullback as 1.1800-05 should limit downside and bring another rebound. Below minor support at 1.1795 would defer and risk correction to 1.1770 but downside should be limited to 1.1745-50 and price should stay above indicated support at 1.1719, bring another rise later. 

USD/JPY - 112.43

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 112.39

Kijun-Sen level                  : 112.33

Ichimoku cloud top             : 112.41

Ichimoku cloud bottom      : 112.39

Original strategy  :

Sell at 112.80, Target: 111.80, Stop: 113.15

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 112.80, Target: 111.80, Stop: 113.15

Position :  -

Target :  -

Stop : -

Although dollar has retreated after faltering below resistance at 112.59, as long as this week’s low at 111.99 holds, risk of another rebound to 112.70-75 (50% Fibonacci retracement of 113.44-111.99) cannot be ruled out, however, reckon 112.83-89 (yesterday’s high and 61.8% Fibonacci retracement) would limit upside and bring another decline later, below said support at 111.99 would add credence to our view that top has been formed at 113.44 and extend weakness to 111.75-80, then towards 111.47 support but oversold condition would limit downside and reckon 111.11 support would remain intact.

In view of this, we are looking to sell dollar on recovery as 112.83 resistance should limit upside and bring another decline. A break of indicated level at 112.83-89 would abort and signal low is formed, bring a stronger rebound to 113.10-20 but price should falter well below said last week’s high at 113.44. 

The EUR/USD price fell today despite positive news on industrial production growth in the Eurozone. Production expanded by 1.4% in August against the forecasted increase of 0.6% and 0.3% growth in July. The possibility of a rate hike in December for the US received another boost following the release of producer price index data that showed growth of 0.4% in September which doubled August's figure. Investors are anticipating retail sales data and the consumer inflation report in the US which are key indicators for the FOMC. An acceleration of inflation growth will lead to an increased probability of monetary policy tightening before the end of 2017 and that in turn will put significant pressure on the EUR/USD quotes.

The British pound lost some ground due to the lack of progress in negotiations between the UK and European Union on the terms for Brexit. Trade talks that were anticipated to start next week will now be delayed and the news is putting pressure on the sterling.

The USD/JPY quotes are consolidating in expectation of new drivers. Tensions between the US and North Korea and between Catalonia and Spain have eased which leads to lower interest in defensive assets like the Japanese yen. The yen did receive some positive news from the report on Bank lending in Japan that has slowed to 3.0% in September, which was by 0.4% better than the average forecast. An increase in volatility for the guppy is expected tomorrow after the release of the consumer price index (CPI) report in the US.

EUR/USD

The single currency rolled back today and approached an important support line at 1.1825. Breaking through this level may become the trigger for further price drops with objectives at 1.1750 and 1.1620. In case of opening short positions, the stop should be set above 1.1875. We do not exclude growth resuming with potential goals at 1.1925 and 1.2000.

GBP/USD

The British pound dropped sharply today, but was able to rebound upwards after an unsuccessful attempt to fix below 1.3150. The next target in case of continuing the positive impulse will be 1.3250 and its overcoming may become the basis for more price increases to 1.3400 and 1.3600. In order to resume the descending movement to the 1.3000-1.3050 range, it will need to fix below 1.3150.

USD/JPY

The amplitude of price fluctuations of the USD/JPY is falling and that may signal a powerful movement soon. The trigger for this move may come from the CPI report in the US that will be published tomorrow at 12:30 GMT. In order to continue growth up to 114.00 and 114.70 the quotes need to overcome 113.00. The closest supports that may be reached in case of a decline are located at 111.70 and 110.30.

The pound could not sustain its rally started during the Asian session on Thursday after discouraging comments on Brexit's progress by the EU chief negotiator pushed the currency down, making it the worst performer among its major peers. The pound's weakness, as well as US data on PPI and initial jobless claims, gave a lift to the dollar.

The fifth round of Brexit talks, which are to be temporarily suspended when the two-day EU summit starts on October 19, was not constructive enough for the negotiations to move to the next stage of trade talks according to the EU's Brexit negotiator Michel Barnier. Barnier, reporting in Brussels on Thursday, said that despite "new momentum" in the discussions, the divorce bill reached "a state of deadlock" as the UK was not ready to clarify the amount it should pay to leave the block. Therefore, he added, "I am not able in the current circumstances to propose next week to the European Council that we should start discussions on the future relationship." Earlier this week, the European Council President, Donald Tusk, said that talks on trade issues would not come until December the earliest.

Sterling tumbled by almost 1% on Barnier's comments, falling to a three-day low of $1.3120 before climbing to $1.3171.

The dollar reversed earlier losses generated after the FOMC meeting minutes released late on Wednesday projected a more dovish tone than expected, revealing that Fed policymakers were debating whether factors weighing on inflation are more persistent or not. The dollar's gains arose on the back of a weaker pound and on encouraging US PPI and initial jobless claims numbers.

Particularly, producer prices rose by 0.2 percentage points to 2.6% y/y in September, slightly surpassing the forecast of 2.5%. The core equivalent climbed to 2.2% y/y, while analysts expected the index to remain flat at 2.0%.

Regarding US jobless claims, the number of people applying for unemployment benefits for the first time, increased by 243,000 during the week ending October 7, exceeding expectations of 251,000. This was the smallest rise since late August and favorably compares to the previous post of 258,000, which was downwardly revised from 260,000. The 4-week average measure declined from 267,000 (revised downwards from 268,250) to 257,500.

Tomorrow, a report on US CPI will give a clearer picture on inflation, while retail sales data will provide some evidence on consumption.

The dollar index was trading 0.16% up at 93.16 after it picked at an intra-day high of 93.20. Dollar/yen was moving sideways around 112.37, being 0.10% down on the day.

The euro drifted lower by 0.16% on the day after rising to a more than a two-week high of $1.1879 earlier in the session. Better than expected readings on the Eurozone's industrial production did little for the currency, with industrial output growing by 3.8% y/y in August, above the forecast of 2.6% and the previous upwardly revised mark of 3.6%. On a monthly basis, the figure recorded the highest growth since the beginning of the year, climbing by 1.4% and surpassing projections for a moderate expansion of 0.5%. Political developments in Spain, though, were the under the spotlight as investors were waiting for the Catalan leader, Charles Puigdemont, to respond to warnings made yesterday by the Spanish Prime Minister, Mariano Rajoy, who called Catalonia to clarify its status of independence in five days (three more days would be given to revoke the region's decision if it indeed declared independence in violation of Spanish laws).

ECB chief Mario Draghi and the Fed Governors Lael Brainard and Jerome Powell will be giving speeches today. It could be the case that their comments will generate some market volatility.

Euro/pound moved up by 0.30% to 0.8991 after it reached a one-month high of 0.9032 earlier in the session.

The monthly oil report delivered by the Paris-based International Energy Agency highlighted that global demand for oil slowed down in 3Q17 mainly due to the impact of hurricanes. Forecasts for global demand, though, remained steady at 1.6% growth for 2017 and at 1.4% for 2018. On the other hand, global oil supply in September increased as non-OPEC output rose moderately, while OPEC production was unchanged. For 2018, analysts anticipate global supply to grow at the same pace as demand, rebalancing the market.

WTI crude and Brent gave up gains earned the last two days following the report, with the former falling by 1.83% to $50.36 per barrel and the latter retreating by 1.32% to $56.19. The EIA weekly report, that among others includes information on crude stockpiles, will be released soon.

Gold gained 0.13%, trading at $1,292.60 per ounce.

• European equities trade narrowly mixed, with the exception of the FX-sensitive FTSE that reached a 5-month high. US equities open with slight losses. JPM and Citi go modestly higher after earnings results.
• The EU's chief Brexit negotiator has said talks with the UK over its exit bill have hit a "deadlock" and he will not tell EU leaders that "sufficient progress" has been made to accelerate talks from divorce to trade negotiations next week. EUR/GBP surged back north of 0.90 for the first time since mid-September.
• EMU industrial output rose by far more than expected and at its highest rate in nine months in August as production of capital goods, such as machinery, rose sharply, boding well for economic growth in the second half of the year. Overall output rose 1.4% M/M and 3.8% Y/Y in August.
• The number of Americans filing for unemployment benefits fell to more than a one-month low last week (243k) as claims in Texas and Florida continued to decline after being boosted by Hurricanes Harvey and Irma. US producer prices rose by the most in six months in September (0.4% M/M & 2.6% Y/Y) as the price of gasoline recorded its biggest increase in more than two years amid production disruptions at oil refineries in Texas caused by Harvey.
• JP Morgan's quarterly profit and revenue easily trumped Wall Street's expectations, but a slump in bond trading clouded gains from loan growth and higher interest rates. Citigroup reported a 7.6% increase in quarterly profit from a gain on an asset sale, lower costs and better-than-expected trading revenue.
• Swedish inflation fell short of estimates, as some suggested price growth may have peaked around the central bank's target. Underlying consumer prices, which adjust for changes in mortgage costs, rose 2.3% Y/Y in September, unchanged from the previous month and less than the 2.5% Y/Y predicted. EUR/SEK rose towards 9.60.
• British lenders are planning the biggest cutback in consumer loans in nearly 10 years, the BoE said, after it warned repeatedly about the strong pace of lending to households.
• The ECB should not keep interest rates low for too long and should tighten policy quickly during an economic upturn, ECB Weidmann said: "the monetary policy taps should be turned off in a quick and consistent manner."

Rates

Core bonds lack direction

Consolidation on core bond markets continued today. Both the German Bund and the US Note future eke out small gains on a daily basis. The US Note future temporarily lost ground on strong PPI data, but the move didn't last long. We might get a stronger reaction if tomorrow's CPI data are higher than forecast.

At the time of writing, US yields decline 1.4 bps to 1.8 bps across the curve with the belly slightly outperforming. German yields decline by 0.9 bps (30-yr) to 2.3 bps (5-yr). On intra-EMU bond markets, 10-yr yield spread changes versus Germany narrow up to 3 bps (Italy). Italian BTP's outperform following a good auction (see below) and as the lower house approved via 3 confidence votes changes to the electoral law. It allows parties to form coalition ahead of elections and is considered to be negative for the anti-euro 5SM party of Beppe Grillo. It now goes to the Senate.

The Italian debt agency issued a new 3-yr BTP (€4B 0.2% Oct2020) and tapped the on the run 7-yr BTP (€2B 1.45% Nov2024) and 30-yr BTP (€1.5B 3.45% Mar2048). The combined amount sold was the maximum of the targeted €6-7.5B with an auction bid cover of 1.59 which is strong for Italian standards. The US Treasury ends its refinancing operation with a $12B 30-yr Bond auction. The WI currently trades around 2.88%.

Currencies

Dollar decline halts, awaiting tomorrow's data.

Today, the USD bottomed after a decline in past days. The swings in EUR/USD and USD/JPY were again modest. A further decline in US jobless claims and rise in the core US PPI were also slightly supportive for the dollar. EUR/USD trades in the 1.1845/50 area. USD/JPY hovers around 112.40. Tomorrow's US retail sales and CPI might decide whether there is room for sustained USD gains.

New record closing levels on WS supported equity gains in Asia overnight. However, the dollar didn't receive additional interest rate support. USD/JPY traded marginally lower despite strong equities. EUR/USD regained the previous 1.1823 range bottom and traded around 1.1875 ahead of European trading. The Spanish/Catalan crisis entered a period of 'distress' as the Catalan leaders have five days to clarify whether they declared independence. The euro still felt no negative fall-out from the Catalan crisis.

There was no obvious story to guide (FX) trading in Europe. EUR/USD declined slightly off the overnight top in Asia, but the moves in EUR/USD and USD/JPY remained modest. EMU production data were very strong. However, the report is outdated and had no lasting impact on the euro. We also didn't see any 'new news' on Catalonia.

In the US, the focus turned to the eco data. The US jobless claims declined more than expected. The headline PPI was in line with the consensus (0.4% M/M and 2.6% Y/Y), but PPI core inflation rose more expected from 2.0% to 2.2% Y/Y (a stabilisation was expected). The dollar gained a few ticks after the release but the move stalled soon. EUR/USD trades in the 1.1840/50 area. USD/JPY is changing hands in the 112.40 area. Tomorrow's US retail sales and CPI might decide whether there is room for an more protracted USD up-leg.

Barnier comments push sterling of a cliff

There were few eco data in the UK. However, Brexit again came to haunt sterling. At the end of the fifth round of negotiations between the EU and the UK, EU Brexit negotiator Barnier said there weren't any great steps forward. The state of the negotiations doesn't allow him to recommend the start of talks on post-Brexit UK/EU trade relationships at next week's EU summit. It was no secret that the Brexit talks hadn't yield much progress yet. However, Barnier spoke very harsh on the financial separation bill as he said the negotiations on this topic were in a deadlock. So, any talks on trade are likely delayed till after the next EU summit on December 14. The comments pushed sterling off a cliff. EUR/GBP jumped north of the psychological barrier of 0.90. The pair trades around 0.9010/20. Cable also reversed part of this week's rebound. The pair trades again in the 1.3140/50 area.

Higher energy prices and the volatile trade services component drove the PPI up 0.4 percent in September. Core goods and services prices rose more modestly, but are within the realm of the Fed's inflation target.

Energy and Trade Services Lead September Gain

Producer prices climbed 0.4 percent in September on another sizable lift in the cost of energy goods (up 3.4 percent). Food prices were flat, while core goods rose 0.3 percent.

The 0.4 percent rise in services last month was largely traced to a 0.8 percent rise in the trade component, which is measured in margins. Transportation services, which can be susceptible to fluctuations in energy costs, rose 1.0 percent.

PPI Consistent with Moderate Inflation

Construction costs were little changed in September (up 0.1 percent), but will likely see the upward trend of recent months continue as rebuilding efforts in the Gulf region get underway.

While not the Fed's primary measure, the PPI has firmed over the past year and is in the realm of the FOMC's 2 percent goal. PPI is up 2.6 percent year-over-year while our preferred measure of the core (ex-food, energy, and trade services) is up 2.1 percent.

EUR/GBP - 0.9012

New strategy  :

Buy at 0.8985, Target: 0.9085, Stop: 0.8945

Position : -

Target :  -

Stop : -

 
As the single currency has surged again after brief pullback and broke above previous resistance at 0.8993, suggesting the rise from 0.8746 low is still in progress, hence mild upside bias is seen for this move to extend further gain to previous resistance at 0.9048, break there would encourage for at least a strong retracement of the fall from 0.9307 to 0.9075-80 but near term overbought condition should limit upside to 0.9100, bring retreat later. 

In view of this, would not chase this rise here and would be prudent to buy euro on pullback as 0.8985-90 should limit downside and bring another rise. Below minor support at 0.8949 would suggest top is possibly formed, risk test of 0.8925 but only break support at 0.8906 would confirm top is formed, bring further fall towards 0.8875, having said that, support at 0.8850 should remain intact. Only a break there would provide confirmation that the rise from 0.8746 has ended and extend weakness to 0.8820-25 first. 

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 - 1.2478

Trend:  Down

 
Original strategy       :

Buy at 1.2415, Target: 1.2600, Stop: 1.2355

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.2395, Target: 1.2595, Stop: 1.2335

Position: -

Target:  -

Stop:-

Although the greenback recovered after finding support at 1.2433, reckon upside would be limited to 1.2531 and near term downside risk remains for the corrective decline from 1.2599 top to bring retracement of recent upmove to 1.2415 but reckon 1.2390-95 would limit downside and bring another rebound later, above 1.2531 resistance would suggest low is formed, bring further gain to 1.2555-60, break there would signal the pullback from 1.2599 has ended, bring retest of this level, above there would extend the rise from 1.2061 low (wave iii trough) towards previous resistance at 1.2663 but upside should be limited to 1.2700 and price should falter well below another previous resistance at 1.2778. 

In view of this, would not chase this rise here and would be prudent to buy again on pullback as 1.2395-00 should limit downside. Below 1.2395-00 would bring correction back to 1.2350-55 but reckon indicated support at 1.2313 would hold. Only a drop below 1.2313 would abort and signal the aforesaid rise from 1.2061 has ended, bring further fall to 1.2254 support, however, reckon downside would be limited to another previous support at 1.2197, bring rebound later. 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.

Daily Pivots: (S1) 148.11; (P) 148.48; (R1) 149.12; More

GBP/JPY's recovery was limited at 149.04 and drops sharply after failing to sustain above 4 hour 55 EMA. But it's staying above 146.92 temporary low. Intraday bias remains neutral first. Another decline is expected with 149.73 intact. Below 146.92 will target 61.8% retracement of 139.29 to 152.82 at 144.45. Such decline is seen as a correction and we'd look for strong support from 144.45 to bring rebound. On the upside, break of 149.73 support turned resistance will argue that the pull back is completed and turn bias back to the upside for retesting 152.82 high. However, sustained break of 144.45 will put 139.29 key support in focus.

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.

Daily Pivots: (S1) 0.8927; (P) 0.8941; (R1) 0.8956; More...

EUR/GBP's rise from 0.8475 resumes today and reaches as high as 0.9015 so far. Intraday bias is back on the upside for 61.8% retracement of 0.9305 to 0.8745 at 0.9091. Decisive break there will bring retest of 0.9305 high. On the downside, break of 0.8905 minor support is needed to indicate completion of the rebound. Otherwise, further rise will remain in favor in case of retreat.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of another fall. And in that case, EUR/GBP could have a retest on 0.9303 low. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.