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The Sterling jumped against the US Dollar to the highest level since late 2016, as Tuesday reports showed the strong growth in the UK consumer inflation. Following the release, the GBP/USD exchange rate surged 0.45% or 59 base points to the 1.3262 mark to reach the yearly peak.

The Office for National Statistics announced that its CPI for Britain revealed stronger-than-expected gain of 2.9% in August, up from an increase of 2.6% in the preceding month. The country's consumer prices growth was the strongest since the decision to quit the European Union, as Brexit kept pushing up the living cost in the UK. Higher costs of fuels as well as solid rise in clothing and footwear prices contributed most to the growth, as retailers passed cost pressures straight to customers.

GBP/USD – 1.3276





Original strategy :

Buy at 1.3170, Target:1.3370, Stop: 1.3110

Position: -

Target:  -

Stop: - 




New strategy :

Buy at 1.3170, Target:1.3370, Stop: 1.3110

Position: -

Target:  -

Stop:- 



As cable has eased after rising to 1.3329 earlier today, suggesting minor consolidation below this level would be seen and pullback to 1.3225-30 is likely, however, reckon downside would be limited to 1.3200 and support at 1.3161 should hold, bring another upmove later, above said resistance at 1.3329 would extend recent upmove to 1.3350-55 (50% projection of 1.2109-1.3269 measuring from 1.2774) but near term overbought condition should limit upside to 1.3390-00 and price should falter below 1.3440-50, bring retreat later.

In view of this, would not chase this rise here and would be prudent to buy sterling on subsequent pullback as said support at 1.3161 should limit downside, bring another rise later. Only below previous resistance at 1.3080-85 would defer and risk test of 1.3030-33 support, break there would suggest a temporary top is formed instead, risk correction to 1.2990-00 first.

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has ended at 1.7192, the subsequent selloff is the larger degree wave (C) which is still unfolding with minor wave (III) of larger degree wave 3 ended at 1.1986, hence wave (IV) correction is in progress which could either be a triangle wave (IV) of a complex formation but upside should be limited to 1.3500 and price should falter well below 1.4000, bring another decline in wave (V) of 3 for weakness to 1.1500, then 1.1200. 


GBP/JPY - 146.00

Original strategy:

Buy at 144.80, Target: 146.80, Stop: 144.20

Position: -
Target: -
Stop: -

New strategy :

Buy at 145.00, Target: 147.00, Stop: 144.40

Position: -
Target:  -
Stop:-

Although sterling has retreated after rising to 146.65 earlier today, this week’s rally signals early fall from 147.75 has ended at 139.35 (tentatively the final e leg of larger degree wave B), hence bullishness remains for test of resistance at 146.80, break there would add credence to this view and encourage for headway to 147.30-40, then retest of previous resistance at 147.75 which is likely to hold from here due to near term overbought condition,

In view of this, we are looking to buy sterling on pullback but at a higher level as 144.90-00 should limit upside. Only below said previous resistance at 143.00 (tentatively wave i top) would abort and signal top is formed instead, bring weakness to 142.50, then 142.20-25, however, reckon support at 141.30-35 would remain intact, bring another rebound later. 

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.


The Kiwi dollar spiked higher yesterday, following the release of an opinion poll regarding New Zealand's upcoming General election on the 23rd of September. The poll showed the incumbent National Party being very safely ahead, something that may have come as a surprise considering that most polls suggest an extremely tight race between the National and Labour parties.

If the outcome is indeed very close, as the majority of opinion polls suggest, then one of these two main parties may have to form a coalition with the populist New Zealand First party, which advocates anti-immigration and protectionist policies. In our view, any potential coalition that includes NZ First could weigh notably on NZD, considering that protectionist policies would likely hurt the nation's trade-focused economy.

So far, the NZD has surged on polls showing the National Party being safely ahead, and declined on polls showing Labour gaining popularity. We believe this may have occurred mainly because a Labour victory could imply a Labour-NZ First coalition that renegotiates trade deals such as the Trans-Pacific Partnership (TPP), something Labour stated is likely to do. Any future polls that show the National Party being safely ahead could support NZD further, on speculation that the status-quo will be maintained. On the other hand, signs that Labour could win and perhaps even form a coalition with NZ First, could raise the likelihood for protectionist policies and thereby, weigh on the currency.

NZD/USD surged during the European morning Tuesday, after it hit support at 0.7225 (S2), near the prior downside resistance line drawn from the peak of the 21st of August. In our view, the pair shows signs of a short-term trend reversal, from a downtrend to an uptrend. However, we would like to see a clear break above the 0.7335 (R2) resistance before we get confident on more bullish extensions. Such a move could initially aim for the 0.7370 (R3) barrier, where another break is possible to pave the way for the key territory of 0.7400.

UK inflation accelerates; focus turns to wage data

Yesterday, both the headline and the core UK CPI rates for August rose by more than anticipated, enhancing speculation for a near-term BoE rate hike and pushing sterling even higher. The probability for a hike by year-end now rests at 50% according to the UK OIS. In our view, this development places even more emphasis on the labor market data for July we get today. The consensus is for the unemployment rate to have held steady at 4.4%, while average weekly earnings (both including and excluding bonuses) are anticipated to have accelerated.

Coming on top of firming inflation, a potential acceleration in wages could heighten further expectations for a more hawkish tone by the BoE when it meets tomorrow, and perhaps raise the odds for more than 2 MPC members voting for a hike. Something like that could bring the pound under renewed buying pressure.

GBP/USD surged yesterday after data showed that UK inflation accelerated. The pair rebounded from near 1.3160 (S3) and subsequently, it broke above the resistance (now turned into support) barrier of 1.3270 (S1), marked by the peak of the 3rd of August. On the 4-hour chart, we still see a short-term uptrend and thus, we believe that the break above 1.3270 (S1) may have opened the way for our next hurdle of 1.3360 (R1).

As for the bigger picture, the rate continues to trade above the medium-term upside support line taken from back at the low of the 7th of October. Actually, the latest recovery started after the rate rebounded from that line. This is another point enhancing our view that the rate could continue trading north for a while, perhaps until it tests the long-term downside resistance line, drawn from the peaks of July 2014.

As for the rest of today's highlights:

Besides the UK employment data, there are lots of second-tier indicators on the calendar today. Germany's final CPI for August, Eurozone's industrial production for July, and the US PPI figures for August are all coming out.

We have only one speaker on the agenda: EU Commission President Jean-Claude Junker. He will speak before the EU Parliament and he is expected to lay out the EU's priorities for the upcoming year. With the theme of potential EU reforms currently in the spotlight after the French elections and ahead of the German ones, Junker's comments could raise some eyebrows, should he address the subject.

NZD/USD

Support: 0.7260 (S1), 0.7225 (S2), 0.7195 (S3)

Resistance: 0.7300 (R1), 0.7335 (R2), 0.7370 (R3)

GBP/USD

Support: 1.3270 (S1),1.3225 (S2), 1.3160 (S3)

Resistance: 1.3360 (R1), 1.3450 (R2), 1.3500 (R3)

EUR/JPY - 131.80

New strategy :

Buy at 131.35, Target: 133.35, Stop: 130.75

Position: -
Target:  -
Stop:-

As euro’s rally has gathered momentum and broke above indicated previous resistance at 131.71, signaling early upmove has resumed and bullishness is for further gain to 132.40-50, then towards 133.00-10, however, near term overbought condition should prevent sharp move beyond 133.50 and upside should be limited to 133.90-00, risk from there is seen for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy euro on pullback as 131.30-35 should limit downside. Below support at 130.91 would abort and suggest top is formed, bring weakness to 130.50-60 but still reckon downside would be limited to 130.25-30 and this week’s low at 129.95 should remain intact.

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).

AUD/USD – 0.8041

Original strategy:

Sell at 0.8090, Target: 0.7900, Stop: 0.8150

Position: -
Target:  -
Stop:-

New strategy :

Sell at 0.8090, Target: 0.7900, Stop: 0.8150

Position: -
Target:  -
Stop:-

As aussie has recovered after finding support at 0.8011, retaining our view that further consolidation above 0.7998 (this week’s low) would be seen and another bounce to 0.8070 cannot be ruled out, however, if our view that top has possibly been formed at 0.8125 is correct, upside would be limited to 0.8090 and bring retreat later, below 0.8011 would bring test of 0.7998, break there would add credence to this view, bring test of previous support at 0.7963, below there would confirm and bring retracement of recent rise to 0.7920-25 and later 0.7890-00 but support at 0.7867-71 should remain intact.

In view of this, we are looking to sell aussie on recovery as 0.8090-00 should limit upside. Above said resistance at 0.8125 would (last week’s high) would extend recent upmove in wave v of (iii) to 0.8150, then towards 0.8200, however, loss of upward momentum should prevent sharp move beyond 0.8225-30 and price should falter below 0.8250-60, risk from there is seen for a retreat later.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

The British pound has moved to a new 2017 trading high against the U.S dollar, for a second consecutive day. Price-action broke above the 1.3289 level, hitting 1.3315 during the Asian trading session.

During the upcoming European session, GBPUSD traders will await the next directional move in sterling, after the release of key wage earnings and jobs data from the United Kingdom economy.

The GBPUSD pair remains strongly bullish on all-time frames, with price-action fast approaching the trend defining 100-week moving average.

Key intraday technical resistance is located at the 1.3328, 1.3347 and 1.3380 levels, with the pairs 100-week moving average, at 1.3398.

Key intraday GBPUSD technical support below the 1.3300 level is located at 1.3289, with the former monthly high, at 1.3268.

The daily pivot point is located at 1.3252, with further support coming from the former swing price low, at 1.3228.

The USDJPY pair has moved above the 110 level, closing the gap created on the price charts on September 1st. Price-action continues to remain bullish, with the pair so far climbing to an intraday high of 110.29.

Later today, traders will look to key United States PPI data for the month of August, with most analysts expecting a 0.3 percent increase, much better than the –0.1 percent decline in U.S PPI seen in July.

The USDJPY remains strongly bullish on an intraday basis while trading above the 109.90 level, with the pair rallying close to three-hundred pips, since last Friday's sell-off to 107.31.

Key intraday technical resistance is located at 110.29, the July 31st swing high, at 110.67, and the former monthly price high, at 111.05.

To the upside, key intraday technical resistance for the EURUSD pair is located at 1.1962, 1.1979 and 1.1999. Above the 1.1999 level, further resistance is found at the former swing price high at 1.3039.

Daily Pivots: (S1) 144.62; (P) 145.57; (R1) 147.27; More

GBP/JPY's rise from 139.29 is still in progress and intraday bias remains on the upside for 147.76/148.42 resistance zone. Decisive break there will confirm resumption of medium term rebound from 122.36. On the downside, below 145.32 minor support will turn intraday bias neutral first. Overall, for the moment, GBP/JPY is still bounded in sideway consolidation pattern from 148.42.

In the bigger picture, the sideway pattern from 148.42 is still unfolding. In case of deeper fall, we'd expect strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Medium term rise from 122.36 is expected to resume later. And break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. However, firm break of 135.58/39 will dampen the bullish view and turn focus back to 122.36 low.

Daily Pivots: (S1) 131.02; (P) 131.46; (R1) 132.25; More...

EUR/JPY's break of 131.69 resistance confirms resumption of larger rally. Intraday bias is back on the upside. Current rise should target 134.20 fibonacci level next. On the downside, break of 129.36 support is now needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, current rise from 109.03 is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). as long as 124.08 resistance turned support holds, further rise is expected to 61.8% retracement of 149.76 to 109.03 at 134.20. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. However, firm break of 124.08 will argue that rise from 109.03 is completed and turn outlook bearish.