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Copper future contract for October delivery entered strong bearish acceleration on Wednesday and extended the second leg of pullback from three-year high at $3.1770, posted on 05 Sep.

The pullback was triggered by overbought conditions of daily studies, but analysts have described the latest strong rally as unjustified, according to market conditions and stronger corrective action could be anticipated

Bears accelerated after loss of strong support at 3.0237 (daily Kijun-sen) which held consolidation in past three days and generated another bearish signal on break below pivotal supports at $3.0000 (psychological support) and 2.9900 (Fibo 61.8% of $2.8745/$3.1770 upleg). The bear-leg that commenced from Monday's high at $3.0820, marks the third wave of five-wave sequence from $3.1770, which eyes its 100% Fibonacci expansion at $2.9336 for validation.

The latter level marks strong support, reinforced by Fibo 38.2% of $2.5385 rally and rising weekly Tenkan-sen, break of which would generate signal of major reversal.

Res: 2.9900; 3.0000; 3.0180; 3.0237
Sup: 2.9749; 2.9418; 2.9336; 2.9087

USD/CHF - 0.9609

Original strategy :

Buy at 0.9540, Target: 0.9640, Stop: 0.9505

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9540, Target: 0.9640, Stop: 0.9505

Position : -

Target :  -

Stop : -

The greenback has maintained a firm undertone after staging a strong rebound yesterday, the breach of previous resistance at 0.9595 adds credence to our view that low has been formed at 0.9421 and consolidation with upside bias remains for further gain to 0.9635-40 (61.8% Fibonacci retracement of 0.9773-0.9421), however, near term overbought condition would limit upside to 0.9680 and reckon resistance at 0.9698-99 would remain intact.

In view of this, we are looking to reinstate long on dips as 0.9550-55 should limit downside and bring another upmove later. Below 0.9525-30 would defer and risk correction to 0.9500 but downside should be limited and 0.9450-60 would remain intact, bring another rebound later.

GBP/USD - 1.3259

Original strategy :

Buy at 1.3230, Target: 1.3330, Stop: 1.3195

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.3195, Target: 1.3295, Stop: 1.3160

Position : -

Target :  -

Stop : -

As cable has retreated after intra-day initial rise to 1.3229, suggesting consolidation below this level would be seen and pullback to 1.3224-28 support is likely, however, reckon downside would be limited to 1.3195-00 and bring another rise later, above 1.3300 would bring a retest of said resistance at 1.3229, break there would extend recent upmove to 1.3355-60 (61.8% projection of 1.2909-1.3224 measuring from 1.3161) but loss of near term upward momentum should prevent sharp move beyond there and reckon 1.3390-00 would hold. 

In view of this, would not chase this rise at current level and would be prudent to buy cable on subsequent pullback as 1.3195-00 should limit downside and bring another upmove. Below support at 1.3161 would defer and signal top has been formed, risk correction towards 1.3125-30 first. 

EUR/USD - 1.1954

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the single currency has rebounded after falling to 1.1926 (exactly 61.8% Fibonacci retracement of 1.1823-1.2093), suggesting consolidation above this level would be seen and recovery to 1.2000 cannot be ruled out, however, reckon upside would be limited to 1.2020-30 and bring another decline. Below said support at 1.19256 would extend the fall from 1.2093 top to 1.1900 but loss of near term downward momentum should prevent sharp fall below previous support at 1.1868 and price should stay well above another previous support at 1.1823, bring rebound later.

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Above 1.2030 (previous resistance) would suggest the fall from 1.2093 has ended and bring a stronger rebound to 1.2050-60  but reckon upside would be limited to 1.2070, bring another decline.

USD/JPY - 110.26

Original strategy  :

Buy at 109.30, Target: 110.30, Stop: 108.95

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 109.45, Target: 110.45, Stop: 109.10

Position :  -

Target :  -

Stop : -

As the greenback has maintained a firm undertone after this week’s rally, adding credence to our view that low has been formed at 107.32 last week and mild upside bias remains for the rise from there to extend further gain towards resistance at 110.49, however, near term overbought condition should limit upside to another previous resistance at 110.67 and price should falter below 111.00, risk from there has increased for a retreat to take place soon.

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as 109.25-30 should limit downside. Below 109.00 would defer and risk correction to 108.70 but still reckon downside would be limited to 108.30-35 and bring another rally later. 

Daily Pivots: (S1) 1.1935; (P) 1.1956 (R1) 1.1987; More...

Intraday bias in EUR/USD remains neutral as consolidation from 1.2091 might extend. Overall, outlook remains bullish as long as 1.1822 support holds. Above 1.2091 will extend larger rise from 1.0339 and target next key fibonacci level at 1.2516. But considering bearish divergence condition in 4 hour MACD, break of 1.1822 will confirm short term topping and bring deeper fall back to 1.1661 support and below.

In the bigger picture, rise from medium term bottom at 1.0339 is still in progress for 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall fro 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside. But after all, break of 1.1661 is needed to indicate medium term topping. Otherwise, outlook will remain bullish in case of pull back.

Daily Pivots: (S1) 0.9554; (P) 0.9586; (R1) 0.9631; More....

Intraday bias in USD/CHF remains neutral. And, with 0.9679 resistance intact, outlook stays bearish. Another fall is still expected. Sustained break of 0.9420 will target 61.8% projection of 1.0099 to 0.9437 from 0.9772 at 0.9363 first. Break will target 100% projection at 0.9110 next. However, break of 0.9679 will indicate near term reversal and turn bias to the upside for 0.9772 resistance for confirmation.

In the bigger picture, current development suggests that 0.9443 key support (2016 low) could be taken out firmly as down trend form 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.

Daily Pivots: (S1) 109.51; (P) 109.88; (R1) 110.53; More...

Outlook in USD/JPY remains unchanged. While the rebound from 107.31 is strong, it's limited below 110.66 resistance so far. Outlook stays bearish and another fall is still expected. Break of 107.31 will extend the whole fall from 118.65 to 61.8% retracement of 98.97 to 118.65 at 106.48 first. We'd look for support from there to bring rebound. But firm break of 106.48 will extend the decline to 100% projection of 118.65 to 108.12 from 114.49 at 103.96 or below. On the upside, firm break of 110.66 will confirm short term bottoming and turn bias back to the upside.

In the bigger picture, rise from 98.97 (2016 low) is now seen as the second leg of the corrective pattern from 125.85 (2015 high). It's unclear whether this this second leg has completed at 118.65 or not. But medium term outlook will be mildly bearish as long as 114.49 resistance holds. And, there is prospect of breaking 98.97 ahead. Meanwhile, break of 114.49 will bring retest of 125.85 high. But even in that case, we don't expect a break there on first attempt.

The Canadian dollar has posted slight losses in the Wednesday session. Early in the North American session, USD/CAD is trading at 1.2150, down 0.40% on the day. On the release front, US inflation numbers improved in August, but fell short of the estimates. PPI improved to 0.2%, shy of the estimate of 0.3%. As well, Core CPI gained 0.1%, short of the forecast of 0.2%. The focus on inflation will continue on Thursday on both sides of the border. Canada releases NHPI, while the US publishes PPI and Unemployment Claims.

The US economy has been performing well in the second quarter. Preliminary GDP came in at a sizzling 3.0%, and the labor market remains close to capacity. Still, the Achilles heel of the economy remains stubbornly low inflation levels. Wage pressure has been limited, despite the fact that many businesses cannot fill job openings. Weak inflation has hampered the Fed's plans to raise interest rates a third time this year, and the odds of a December hike have dipped to just 31%, as the markets are increasingly doubtful that the Fed will make a move before next year. Will we see stronger numbers from CPI? Both CPI and Core CPI are expected to improve in the September readings, with estimates of 0.2% and 0.3%, respectively.

The Canadian dollar has enjoyed an impressive run, as the currency has jumped 2.7% against the greenback in September. Oil prices have remained close to $50, and stronger economic growth led the BoC to raise the benchmark rate by 25 basis points last week, from 0.75% to 1.00%. The rate hike caught the markets by surprise, and sent USD/CAD down to a 2-year low. However, Canada is heavily reliant on its export sector, and the downside of a strong Canadian dollar is that it makes the country's exports more expensive. Still, Canadian finance minister Bill Morneau said he had no problem with a higher Canadian dollar, which reflected a strong economy.

The Greenback appeared slightly weakened against a basket of major currencies on Wednesday, as market players directed their attention towards August's US inflation data release, that is scheduled for tomorrow.

Thursday's CPI report is a big deal, especially when considering how concerns over stubbornly low inflation rates remain one of the key culprits weighing heavily on US rate hike expectations. Price action suggests that Dollar bears still remain in control, as investors become increasingly sceptical over the Federal Reserve's ability to raise interest rates again before the end of the year. A soft inflation figure on Thursday that falls below market estimates is likely to dent the prospect of higher US rates, consequently punishing the vulnerable Dollar further.

Focusing on the technical outlook, the Dollar Index remains bearish on the daily charts. Sustained weakness back below 91.50 should encourage a further decline towards 91.00. In an alternative scenario, a daily close 92.00 may open a path towards 92.25.

Commodity spotlight - Gold

Gold was on standby on Wednesday, amid firmer word stocks and shaky US Dollar.

Although North Korean tensions have offered some support to the yellow metal, the upside could be capped ahead of Thursday's inflation data. With the pending US CPI release likely to influence expectations over when the Fed will raise rates, Gold, which remains highly sensitive to rate hike expectations, will be directly impacted. A disappointing US inflation figure should heavily support the zero yielding metal.

I believe Gold still remains attractive, despite the return of risk appetite, with further upside on the cards as heightened political uncertainty in Washington and geopolitical concerns encourage investors to seek safety.

From a technical standpoint, the metal still remains bullish on the daily charts. A breakout above $1340 should encourage a further appreciation higher towards $1350. In an alternative scenario, a breakdown and repeated weakness under $1325 is likely to encourage a decline towards $1315 and $1300, respectively.