Sample Category Title

EUR/JPY - 129.83





Although the single currency recovered after finding good support at 129.37 this week, as renewed selling interest emerged at 131.09 yesterday and euro has retreated again, retaining our view that further consolidation below recent high at 131.71 would take place and as long as 131.09 holds, mild downside bias is seen for test of said support at 129.37, break there would bring test of previous resistance at 129.18, below there would suggest top is possibly formed, bring further fall to 128.45-50, break there would bring retracement of recent rise to 128.00-10, then towards previous support at 127.56 which is likely to hold from here. In the event euro drops below 127.56, this would signal correction of recent upmove has commenced and bring subsequent fall to 126.45-50 and later towards previous resistance at 125.82 which is likely to remain intact.

The daily chart is labeled as attached, early selloff from 169.97 (July 2008) to 112.08 is wave (A) of B instead of end of entire wave B and then the rebound from there to 139.26 is wave (B), hence, wave (C) has possibly ended at 94.12 with a diagonal triangle as labeled in the daily chart, hence upside bias is seen for further gain. Recent rally above indicated retracement level at 116.69 (50% Fibonacci retracement of the intermediate fall from 139.26-94.12) adds credence to this view and signal major reversal has commenced but first leg of this wave C has possibly ended at 149.79, hence wave 2 has commenced with wave A ended at 126.09, followed by wave B at 141.06, wave C commenced and could have ended at 109.49, above 126.00 would add credence to this view, then headway to 130.00 would follow. 



On the upside, whilst recovery to 130.50-60 cannot be ruled out, said resistance at 131.09 should remain intact, bring another retreat later. A daily close above 131.09 would suggest the retreat from 131.71 has ended instead, bring retest of this level, however, euro needs to penetrate this resistance to revive bullishness and signal the major rise from 109.49 low (2016 low) has resumed for headway to 132.00-10, then 132.50-60 but overbought condition should prevent sharp move beyond 133.10–15 (61.8% projection of 122.40-131.40 measuring from 127.56) and price should falter well below previous chart resistance at 134.59, bring retreat later.


Recommendation: Sell at 130.50 for 128.50 with stop above 131.50.

To re-cap the corrective upmove from the record low of 88.93 (18 Oct 2000), the wave A from there is subdivided as: 1:88.93-113.72, 2:99.88 (1 Jun 2001), 3:140.91 (30 May 2003), 4:124.17 (10 Nov 2003) and 5 ended at record high of 169.97 (21 Jul 2008). The brief but sharp selloff to 112.08 is viewed as a-b-c x a-b-c wave (A) of B. The subsequent rebound to 139.26 is (B) of B and (C) of (B) has possibly ended at 94.12 and in any case price should stay well above previous chart support at 88.93, bring rally in larger degree wave C towards 150.00.

USD/CHF –  0.9470

 
Although the greenback has retreated after running into resistance at 0.9680 last week and initial downside risk of marginal weakness towards 0.9400, loss of near term downward momentum should limit downside and bring rebound later. Above 0.9570 would bring rebound to 0.9615-20, break there would encourage for test of indicated resistance at 0.9680 but break there is needed to suggest low is formed, bring a stronger rebound towards resistance at 0.9773. Looking head, only break of this level would provide confirmation and bring retracement of recent decline to resistance at 0.9808 but previous support at 0.9859 should hold from here.

Our preferred count on the daily chart is that early selloff to 0.9630 is an end of the larger degree wave III and major correction is unfolding from there with a leg ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b ended at 0.9910 with (a): 1.0370, (b): 1.1967, (c): 0.9910. The rise from there to 1.1730 is the wave c which also marked the end of wave IV and wave V has possibly ended at 0.7068.


On the downside, whilst marginal weakness from here cannot be ruled out, reckon downside would be limited to 0.9390-00 and reckon 0.9350 would hold. If decline gathers momentum, this would indicate medium term erratic decline from 1.0344 top (formed back in late 2016) is still in progress and may extend further weakness to 0.9300, however, loss of downward momentum should prevent sharp fall below 0.9250-60 and 0.9200-10 should hold, risk from there has increased for a rebound to take place later.

 
Recommendation: Stand aside for this week.

Dollar's long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) with wave III ended at 0.9630 (Mar 2008). Under this count, correction in wave IV has possibly ended at 1.1730 and wave V already broke below support at 0.9630 and met indicated downside target at 0.7500 and 0.7400. The reversal from 0.7068 suggests the wave V has possibly ended and the breach of resistance at 0.9595 add credence to this view and indicated upside target at 1.0000 had been met, however, the sharp retreat from 1.0296 to 0.7401 suggests choppy trading would be seen but price should stay above said record low at 0.7068.

EUR/USD

Current level - 1.2048

The break through 1.1985 resistance unleashed a renewal of the uptrend and the bias is positive above 1.1950, for an attack of 1.2160 area.

USD/JPY

Current level - 107.69

The pair broke through 108.12 low and the bias is bearish, for a slide towards the main target at 107.00. 

GBP/USD

Current level - 1.3137

The uptrend has reached the resistance around 1.3157 and the bias is still positive, as only a violation of 1.3060 will signal a reversal of the upmove. A dive below the latter will challenge 1.2990 and 1.2910.

Sterling Strength and Economic Data Out of Sink
Tapering Ahead

US futures and European markets are trading lower as investors are anxious about the impact and costs of Hurricanes Harvey, Irma and Jose. The Japanese final GDP q/q which missed the forecast isn't helping the sentiment either. The Chinese trade balance also took a wrong turn choking the bulls further.

Sterling Strength and Economic Data Out of Sink

Many thought that the weakness in the British pound would not only stimulate the export but also the growth for the UK economy. That could have been the case if Brexit wasn't the major hurdle and given that the politicians have returned from their holidays, they are still stuck on the very same issue as before they left. The British Chamber of Commerce has also acknowledged that the weakness in the pound is not providing the kind of tailwind which was initially expected. The Consumer spending is simply abated and inflation is outpacing the job growth, an environment which is toxic for the economy. The UK GDP is going to see less colour from the net trade and this would be the primary confirmation of how a lower currency failed to add the amount of value which was widely expected.

The UK soft data, the PMI's and business survey, initially confirmed that investors can weather the Brexit storm relatively better, but the current trend in the manufacturing and industrial production numbers is worrisome. At 09.30 BST, we have the manufacturing production number and the forecast is relatively more optimistic with the reading of 0.3%. If you look at the construction output and industrial production, then the picture becomes duller and the forecast for today for both numbers (0.3% and 0.2% respectively) isn't something to cheer about.

Do not be fooled by the strength of the Sterling-dollar which is trading above 1.31, a lot of this is simply the weakness in the dollar. The price is retracing from its highs and if it breaks the support of 1.31, the move to the level of 1.3060 is highly likely.

Tapering Ahead

If you think that Draghi has failed to keep the lid on the euro's strength in his press conference yesterday, then certainly you are making a mistake. Draghi certainly has the ability to punch above his weight and we know that very well. The policy maker did make a reference to the currency's volatility and exchange rate. However, the primary and significant focus remained towards more pressing affairs such as domestic strength. The Euro dollar algos went bananas as Draghi started to speak despite the fact that the president was reluctant to spell out the month, date and pace of the tapering process.

WTI oil price eased below $49.00 on Friday after repeated upside rejections at $49.40/31 in previous two days and Thursday’s action being shaped in Doji, signaling indecision.

In addition, strong build in crude inventories last week added to pressure on oil price which was inflated by increased demand for oil on restart of Texas refineries which were shut on Hurricane Harvey.

Current easing could be seen as correction of larger bull-leg from $45.57 on overbought studies and ahead of attack at strong barriers at $49.62 (200SMA) and psychological $50.00 barrier.

Dips should be ideally contained by supports at $48.00 zone, provided by daily cloud top and Fibo 38.2% of $45.57/$49.40 upleg).

Focus is shifting to three other hurricanes that are approaching the US Gulf coast and may disrupt refining process again and reduce demand for oil again that would further boost oil prices.

Another supportive factor for oil price would be decision of Saudi Arabia to cut supplies in October by 350.000 barrels per day.

Res: 49.24, 49.40, 49.62, 50.00
Sup: 48.72, 48.50, 48.00, 47.65

Draghi plays for time, all eyes on Yellen

In spite of huge market expectations, Mario Draghi gave little information about the future of the QE and played for time once again. As broadly anticipated the European Central Bank did not change the level of any of its three key interest rates. However, investors were hoping Draghi will come with a plan regarding the future of the central bank's quantitative easing program. The ECB's president chose to leave if for the end of the year as he declared the QE will run until December and beyond if necessary.

Investors were also expecting a reaction to the euro appreciation of the last few months. They were quite disappointed again as Draghi only declared that the “euro volatility represents a source of uncertainty.” That's it that's all. Investors will have to wait until the next meeting in October or most likely in December to get answers to their questions.

EUR/USD spiked to $1.2059 during the press conference and continued to rally during the Asian session, hitting $1.2092. The fact that Draghi appeared not too concerned about the euro strength was interpreted as a bullish signal by investors and they quickly forgot that he did not provide any hint about tapering.

With the ECB meeting behind us, investors will focus on the next big event that is the FOMC meeting of September 20th. Although the Fed hiking cycle seems on pause for now as the market is not pricing any interest rate hike before next year, investors are impatiently awaiting the Fed to finally reveal the starting date of its balance sheet unwinding programme.

On Friday the greenback kept losing ground against most of its peers as US rates dipped lower. The dollar index slid to 91.01, its lowest level since January 2015. The US 10-year treasury yield accelerated its debasement and 2.0144% this morning while the monetary policy sensitive 2-year yield was down 1.25%.

Markets dump USD on artificial comfort level

Great article in Bloomberg highlighting the disappearance of volatility in FI due to central bank's interventionist policy. To reiterate a well-understood fact, central banks are suppressing the true price of risk in rates, which in turn are distorting all other market risk measures. Worryingly investors are significantly underpricing the real price of risk. Seven months ago Greece 2-year yields were at 9.5%, now stand at 2.67%, on par with dysfunctional Argentina and only 60bp above AA New Zealand. In terms of Greece there is the view that ECB convergence trade is back on (thanks to Merkel clear pro-EU platform and yesterday's Macron speech on EU integration), making Greek sovereign debt ultimately backstopped by the ECB.

In broader terms, rightly so investors are aware that Central banks have discovered the miracle solution for managing debt and default avoidance, unadulterated raw capital creation. So if there is no longer credit risk (currency risk can be hedged) any return is a good return. This is also why the Swiss National Bank stock (yes the SNB is a publicly traded company) continues to rally. Printing CHF to buy asset such as EUR and equites (over chf60bn in stocks) is a great business model. VIX index is trading at 12 despite the lingering concern of potential nuclear war. Capital continues to flow out of the USD and into emerging markets as risk sentiment remains strong.

The pair remains firmly in red and extends strong fall of the previous day through key supports at 108.11 (2017 low, posted on 17 Apr) and round-figure 108.00.

Risk aversion over North Korea tensions continues to heavily weigh on the pair, with rising fears of another incident during the weekend when North Korea will be celebrating National Day.

Such scenario could further accelerate yen's bulls as break below 108 handle also triggered a number of stops parked below.

Bear-leg from 110.66 (31 Aug lower top) could extend to 106.51 (Fibo 61.8% of 98.99/118.66 ascend) as bears see no obstacles en-route after 108.11 pivot was taken out.

The pair is on track for strong bearish weekly close (the biggest one-week fall since early April), with close below 108.83 (weekly cloud base which was cracked several times but without clear break) to confirm bearish continuation.

Corrective action could be anticipated in the near-term as slow stochastic entered oversold territory, with weekly cloud base now offering strong resistance and expected to cap.

Res: 108.11, 108.48, 108.83, 109.26
Sup: 107.34, 107.00, 106.77, 106.51

Crude oil is showing further buying interest since bouncing off key support at 45.40. Strong resistance can be found at 50.41 (31/07/2017). Hourly support is given at 45.40 (17/08/2017 high). Expected to show continued short-term bearish move.

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

Silver has broken its key resistance at 17.75 opening the way for a test of the strong resistance at 18.65 (17/04/2017 high) while support can be found at 16.58 (15/08/2017 high). The commodity lies in an uptrend channel. Expected to show another leg higher.

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 seen increased buying interest, clearing rising trend-line. Hourly support is given at a distance 1326 (gap low). Key resistance is located at 1375 (06/07/2016). Stronger support lies at 1204 (10/07/2017 high). Expected to show continued increase.

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)