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The French President Emmanuel Macron has won the strong parliamentary majority he asked the people of France to give him and can now proceed with the reforms he campaigned for, aiming to revive the French economy. Given his pro-EU rhetoric, his success could translate into success for the rest of the EU and perhaps more specifically the Eurozone.

Macron's centrist party, La République en Marche, and its fellow centrist ally, Modem, secured a comfortable majority in the National Assembly, the lower house of the French Parliament, by winning 350 of the 577 seats. After the first round of elections a week ago, some anticipated that more than 400 seats would be won by the two parties. Despite those expectations not materializing, the result is impressive for Macron's party which was formed only fourteen months ago and which would still hold a majority in parliament even without Modem's support.

The Socialist party of former President François Hollande suffered a crushing defeat, losing more than 200 seats. Jean-Christophe Cambadélis, the party's leader immediately stepped down. The National Front of far-right leader Marine Le Pen won nine seats, failing to capitalize on the votes its leader secured when running for president. Le Pen, who won a seat in the National Assembly for the first time in four attempts, was aiming to reach the 15-seat threshold, a feat which would grant her party greater financial support and more speaking time. Jean-Luc Mélenchon's Unbowed France won 17 seats, the Communist party 10, while the centre-right Republicans and ally forces, who will form the main opposition, won 137 seats from 199 before.

The turnout hit a new record low of just 43%, offering Le Pen the opportunity to question the legitimacy of the new parliament and the strength of the support Macron has received. It is also interesting to note that female representation in the new parliament will go up to 40% from just a quarter previously.

Closing with the reaction in the forex markets, as Asian markets opened for trading the euro received a modest boost, jumping to as high as $1.1208 to reach its highest for the day so far. As European traders are commencing their trading day, euro/dollar is marginally below the 1.12 handle.

GBP/USD – 1.2799

Recent wave: Wave V of larger degree wave (III) has ended at 1.1986 and major correction has commenced from there for gain to 1.3000 and 1.3140-50

Trend: Near term down

Original strategy :

Sold at 1.2750, Target: 1.2600, Stop: 1.2810

Position: - Short at 1.2750
Target:  - 1.2600
Stop: - 1.2810

New strategy :

Hold short entered at 1.2750, Target: 1.2600, Stop: 1.2810

Position: - Short at 1.2750
Target:  - 1.2600
Stop:- 1.2810

As sterling staged a strong rebound after finding support at 1.2690 last week, suggesting further consolidation would be seen, however, as long as resistance at 1.2818 holds, bearishness remains for another decline, below said support at 1.2690 would add credence to our view that the rebound from 1.2635 has ended at 1.2818, bring weakness towards said support at 1.2635 but break there is needed to confirm recent decline from 1.3048 top has resumed for retracement of recent upmove to 1.2600, having said that, downside should be limited to 1.2550 and reckon previous support at 1.2515 would hold.

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.

On the upside, expect recovery to be limited and bring another decline. Only above said resistance at 1.2818 would defer and risk a stronger rebound to 1.2860-70 would but price should falter below 1.2900, bring another selloff later.

GBP/JPY - 142.25

Recent wave: Medium term low formed at 120.50 and (A)-(B)-(C) major correction has commenced with (A) leg ended at 148.45, hence wave (B) is unfolding for retreat to 131.00-10.

Trend: Near term down

New strategy :

Buy at 141.50, Target: 143.50, Stop: 140.90

Position: -
Target:  -
Stop:-

As sterling has maintained a firm undertone after the strong rebound from 138.70, suggesting low has been formed there and consolidation with upside bias is seen for test of 142.75 resistance, however, a sustained break above there is needed to add credence to this view, bring retracement of recent selloff to 143.05-10, then 143.50-60 but near term overbought condition should limit upside to resistance at 143.95-00.

In view of this, would not chase this rise here and would be prudent to buy sterling on pullback as 141.35-40 should limit downside. Below previous resistance at 140.90 would defer and risk weakness to 140.50, however, if our view that low has been formed at 138.70 is correct, downside should be limited to 140.15-20 and 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.


Sterling is standing at the front foot in early Monday’s trading and probing again through very strong 1.2800 resistance zone (daily cloud top / daily Tenkan sen and falling 10SMA in attempt to cross below rising 55SMA).

Several attempts at 1.2800 barrier failed last week, keeping near-term risk skewed lower while the price stays below. Negatively aligned daily indicators support the notion, however, limited downside is seen while 1.2700 pivot is intact. Break here is needed to generate stronger bearish signal.

Conversely, sustained break above 1.2800 would neutralize downside risk and signal further retracement of 1.2977/1.2635 downleg.

Falling 20SMA / Fibo 61.8% of 1.2977/1.2635 mark next strong barrier at 1.2848.

Res: 1.2800, 1.2817, 1.2848, 1.2896
Sup: 1.2750, 1.2722, 1.2704, 1.2690

'Homebuilders continue to caution that construction may be limited by a lack of available lots or skilled labor, but the market fundamentals suggest that demand should remain solid.' — Tom Simons, Jefferies LLC

US homebuilding activity rose slowed unexpectedly last month, official figures revealed on Friday. The Commerce Department reported that housing starts fell 5.5% to a seasonally adjusted annual pace of 1.09M units, the lowest since September 2016, following the preceding month's downwardly revised pace of 1.16M and falling behind analysts' expectations for decline to 1.23M-unit pace. On an annual basis, homebuilding dropped 2.4%. Single-family homebuilding fell 3.9% to a 194K-unit pace in May, the lowest in eight months, after hitting its almost 10-year high in February. The volatile-family housing sector posted a drop of 9.7% to a 298K-unit pace last month. In the meantime, building permits plunged 4.9% to a pace of 1.17M units during the reported month, compared to the prior month's pace of 1.23M units, whereas analysts anticipated an increase to a 1.25M-unit pace. Despite weak data on homebuilding, analysts suggested that employment would boost home construction in the upcoming months, taking into account the jobless rate at a record low of 4.3% and strong job creation.

EUR/JPY - 124.36

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Near term up

Original strategy:

Buy art 123.40, Target: 125.40, Stop: 122.80

Position: -
Target: -
Stop: -

New strategy :

Buy art 123.40, Target: 125.40, Stop: 122.80

Position: -
Target:  -
Stop:-

Although the single currency edged higher after staging a strong rebound from 122.40 (last week’s low), loss of near term upward momentum should prevent sharp move beyond 124.70-75 and reckon 125.00 would hold on first testing, risk from there has increased for are retreat to take place soon. Looking ahead, only a break of resistance at 125.31 would retain bullishness and suggest the correction from 125.82 has ended, bring eventual retest of this level later this month.

In view of this, would not chase this rise here and we are looking to buy euro on dips as 123.40-50 should limit downside and bring another rebound later. Below 122.90-00 would defer and risk another fall to said support at 122.40 but only break there would signal the erratic decline from 125.82 top is still in progress for correction of early upmove to 122.00, then 121.70-75.

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 – 0.7592

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term up

Original strategy :

Buy at 0.7525, Target: 0.7670, Stop: 0.7465

Position: -
Target:  -
Stop: -

New strategy :

Buy at 0.7525, Target: 0.7670, Stop: 0.7465

Position: -
Target:  -
Stop:-

As aussie has retreated again after faltering below indicated resistance at 0.7636, retaining our view that consolidation below this level would be seen and pullback t0 0.7550-60 cannot be ruled out, however, reckon support at 0.7524 would limit downside and bring another rise later, above said resistance at 0.7636 would extend recent upmove from 0.7329 towards resistance at 0.7680 but loss of momentum should limit upside and price should falter below chart point at 0.7750.

In view of this, we are looking to buy aussie on dips as 0.7520-25 should limit downside and bring another rise. Only below support at 0.7457 would abort and suggest top is possibly formed, bring weakness to 0.7415-20 but price should stay well above key support at 0.7372, bring another rebound 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 Euro extended recovery from last Friday in Asia but probes above 1.1200 barrier were so far limited.

Last Friday's rally formed bullish inside day pattern, suggesting corrective pullback from 1.1295 may be over. Rising 55SMA and 100/200SMA bull-cross formed on daily chart continue to under pin broader bulls.

On the other side, 10/20SMA bear-cross is forming at 1.1210 and along with daily Tenkan-sen, capping near-term recovery attempts from last week's correction low at 1.1132.

Mixed near-term technical studies and south-heading d e to under pin broader bulls. aily indicators see risk of extended consolidation within initial range of 1.1132/1.1210 on repeated close below 20SMA.

Stronger signals could be expected on break above 1.1210 (10/20SMA) which would re-expose key barrier at 1.1300, or slide below 1.1121/09 (Fibo 38.2% of 1.0839/1.1295 upleg/30 May low) which would risk deeper pullback. Very light calendar on Monday suggests the pair will be driven mainly by technicals.

Res: 1.1210, 1.1268, 1.1295, 1.1327
Sup: 1.1185, 1.1132, 1.1121, 1.1109

Weekly

    •    Last Candlesticks pattern: Shooting star 
    •    Time of formation: 03 May 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 3 May 2016
    •    Trend bias: Sideways

EUR/USD – 1.1200

Although the single currency resumed recent upmove and rose briefly to 1.1296, lack of follow through buying on the break of previous resistance at 1.1285 and the subsequent retreat suggest a temporary top is possibly formed there and consolidation below this level would be seen, below last week’s low at 1.1132 would bring test of previous support at 1.1109 but a daily close below there is needed to add credence to this view, bring retracement of recent upmove to 1.1050, then test of previous resistance at 1.1025 (now support) but reckon downside would be limited to 1.0950-60 and price should stay well above support at 1.0839.

On the upside, whilst initial recovery to 1.1230-35 cannot be ruled out, reckon said resistance at 1.1296 would remain intact, bring retreat later. A break above said last week’s high would extend recent upmove from 1.0340 low to previous resistance at 1.1327, however, near term overbought condition should limit upside to previous chart resistance at 1.1366 and reckon 1.1440-50 would hold from here, risk from there is seen for a retreat later.

Recommendation: Take profit on our long entered at 1.1120 and stand aside

On the weekly chart, euro’s retreat after last week’s late rise to 1.1296 suggests consolidation below this level would be seen and pullback to 1.1109 support cannot be rued out, however, a weekly close below the Tenkan-Sen (now at 1.1059) is needed to suggest a temporary top is formed there, bring retracement of recent rise to the upper Kumo (now at 1.0984), then towards 1.0920-25, however, reckon downside would be limited to 1.0850-60 and previous support at 1.0839 would hold from here, bring rebound later.

On the upside, above said resistance at 1.1296-00 would signal the rise from 1.0340 low is still in progress and bring a test of previous resistance at 1.1366 but a break of this level is needed to signal early downtrend has ended at 1.0340, bring further subsequent rise to 1.1428, then towards 1.1500, having said that, price should falter well below another previous chart resistance at 1.1616.

Weekly

    •    Last Candlesticks pattern: Marubozu
    •    Time of formation: 14 Nov 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 15 Feb 2017
    •    Trend bias: Down

USD/JPY – 111.18

Although dollar fell briefly to 108.82, lack of follow through selling on break of previous support at 109.11 and the subsequent rebound suggest low has possibly been formed there and consolidation with mild upside bias is seen for gain to 111.60-65 (50% Fibonacci retracement of 114.39-108.82), however, reckon 112.25-30 (61.8% Fibonacci retracement) would hold from here, price should falter well below 113.00 and bring retreat later.

On the downside, whilst pullback to 110.65-70 is likely, reckon downside would be limited to the Tenkan-Sen (now at 110.12) and bring another rebound later. Only below said support at 108.82 would abort and signal the fall from 114.39 is still in progress and may extend weakness towards recent low at 108.13 which is likely to hold from here due to oversold condition, risk from there is seen for another rebound later.
 
Recommendation : Sell at 112.00 for 110.00 with stop above 113.00 or buy at 110.00 for 112.00 with stop below 109.00.

On the weekly chart, although dollar fell briefly to 108.82, as the greenback found good support there and staged a strong rebound, a white candlestick with a long lower shadow was formed, suggesting low has possibly been formed there and consolidation with upside b was is seen for test of 111.60-65 (current level of the Tenkan-Sen and 50% Fibonacci retracement of 114.39-108.82) cannot be ruled out, however, reckon upside would be limited to 112.25-30 (61.8% Fibonacci retracement), price should falter below the Kijun-Sen (now at 113.37), bring another decline later this week.

On the downside, expect pullback to be limited to 110.00-10 and bring another rise later. Below 109.85-90 would bring weakness to 109.25-30 but break there is needed to revive bearishness and signal the rebound from 108.82 has ended, bring retest of this level, break there would extend weakness to previous chart support at 108.13. Looking ahead, a drop below this level would signal the fall from 118.66 top has resumed and extend decline towards previous resistance at 107.49.