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What was expected to have been a bold declaration of independence turned out to be a weak statement. Catalan’s President Puigdemont held back from a total declaration of independence merely stated that he had the right to do so. Puigdemont stated that he wanted to reduce tensions and provide time for talks with the Spanish government. Puigdemont was able to declare independence then repeal the same statement. The Euro rallied hard as the immediate threat was lifted. However, the confusion statements provided no closure while exposing additional complexity. Perhaps the Catalonian government was expected an olive branch from Madrid got a directly worded rebuttal.

Deputy Prime Minister Santamaria reiterated that the Spanish government views the actions of Catalonia as illegal and would not engage in discussions until efforts towards independence was halted. The lack of full-blown independence has certified normalizations of Spanish asset prices, with sovereign spreads narrowing and IBEX to rally. We still see uncertainty in the near term, expecting EURUSD to slide back toward 1.1700. However, the trend for further EU integration has made another significant step forward by stopping dissident democratic movements. Whether we make it out of this short EURUSD trade or not, remain unknown. But a strong, unified EU, in spite of optics, will clearly influence how we trade Italy in the spring.

The week has been pretty light in term of economic data so far. Today is different as the minutes of the September FOMC meeting are due for release later today. Beside the fact that the minutes will probably revealed some details about the Fed balance sheet run-off, investors will meticulously scrutinized the minutes and adjust their expectations for December rate hike. For now, there is a 76.5% change of a 25bps increase on December 13, according to market pricing. Against such a backdrop, the Fed has little choice as postponing it would raise concerns among investors.

However, the rate hike story is not the only matter that investors will pay attention. Fed’s members discussions about the inflation outlook and more specifically about the last few months’ weakness in inflation pressures together with the potential impact on next year rate hike cycle will take high interest.

The US dollar eased slightly on Wednesday but it could be seen as a consolidation after the sharp reversal of the last few days. The USD should continue to trade sideways ahead of the minutes. Further weakness of the greenback has to considered, especially should the minutes suggest a more dovish stance from the monetary policy committee.

EUR/JPY - 132.52

Original strategy:

Sold at 132.40, Target: 130.70, Stop: 133.00

Position: - Short at 132.40
Target: - 130.70
Stop: - 133.00

New strategy :

Hold short entered at 132.40, Target: 130.70, Stop: 133.00

Position: - Short at 132.40
Target:  - 130.70
Stop:- 133.00

Although the single currency edged higher, as euro has rerouted after faltering below 133.00 level, retaining our bearishness and consolidation with downside bias remains for another fall to 131.85-90, however, break of support at 131.75 is needed to signal top has been formed at 134.41 earlier and extend the fall from there for retracement of recent rise to 131.00-05, break there would bring further decline towards support at 130.62 which is likely to hold on first testing. 

In view of this, we are holding on to our short position entered at 132.40. Above 133.00 would risk test of indicated resistance at 133.12 but break there is needed to retain near term bullishness and extend the rebound from 131.75 to previous support at 133.43, however, upside should be limited to 134.00 and price should falter well below said resistance at 134.41, bring further consolidation.  

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

Crude oil is bouncing lower below the $50 level. Key support is given at 45.40 (17/08/2017 high). Strong resistance lies at 52.86 (28/09/2017). Expected to show continued weakness.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. For the time being the pair lies in an upside momentum. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).

Silver is trading higher. The precious metal is now trading above $17. Hourly support can be found at 16.13 (06/10/2017 low). Expected to show further increase.

In the long-term, the trend is rater negative. Further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Gold has broken downtrend channel precious metal drove the precious metal from 1357 to hourly support given at 1267 (15/08/2017 low). Strong support lies at a distance at 1204 (10/07/2017 high). Expected to show further upside move.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).

Bitcoin is definitely on a strong momentum. Strong support is given at 2975 (22/08/2017 low). Sell walls around $4000 have been broken. Key resistance can be located at 4921 (01/09/2017 high - All-Time High). The road is wide open for further increase.

In the long-term, the digital currency has had an exponential growth. There are decent likelihood that the asset will reach $10'000.

EUR/CHF is trading into a new short-term trend. Yet momentum is not "that" strong at the moment. Strong resistance lies at a distance at now at 1.1623 (22/09/2017 high). Support is given at 1.1388 (02/09/2017 low). Downside risk is very likely.

In the longer term, the technical structure has reversed. Strong resistance is given at 1.20 (level before the unpeg). Yet, the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

AUD/USD – 0.7786

Original strategy:

Sell at 0.7850, Target: 0.7700, Stop: 0.7910

Position: -
Target:  -
Stop:-

New strategy :

Sell at 0.7860, Target: 0.7700, Stop: 0.7920

Position: -
Target:  -
Stop:-

Aussie’s recovery after holding above last week’s low at 0.7733 suggests further sideways trading above this level would take place and corrective bounce to 0.7830-35 cannot be ruled out, however, reckon resistance at 0.7875 would cap upside and bring another decline later, below said support at 0.7733 would add credence to our view that the fall from 0.8125 top is still in progress for weakness to 0.7700-10 but loss of near term downward momentum should prevent sharp fall below 0.7660-65 and reckon 0.7600-10 would hold from here, bring rebound later.

In view of this, we are looking to sell aussie again on recovery as said resistance at 0.7875 should limit upside and bring another decline. Above previous support at 0.7908 (now resistance) would defer and risk a stronger rebound to 0.7950 but resistance at 0.7986 should remain intact and bring another decline later. 

On the 4-hour chart, recent upmove from 0.7329 is unfolding as an impulsive rise with wave 3 as well as smaller degree wave (iii) extending, only minor wave v of (iii) has ended at 0.8125, hence bullishness remains for this move to extend headway to 0.8200, then towards 0.8300, however, reckon upside would be limited to 0.8400 and the final wave 5 should falter below 0.8500, bring correction later.

EUR/GBP is consolidating lower. The pair has broken the resistance at 0.8899 (19/09/2017 low). The very short-term technical structure is biased to the upside. Hourly support is given at 0.8906 (09/10/2017).

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 (psychological level).