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We expect BOE to leave the Bank rate unchanged at 0.25% and the asset purchase program at 435B pound at the upcoming meeting. The vote split might probably come in at 6-2 from 5-3 in June, as Silvana Tenreyro, successor of Kristin Forbes appears less hawkish and noted that the monetary policy decision would be data-dependent. Members favoring a rate hike were mainly hinged on the fact that inflation has been overshooting the central bank's target. However, there was a sign of slowdown on the consumer price level in June, offering room for policymakers to stand on the sideline amidst lackluster economic growth and wage, as well as uncertainty in Brexit negotiations.

UK GDP expanded +0.3%q/q in 2Q17, up from +0.2% in the first quarter, as driven by services, which grew +0.5% following a +0.1% growth in 1Q17. The largest contributors to growth in services were retail trade, which improved after a fall in the first quarter, and film production and distribution. Construction and manufacturing were the largest downward pulls on quarterly GDP growth, following 2 consecutive quarters of growth. Growth in the first half of the year markedly weakened from the same period last year. The Office for National Statistics called a "notable slowdown in the first half. It added, however, that "the economy is now 9% above its pre-downturn peak".

The job market continued to improve with total employment increasing +175K in the three months to May. The unemployment rate fell to 4.5%, the lowest since June 1975 during the period. However, wage growth disappointed with the three-month average real total pay dropping -0.7%, the fastest decline since August 2014, in May. The three-month average growth rate for regular pay, excluding bonuses, climbed modestly higher to +2% from +1.8% in April.

Overshooting the +2% inflation target has been a headache for the MPC and the key reasons for the hawks to propose a rate hike. However, signs of slowing price level were seen in June. Inflation rate fell to +2.6% y/y in June, from +2.9% in the prior month. The reading came in weaker than expectations, mainly due to falling petrol price.

Kristin Forbes, one of the three hawks, stepped down in June and is replaced by Silvana Tenreyro, who appears less hawkish than Forbes and has repeatedly warned about the negative effects of Brexit on growth. We expect her to vote for keeping the policy unchanged in August.

GBPUSD: The pair continuing to retain its upside threats on correction, more strength is envisaged. Support lies at the 1.3150 level where a break will turn attention to the 1.3100 level. Further down, support lies at the 1.3050 level. Below here will set the stage for more weakness towards the 1.3000 level. Conversely, resistance stands at the 1.3250 levels with a turn above here allowing more strength to build up towards the 1.3300 level. Further out, resistance resides at the 1.3350 level followed by the 1.3400 level. Its daily RSI is bullish and pointing higher suggesting further upside pressure. On the whole, GBPUSD continues to face upside risk though with caution.

EUR/GBP - 0.8943

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term up

Original strategy  :

Bought at 0.8925, Target: 0.9025, Stop: 0.8885

Position : - Long at 0.8925

Target :  - 0.9025

Stop : - 0.8885

New strategy  :

Hold long entered at 0.8925, Target: 0.9025, Stop: 0.8885

Position : - Long at 0.8925

Target :  - 0.9025

Stop : - 0.8885

 
Although the single currency has retreated after rising to 0.8976 and further consolidation would be seen, as long as indicated support at 0.8891 holds, mild upside bias remains for another rebound, above said resistance at 0.8976 would signal the pullback from 0.8995 has ended, bring retest of this level, however, break there is needed to confirm upmove has resumed for test of psychological resistance at 0.9000, then 0.9020 but reckon upside would be limited to 0.9050 due to overbought condition, risk from there has increased for a retreat later.

In view of this, we are holding on to our long position entered at 0.8925. A break of said support at 0.8891 would defer and suggest a temporary top is formed instead, bring correction to 0.8860-65 but only break of support at 0.8829 would provide confirmation, bring correction to 0.8800 first. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.2498

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway with wave iii ended at 1.4690, wave v of C may bring one more marginal rise probably in 2018

Trend:  Down

 
Original strategy       :

Sell at 1.2690, Target: 1.2490, Stop: 1.2750

Position: -

Target:  -

Stop: -

 
New strategy             :

Sell at 1.2690, Target: 1.2400, Stop: 1.2750

Position: -

Target:  -

Stop:-

As the greenback held above last week’s low at 1.2414 and recovered, retaining our view that further consolidation would take place and another corrective bounce too 1.2575-80 is likely, above there would bring retracement of recent decline to 1.2640-50 but reckon 1.2700-05 would limit upside and bring another decline later, below said support at 1.2414 would signal downtrend has resumed and extend weakness to 1.2400, then  towards 1.2350-60, however, oversold condition should prevent sharp fall below 1.2330 and reckon 1.2300 would hold, risk from there is seen for a rebound later. We are keeping our count that wave v as well as wave (C) ended at 1.3794 and impulsive wave (i ii, i ii) is now unfolding with minor wave iii still in progress, hence bearishness remains for this fall to extend weakness to aforesaid downside targets.

In view of this, would not chase this fall here and would be prudent to sell the pair again on recovery as 1.2690-95 should limit upside. Above 1.2745-50 would defer and risk a stronger rebound to 1.2800-10 but only break of latter level would signal a temporary low is formed instead, bring retracement of recent decline to 1.2850, then 1.2900, however, price should falter below 1.3000 and the greenback shall head south again from there.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

Personal income was essentially flat in June, as decreases in personal dividend and interest income partially offset a 0.4% monthly gain in wages and salaries. Removing taxes and price changes, real disposable personal income fell 0.1% on the month.

There were fewer surprises on the spending side, with personal spending rising 0.1%. In real terms, personal spending was flat, after a sizeable 0.7% monthly gain in May.

Consumer prices were essentially flat in June, bringing the year-on-year inflation rate to just 1.4% (from 1.5% in May). Core prices (excluding food & energy) rose 0.1% month-on-month – leaving year-on-year core PCE inflation at 1.5%, unchanged from May.

No growth in income combined with spending gains, led the savings rate to tick down to 3.8% from 3.9% in May. If that sounds lower than you may remember it, it is. Today's data reflects annual updates to the national accounts, which resulted in the savings rate in Q1 being revised down from 5.2% to 3.9%. That reflected downward revisions to personal income in the recent history, while personal spending was revised up. On net, it means that the savings rate declined more rapidly through 2016 than previously reported, as consumers increasingly spent their windfall gains from lower energy prices. And, that the recent trend level of the savings rate is now at levels not seen since prior to the recession.

Key Implications

The softness in June consumer spending was not unexpected, with Q2 data already released with last week's GDP report. June's softness does provide a bit of a weak start to consumer spending in the third quarter. However, the lack of income growth would be more concerning were it not for the fact that growth in wages and salaries remained healthy.

With the recent softness in inflation front and center, more important are the nuances of June prices and what they say about inflation trends. The core PCE deflator – the Fed's preferred inflation gauge – did gain a bit of momentum in June as expected.

The Federal Reserve has signaled that it is monitoring inflation developments closely. As discussed in our latest Dollars and Sense, the relationship between growth and inflation has become more muted in recent years. Inflation is taking longer to respond to an acceleration in growth this time around. For now, we and the Fed maintain faith in our models that tell us inflation should pick up in the months ahead, and that the Fed can take interest rates higher. But, the pace of hikes the Fed currently has penciled in in its outlook are likely too aggressive given the soft starting point for inflation.

SPX500 move up from 3/27 (2322) low is proposed to be unfolding as a double three Elliott wave structure when rally to 6/19 (2453) completed wave W and dip to 6/29 (2405.74) completed wave X. Up from there, Index rallied in 5 waves to 7/27 (2484) which completed wave ((a)) of Y and now the Index is showing 5 swings up from 3/27 low. 5 swings is an incomplete sequence and calls for more upside to complete 7 swings sequence. Index is currently in wave ((b)) correcting the cycle from 2405.74 low. This pull back is expected to unfold as a zig-zag Elliott wave pattern and while below 7/31 (2477), SPX500 has scope to trade lower towards 2453.73 – 2438.81 area to complete wave ((b)). From this area, SPX500 should turn higher to resume the rally in wave ((c)) of Y towards 2537 – 2568 area or bounce in three waves at least. In case the bounce from the above mentioned area fails to make a new high, then Index could turn lower and do a 7 swings pull back in wave ((b)) before starting wave ((c)) higher. We don't like selling the Index and favor buying the dip towards 2453.73 – 2438.81 area looking for a target of 2537 area or a 3 waves bounce at least to get into a risk free position.

SPX500 4 Hour Elliott Wave Chart

SPX500 Potential buying area

The following video/chart shows NASDAQ composite index. The index has a tremendous rally since the lows around 1975 which is pretty close to the zero level. The index has reached the bottom of the blue box at 6219 area. The question then is whether the index will extend higher or start correcting lower as the minimal target has been reached. As we often say, Elliott wave theory by itself is not enough. In this case, we can see that from the zero line, we can count the index as a completed ABC. However, we can also count it as an incomplete ABC with a black((4)) still to happen. In the Elliott wave theory, any five waves structure always at one moment is a three wave move. It is therefore too early at this stage to determine if the rally will develop into a five waves move.

In Elliottwave-forecast.com, we have implemented new ideas and tools to make the theory a more reliable tool. We use cycles, sequences, distributions and momentum indicators to increase the accuracy of Elliott wave theory. As we explain in this video, the RSI (Relative Strength Index) indicator is still showing a divergence compared to the peak in 1999. One of the rules that we introduced in the new Eliott wave theory is that a three waves move can not have divergence in any single time frame. Looking at Nasdaq quarterly chart, we can observe the divergence between momentum and price action. Thus, the index still has scope to extend into the areas of 7431 minimal or even reach the 9391 area before the 2009 rally is complete.

The five waves move in blue degree is now about to end. But we feel very comfortable to say that the pullback will be another buying opportunity. It is very easy to trade following our forecast. We always prioritize the trend and we use a distribution system and a series of pivots and cycles to prioritize the trend. In conclusion, even though the index has reached the minimal target, a multi market correlation and simple indicator like the RSI are calling for a pullback soon into a wave four but more upside to follow afterwards.

If you enjoy this video, we invite you to take the 14 days free trial where you can learn all these new techniques and receive an honest Elliott wave forecast. We listen to the market and don't force five waves. We analyze the market structures, sequences, and provide the best possible and more aggressive forecast with the trend.

Long Term Nasdaq Elliott Wave Path

WTI Oil eases below $50 handle after hitting fresh highs of over two months at $50.39/41 on Monday /today, failing to emerge above weekly cloud top on repeated attempt.

Oil price's recent advance was supported by rising global demand and continuous drawdown in oil stocks, but rise in OPEC production in July, despite a deal among oil producers to cut output, marks strong headwind for oil prices.

Corrective easing was signaled by reversal of slow stochastic deeply in the overbought territory and turning near-term focus towards initial supports at $49.41/17 (broken 200SMA / Monday's low), with deeper pullback on break of the latter supports not ruled out.

Extended dips would target next pivot at $48.48 (Fibo 38.2% of $45.39/$50.39) and $47.90 (daily Tenkan-sen) which is expected to contain.

Release of US API and EIA crude inventories reports is in focus as both inventory reports are expected to show further draw in oil stocks which would further boost oil prices.

Res: 50.42; 50.90; 51.98; 52.14

Sup: 49.73; 49.41; 49.17; 48.48

USD/CHF - 0.9648

Original strategy :

Buy at 0.9600, Target: 0.9700, Stop: 0.9565

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9600, Target: 0.9700, Stop: 0.9565

Position : -

Target :  -

Stop : -

Although the greenback has recovered after finding support at 0.9637 yesterday, reckon resistance at 0.9727 would limit upside and bring further consolidation below this level, hence risk of another retreat to 0.9635 (38.2% Fibonacci retracement of 0.9490-0.9727) remains, however, previous resistance at 0.9596 should turn into support and contain downside, bring another rise later, above said resistance at 0.9727 would extend recent rise to 0.9750-60, then 0.9780 but reckon 0.9800 would hold from here.
 
In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as previous resistance at 0.9596 should turn into support and contain dollar’s downside. Below 0.9580 (61.8% Fibonacci retracement of 0.9490-0.9727) would defer and suggest a temporary top is formed instead, bring correction to 0.9540-50 but price should stay well above support at 0.9490, bring another rise later. 

GBP/USD - 1.3224

Original strategy :

Buy at 1.3130, Target: 1.3230, Stop: 1.3095

Position : - 

Target :  -

Stop : -

New strategy  :

Buy at 1.3130, Target: 1.3230, Stop: 1.3095

Position : -

Target :  -

Stop : -

Yesterday’s rally above previous resistance at 1.3159 confirms recent upmove has resumed and upside bias is seen for further gain to 1.3240-50, however, near term overbought condition should prevent sharp move beyond 1.3275-80 and reckon 1.3300-10 would hold from here, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and would be prudent to buy cable on pullback as the upper Kumo (now at 1.3123) should limit downside, bring another upmove later. Below 1.3105-10 would defer and risk test of support at 1.3097 but only break there would signal a temporary top is possibly formed, bring further fall towards previous support at 1.3052.