Sample Category Title

EUR/USD - 1.1938

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the single currency has fallen again after brief recovery, suggesting the decline from last week’s high of 1.2093 is still in progress for retracement of recent rise, hence weakness to 1.1900 cannot be rule out, however, 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 the Kijun-Sen (now at 1.1966) would bring recovery to 1.1978-80, however, reckon upside would be limited to 1.2000 and resistance at 1.2030 should remain intact, bring another decline.

Daily Pivots: (S1) 1.3141; (P) 1.3182; (R1) 1.3203; More...

GBP/USD's rally resumed quickly after brief consolidations. Break of 1.3267 resistance also confirms resumption of whole rise from 1.1946. Intraday bias is back on the upside for 1.3444 key resistance next. At this point, we'd maintain that price actions from 1.1946 are still seen as a corrective pattern. Hence, we'd expect strong resistance from 1.3444 to limit upside to bring larger down trend reversal eventually. On the downside below, 1.3158 minor support will turn intraday bias neutral again.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern. While further rise cannot be ruled out, larger outlook remains bearish as long as 1.3444 key resistance holds. Down trend from 1.7190 (2014 high) is expected to resume later after the correction completes. And break of 1.2773 support will be the first sign that such down trend is resuming.

The British Pound surges sharply today as boosted by strong inflation reading. BoE is still widely expected to keep bank rates and asset purchase target unchanged on Thursday. But there is now more reasons for the central bank to reiterate its stance on interest rates. That is, BoE would like to remind households and businesses that markets are under-estimating the scale of interest rate hikes in the coming years. Following Sterling, commodity currencies and Dollar are the strong ones on full return of risk appetite. But Canadian Dollar lags behind as it continues to digest recent gains. Meanwhile, Yen and Swiss Franc remain the weakest ones. Both maintains this week's loss after United Nations Security Council approved watered down sanctions on North Korea. And risks of immediate military conflicts are much reduced.

UK CPI jumps to year high, Sterling soars

Sterling soars today as boosted by stronger than expected consumer inflation reading. Headline CPI accelerated to 2.9% yoy in August, up from 2.6% yoy, and beat expectation of 2.8% yoy. That's also the highest level in a year. Core CPI also accelerated to 2.7% yoy, up from 2.4% yoy and beat expectation of 2.5% yoy. RPI rose to 3.9% yoy, up from 3.6% yoy and beat consensus of 3.8% yoy. PPI input rose to 7.6% yoy, PPI output rose to 3.4% yoy and PPI output core was unchanged at 2.5% yoy. Also from UK, house price index rose 5.1% yoy in July, above expectation of 4.8% yoy.

The data come just two day ahead of BoE rate decisions. With re-acceleration in headline CPI, there is very little chance that hawks Michael Saunders and Ian McCafferty would change their mind. Both are very likely to continue to vote for a 25bps hike. The question is now on whether chief economist Andy Haldane would finally put his hawkish comments into a vote for hike. But still even, if Haldane votes for hike, two more are needed in the 9-member MPC to approve it. BoE is still generally expected to keep bank rate unchanged at historical low at 0.25%. Money markets are pricing in one-in-three chance of a rise by the end of the year, comparing with one-in-five a week ago. And based on Sonia fixings, markets are pricing in a full 25bps rise by August 2018.

Nonetheless, technically, today's rally in the pound is decisively bullish in near term. GBP/USD's break of 1.3267 confirms resumption of recent rally from 1.1946 and it's set to test 1.3444 key medium term resistance. EUR/GBP's sharp fall also confirms near term reversal and opens up the case of deeper fall back to 0.8303/12 support zone. GBP/CHF's strong rally should also confirm that the three wave pattern from 1.3067 has completed at 1.2219. Further rise would be seen to 1.2852 resistance next. Break there will put long term fibonacci level of 38.2% retracement of 1.5570 (2015 high) to 1.1684 (2016 low) at 1.3216 into focus.

German Merkel "guaranteed" to reject refugee cap

In Germany, ahead of the federal election on September 24, Chancellor Angela Merkel ruled out imposing an upper limit on refugee intake. She told voter yesterday that a cap of refugees entering into Germany would not be "practical". And she "guaranteed" she will reject any such policy. Meanwhile, she also warned Hungary that it's unacceptable to ignore a ruling by the European Court of Justice. And Hungary must accept refugees under the EU-wide plan.

Based on recent polls, Merkel's Christian Democrats (CDU) is likely to win the election. CDU is generally in high 30's, with running up Social Democrats (SDP) at low 20%. The ex-Communist Left, Greens, Free Democrats (FDP) and right wing Alternative for Germany (AFD) are all between 7% and 11%. Should FDP and and CDU win a combined majority, it's highly likely that they will form a coalition.

USD/CNY surged as PBOC removed capital control

USDCNY continues to recover after the pair slumped to the lowest level since December 2015 last Friday. The rebound is long-awaited as the broad-based USD weakness has caused the pair to decline over the past 4 months. It is facilitated by PBOC's announcement to remove the requirement for banks to hold the equivalent of 20% of clients' FX forward positions as reserve for a year at 0% interest. For more than a decade, China has been implementing reforms in its currency, with the ultimate goal of achieving a floating exchange rate regime and convertibility for renminbi - a movement widely described as renminbi internationalization. However, the government has only been moving back and forth, without making significant progress in transforming renminbi into a market-oriented exchange rate. More in PBOC Removes Capital Control. Yet, Renminbi Internationalization Remains Distant

Australia business confidence dropped below long term average

Australia NAB business condition rose to 15 in August up from 14, and hit the highest level since 2008. However, business confidence tumbled notably to 5, down from 12. It's also the first time it dropped below its long-term average since mid-2016. NAB chief economist Alan Oster noted that "for those indicating deterioration in confidence, the biggest concerns appear to be customer demand, government policy, as well as cost pressures - both energy and wages." But, it's "it is probably too early to read much into the drop in confidence this month." And, "household consumption is a notable point of difference between our relatively subdued growth outlook and the RBA's more sanguine forecasts, and will be key to the economy's sustained return to trend growth."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3141; (P) 1.3182; (R1) 1.3203; More...

GBP/USD's rally resumed quickly after brief consolidations. Break of 1.3267 resistance also confirms resumption of whole rise from 1.1946. Intraday bias is back on the upside for 1.3444 key resistance next. At this point, we'd maintain that price actions from 1.1946 are still seen as a corrective pattern. Hence, we'd expect strong resistance from 1.3444 to limit upside to bring larger down trend reversal eventually. On the downside below, 1.3158 minor support will turn intraday bias neutral again.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern. While further rise cannot be ruled out, larger outlook remains bearish as long as 1.3444 key resistance holds. Down trend from 1.7190 (2014 high) is expected to resume later after the correction completes. And break of 1.2773 support will be the first sign that such down trend is resuming.

Economic Indicators Update

USD/JPY - 109.97

Original strategy  :

Sold at 109.35, stopped at 109.70

Position :  - Short at 109.35

Target :  -

Stop : - 109.70

New strategy  :

Buy at 109.30, Target: 110.30, Stop: 108.95

Position :  -

Target :  -

Stop : -

As the greenback has surged again today after brief pullback, dampening our bearishness and suggesting the rise from 107.32 low is still in progress, hence further gain to resistance at 110.49 would be seen, however, near term overbought condition should limit upside to resistance at 110.67, 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 108.6570 but still reckon downside would be limited to 108.35-40 and bring another rally later. 

The DAX index continues to post gains this week. In the Tuesday session, the DAX is trading at 12,439.50, up 0.60% on the day. For a second straight day, there are no German or Eurozone events on the schedule. On Wednesday, Germany will release Final CPI and WPI, and the eurozone publishes employment change and industrial production.

European stock markets continue move higher, boosted by renewed investor appetite this week. The DAX has gained 3.7% in September, and is trading at its highest level since July 20.

With North Korea one of the world's geopolitical hot spots, there were concerns that tensions might rise again over the weekend, as the country celebrated the 69th year of its founding. Last year, North Korea marked last year's anniversary by exploding its fifth nuclear test. To the market's relief, there were no nuclear tests or missile launches over the weekend, although Pyongyang has reacted angrily to a UN Security C0uncil resolution which extended sanctions on North Korea. On the fundamental front, it's been a slow start to the week, and the markets are keeping on eye on German inflation numbers, which will be released on Wednesday.

The US dollar suffered broad losses last week, as tensions rose in the Korean peninsula after North Korea tested a hydrogen bomb. This weighed on risk appetite, and the euro jumped on the bandwagon, gaining 1.3 percent against the greenback. With North Korea celebrating its 69th anniversary of independence, there were concerns that Pyongyang would use the occasion to flex some muscle and test a nuclear bomb or missile. There were no incidents over the weekend, although the US, along with its allies Japan and South Korea, remain on alert for further provocations from the north. The dollar responded with gains on Monday, as EUR/USD dipped below the symbolic 1.20 level.

Dow Jones future contract for September delivery remains well supported and extends strong rally from Monday (up 0.90% for the day), approaching key barrier at 22131 (record high posted on 08 Aug).

The contract is about to complete corrective phase from 22131 to 21580 (08/21 Aug pullback) and resume broader uptrend.

Fresh bullish sentiment on fading concerns over North Korea and impact of Hurricane Irma on the US economy boosts the price strongly. Eventual break above 22131 pivot would commence fresh bullish phase and expose Fibo projections at 22261 (123.6%) and 22341 (138.2%). Initial support lies at 22054 session low, followed by round-figure 22000 support, also broken bear-trendline from 22131 peak.

Res: 22131; 22200; 22261; 22341
Sup: 22054; 22000; 21910; 21856

The euro has remained under selling pressure against the U.S dollar during much of the European session, with intraday upside attempts contained by the 1.1979 technical resistance level.

Presently, the EURUSD is moving lower, with price-action approaching the 1.1950 level, due to intraday U.S dollar strength, and an unwinding on long positions in the EURGBP cross-pair.

The EURUSD pair remains further intraday bearish, after price-action failed to close back above the key 1.1979 technical resistance level.

To the downside, EURUD technical support is located at 1.1940, 1.1906 and the crucial monthly time frame, 50-period moving average, at 1.1871.

To the upside, once above the current daily price high, at 1.1979, further intraday resistance for the EURUSD pair is found at the 1.1999, 1.2029 and 1.2039 levels.

The British pound has moved to new 2017 trading high against the U.S dollar, hitting 1.3288 during the European session, after much better than expected United Kingdom inflation data for the month of August.

Monthly inflation increased 0.6 percent in the UK, which was much better than analyst expectations, and a sharp rise from the previous months figure of –0.1 percent.

Price remains at elevated level, trading well above the former yearly price high, located at 1.3268.

Traders will now watch for a higher-time frame price close above the former yearly price high, at 1.3268, for further confirmation of continued upside on the GBPUSD pair.

Key technical resistance above the 1.3288 level, is located at 1.3300, and the September 13th, 2016 price high, at 1.3338. Further longer-term GBPUSD resistance is found at the 1.3395 level.

Any corrections to the downside, should find support from the recent pullback low, at 1.3248, with Fibonacci support coming at 1.3220.

Further GBPUSD support below the 1.3200 level comes from the 50-hour moving average, located at 1.3187.

EURUSD - With the pair seen closing lower on correction on Monday and following through on Tuesday, more decline is envisaged in the days ahead. Resistance comes in at 1.2000 level with a cut through here opening the door for more upside towards the 1.2050 level. Further up, resistance lies at the 1.2100 level where a break will expose the 1.2150 level. Its daily RSI is bearish and pointing lower suggesting further downside pressure. Conversely, support lies at the 1.1900 level where a violation will aim at the 1.1850 level. A break of here will aim at the 1.1800 level. Below here will open the door for more weakness towards the 1.1750. All in all, EURUSD faces further downside on correction.

Crude oil bounce from 47.00 yesterday and it turning slightly bullish now which means that USDCAD will likely stay in downtrend. From an Elliott Wave perspective we see bearish impulse in progress, currently with sub-wave 4 underway that will ideally make test of 1.2238 resistance before prices attacks 1.2000 with fifth wave down.

USDCAD, 1H

NZDUSD is also on our radar screen this week as we think that rally from Aug 31 can be corrective. Reason is of-course slow and overlaping price action which is personality of a corrective movement. That said, upside can be limited, but after seven legs as correction is going complex. It's a double zigzag with final wave c in play within wave Y that may look for a reversal at 0.7350-0.7380.

NZDUSD, 1H