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Daily Pivots: (S1) 129.56; (P) 129.97; (R1) 130.59; More...

EUR/JPY recovers after hitting 129.36 and with 4 hour MACD crossed above signal line, intraday bias is turned neutral first. On the upside, break of 131.69 high is needed to confirm rally resumption. Otherwise, we'd expect more corrective price action in near term, with risk of deeper fall. Below 129.36 will target 127.55 support first. Firm break there will indicate near term reversal and deeper fall would be seen back to 122.39/125.80 support zone.

In the bigger picture, the down trend from 149.76 (2014 high) is completed at 109.03 (2016 low). Current rally from 109.03 should be at the same degree as the fall from 149.76 to 109.03. 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. Medium term outlook will remain bullish as long as 124.08 resistance turned support holds. However, firm break of 124.08 will argue that rise from 109.03 is completed and turn outlook bearish.

Daily Pivots: (S1) 1.1371; (P) 1.1396; (R1) 1.1426; More...

Intraday bias in EUR/CHF stays neutral as consolidation from 1.1537 extends. On the upside, break of 1.1537 resistance will confirm resumption of larger rally from 1.0629. In that case, EUR/CHF should target 1.2 key resistance level next. On the downside, firm break of 38.2% retracement of 1.0830 to 1.1537 at 1.1267 will extend the correction to 61.8% retracement at 1.1100 before completion.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1087 resistance turned support holds.

Daily Pivots: (S1) 1.4840; (P) 1.4910; (R1) 1.4962; More....

No change in EUR/AUD's outlook. Deeper decline is expected as long as 1.5042 minor resistance holds. Break of 1.4732 support will confirm that fall from 1.5173 is the third leg of consolidation pattern from 1.5226. In that case, further fall should be seen to 1.4421 again. But we'd expect strong support from there to contain downside and bring rebound. On the upside, above 1.5042 minor resistance will turn bias back to the upside for 1.5173 resistance instead.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term has completed at 1.3624. Rise from 1.3624 is expected to extend to retest 1.6587. The corrective structure of the price actions from 1.5226 is affirming this view. Above 1.5226 will target a test on 1.6587 key resistance. However, break of 1.4421 will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.

Daily Pivots: (S1) 0.9118; (P) 0.9141; (R1) 0.9159; More

Intraday bias in EUR/GBP remains on the downside for the moment. Current fall from 0.9305 short term top would target 55 day EMA (now at 0.9013). Sustained trading below there will likely start the third leg of the consolidation from 0.9304 and target 0.8303 key support again. On the upside, above 0.9236 minor resistance will turn bias back to the upside for 0.9225 minor resistance instead.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's uncertain whether it is finished yet. But in case of another fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes. Firm break of 0.9799 high will target 61.8% projection of 0.5680 to 0.9799 from 0.6935 at 1.1054.

Euro recovers mildly in Asian session today but stays in red for the week except versus Dollar. Markets are cautiously awaiting the highly anticipated ECB policy decision and press conference. There were rumors flying around since last week that ECB will deliver nothing this time. The decision on tapering the asset purchase program would be delayed to October or even December. At this point, October is still a more likely option. After all, the central bank will likely maintain the rhetoric that "the net asset purchases, at the current monthly pace of EUR 60b, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim". Policymakers would also warn of currency appreciation. At the Q&A session, Draghi would probably stay neutral in the tapering schedule.

Canadian Dollar maintains post BoC gains

Canadian Dollar remains the strongest one for the week after BoC's surprised rate hike. BoC increased the policy rate by 25 bps to 1.00%, following a rate hike in July. Policymakers cited the better-than-expected economic developments as a key reason for the removal of stimuli from the market. However, they remained cautious over a number of issues including excess capacity, subdued inflation, geopolitical risks and the strength in Canadian dollar. On the future tightening path, the central bank stressed that it is "not predetermined" and "will be guided by incoming economic data and financial market developments as they inform the outlook for inflation". We believe the progress of NAFTA renegotiations and other trade-related issues, the inflation outlook, the housing market developments and the Fed's balance sheet reduction would be key factors driving BoC's rate decision. More in BOC Surprisingly Hikes Rate For Second Consecutive Meeting.

Trump upsets Republicans on debt limit deal with Democrats

Dollar, on the other hand, is trading as the weakest one for the week. US President Donald Trump reached a short-term deal with Democrats, despite opposition from Republicans, to extend the US debt limit, providing government funding for three months until December 15. The deal would also provide financial relief to victims of Hurricane Harvey. However, the decision attracted criticism that Trump is further distancing himself from his own party, the Republicans. And some pointed out it's an act to deflect blame for the gridlock for a year. The move overruled Trump's own treasury secretary, Steven Mnuchin, who's in the middle of a proposal for long term fix to the debt ceiling problem. Also, shortly before the meeting, Republican House Speaker Paul Ryan called the Democratic proposal a "ridiculous and disgraceful" idea that would "play politics with the debt ceiling". The bill is due to pass in the Republican-controlled Congress and Senate.

Fed Beige Book showed concern on auto industry

Fed's Beige Book economic report showed modest moderate growth across the regions in the past two months. Labor markets were "widely characterized as tight" but "growth slowed some on balance". But the report also showed that "contacts in many districts expressed concerns about a prolonged slowdown in the auto industry." Wage growth also remained subdued as " majority of districts reported limited wage pressures and modest to moderate wage growth." Regarding inflation, "prices rose modestly overall across the country".

Fed Vice Fischer announce early step down

Fed Vice Chair Stanley Fischer announced to step down from his position for personal reasons, on or around October 13. That is eight months ahead of the end of his term. Fischer noted in his letter to Trump that job growth has returned and "steps to make the financial system stronger and more resilient" had been taken. Fischer is seen as a close ally of Chair Janet Yellen. And, his departure intensify rumors that Yellen will also leave after her term expires next February. Trump's top economic advisor Gary Cohn has always been tipped as the replacement for Yellen. But the Wall Street Journal reported yesterday, citing sources, that Cohn won't be picked. Relationship between Cohn and Trump turned sour after the former criticized the latter's reactions to white supremacist rally in Virginia last month.

BoJ Kuroda front runner for next term

Talking about top central bankers, BoJ Governor Haruhiko Kuroda will also end his five year term next March. There have been some criticism on Kuroda for being out of ideas in boosting inflation in Japan. Prime Minister Shinzo Abe's top advisor Nobuyuki Nakahara warned before that Kuroda will "fall into inertia" after being in the job for so long. But according to a Bloomberg survey of economist done between August 21 and 25, Kuroda is still the front runner for the job by a market. Respondents assigned a score of 68 out of 100 for Kuroda. The next is Deputy Governor Hiroshi Nakaso at 34/100, and then Columbia University Professor Takatoshi Ito at 30/100.

On the data front

Australia retail sales rose 0.0% mom in July, below expectation of 0.2% mom. Trade surplus narrowed to AUD 0.46b in July. German industrial production and Swiss foreign currency reserves will be featured in European session. But the main focus will certainly be on ECB announcement and press conference. Later in the day, Canada will release building permits and Ivey PMI. US will release jobless claims and non-farm productivity.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.9118; (P) 0.9141; (R1) 0.9159; More

Intraday bias in EUR/GBP remains on the downside for the moment. Current fall from 0.9305 short term top would target 55 day EMA (now at 0.9013). Sustained trading below there will likely start the third leg of the consolidation from 0.9304 and target 0.8303 key support again. On the upside, above 0.9236 minor resistance will turn bias back to the upside for 0.9225 minor resistance instead.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's uncertain whether it is finished yet. But in case of another fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes. Firm break of 0.9799 high will target 61.8% projection of 0.5680 to 0.9799 from 0.6935 at 1.1054.

Economic Indicators Update

Brent shows little activity after the last's day's impressive rally. Price has managed to climb above the 61.8% retracement level, signaling that the bulls are in total control. However, price stands under the first warning line (wl1) of the major descending pitchfork, which represents a major resistance line. Only a valid breakout above it will confirm a further increase in the upcoming weeks. Resistance can be found at the 54.55 as well.

USD/JPY narrows on the Daily chart and fails to show us a clear direction. Price failed once again to reach the 108.12 horizontal support, showing an oversold and a potential up movement. Personally, I hope that we’ll have clear direction after today’s major fundamental events.

The pair moves in range also because the Nikkei stock index move sideways as well on the short term. JP225 lost the bearish momentum and could climb higher again if the USDX will receive a helping hand from the US economy today.

EUR/USD posted humble gains today and seems like has lost the bullish momentum. It shows a little activity as the USDX has changed little as well today. The dollar index is trading in the red, but shows some exhaustion signs, even if is located under the 92.49 broken static support.

However, the USDX could drop much deeper to retest a dynamic support before will really start another leg higher. The dollar index is on a declining path, only some good US data and a dovish ECB could turn it to the upside again.

We have a crucial day for the Euro, the ECB is to release the Minimum Bid Rate, which is predicted remains steady at the 0.00% historical minimum. However, there are rumors that said that the European Central Bank will take action today, any stimulus measures will weaken the European currency.

The EUR/USD is fighting hard to hold the ground and to retest the upper median line (uml) of the ascending pitchfork. Technically, is overbought and could decrease at least till will reach the median line (ml) of the ascending pitchfork.

I want to remind you that the current bounce back is natural after the false breakdown below the median line (ml) of the minor descending pitchfork. A failure to reach and retest the upper median lines of the mentioned pitchforks, will signal a sharp drop in the upcoming period.

AUDUSD Short Term Elliott Wave view suggests that the rally from 8/15 low is unfolding as a double three Elliott Wave structure. Up from 8/15 low, Minute wave ((w)) ended at 0.79957 and Minute wave ((x)) ended at 0.7868. Minute wave ((y)) is in progress and the subdivision also unfolds as a double three. Minutte wave (w) of ((y)) ended at 0.7995 and Minutte wave (x) of ((y)) ended at 0.793. Near term, while pullbacks stay above 0.793, but more importantly above 0.7868, expect pair to extend higher towards 0.806 – 0.8108. We don’t like selling the pair.

AUDUSD 1 Hour Elliott Wave Chart

Double three ( 7 swings) is the most important pattern in Elliott wave’s new theory. It is also probably the most common pattern in the market these days. Double three is also known as a 7-swing structure. It is a very reliable pattern that gives traders a good opportunity to trade with a well-defined level of risk and target areas. The image below shows what Elliott Wave Double Three looks like. It has labels (W), (X), (Y) and an internal structure of 3-3-3. This means that all 3 legs has corrective sequences. Each (W) and (Y) is formed by 3 wave oscillations and has a structure of A, B, C or W, X, Y of smaller degrees.

ECB Faces Cat & Mouse Game
Well-Tailored Statement
ECB May Go On Autopilot in January
Euro Bets Skewed For Bullish Move

We have less than four months left before the ECB asset purchase program ends, and the president of the ECB, Mario Draghi is reticent about the future path of the monetary policy. Month after month, the tapering process has been delayed while the recovery in the Eurozone has strengthened. The patient is not sick and there is no need for the lifeline. Investors are forced to take their best guess and their bets are skewed by their perspective due to lack of information and clarity from the ECB in relation to their monetary policy.

ECB Faces Cat & Mouse Game

The Euro has touched the high of 1.20 against the dollar and its strength against the Sterling is even more remarkable. Not only investors but also some officials of the European central bank are concerned about the currency's strength. It will not be far stretched to say that the ECB is in a cat and mouse chase game. The bank would have sufficient excuses if it wants to keep delaying the tightening of the monetary process. However, there is a lack of evidence that the strength of the currency in the medium term will choke the economy. The ECB should keep their focus on the domestic demand and not be played by the strength of the currency as that would be misleading.

Well-Tailored Statement

Forget about pulling a rabbit out of the hat, when it comes to the ECB's meeting on Thursday, I expect the statement to be immensely tailor-made. It is widely expected that the ECB would say that they have officially discussed the process of tapering in the light of their latest economic projections. The probabilities are high that there would not be any loose ends because I expect Draghi to learn from his previous mistake. On the outset it may look as if the statement was very vague but in reality it would be highly tailor-made. The reason is that the bank would like to have their options open due to the nature of complexity involved in this task.

ECB May Go On Autopilot in January

It is highly likely that the ECB would adopt the same path as the Fed did. The bank is going to be gradual with its tapering process and it would only ease off the gas slowly and in a systematic way. These are unusual dynamics and the bank would prefer to rather play it safe than sorry.

Euro Bets Skewed For Bullish Move

The euro-dollar one week risk reversal shows that traders are highly bullish and they are anticipating the euro-dollar pair to move higher.