Sample Category Title

NZDUSD is making an intra-day rally from the lows, where previous five wave movement has ended. That said, current rally can now be part of a three wave contra-trend reaction that can in sessions ahead find some resistance around the Fibonacci ratio of 50.0/61.8 and near the previous swing high of wave four at 0.7269. Around the mentioned area a new reversal lower can begin.

NZDUSD,1H

• EMU equities went moderate higher( 0.4% EuroStoxx) led by utilities and IT. US equity indices start with minor (S&P/Dow) to moderate losses (Nasdaq).
• The pace of US new-home construction unexpectedly cooled in May, the latest piece of data to offer a mixed reading on the economy's QE performance. Housing starts tumbled 5.5% M/M to an annualised pace of 1.09m units, widely missing expectations of a 4.1%. Permits were down 4.9% to an annual pace of 1.2m units, also missing forecasts.
• Prime Minister Theresa May's government has bowed to European Union demands to focus the initial stage of Brexit talks on the terms of the U.K.'s departure rather than trying to arrange a future trade relationship at the same time, according to two EU officials with knowledge of the preparations.
• The Russian rouble outperformed its emerging-market peers on Friday after oil prices picked up and the country's central bank cut interest rates to 9% from 9.25%, less than some analysts had expected, as investors remain relatively sanguine about the currency's prospects despite weaker oil prices and new sanctions from the US.
• Nine months after schedule, Greece finally has some more creditor cash. The country's stock index been driven to a two-year high and bonds are rallying after eurozone and International Monetary Fund officials agreed to unlock a $8.5B bailout tranche to help Greece avoid default and pay off some of its arrears.
• Labour costs in Spain remained steady in the first quarter of 2017 after falling throughout last year, reflecting the growing strength of the country's labour market, but highlighting the fact that there is still a long way to go before the ECB sees its goal of higher wage growth across the eurozone.
• Wages for French workers grew at their fastest pace in three years at the start of 2017 - showing welcome signs of acceleration as the country prepared for its major presidential election. Quarterly wage growth picked up to 0.6% in Q1 from 0.1% in Q4 of 2016.

Rates

Core bonds end the week uneventful

Following wild swings in the past two sessions, core bonds are little changed today in a low volume session devoid of key data releases or events. The Bund started the session on a weak footing and lost more ground in follow through selling, but the tide turned at mid-morning and losses were erased during the remainder of a lethargic session. US Treasuries moved sideways in a tight range, but weak housing data brought a bid in the market, pushing US Treasuries to minor daily gains. It helped the Bund travel to unchanged levels.

The German yield curve shifted marginally higher with yields changes varying between -0.5 bp (5-yr) and +2 bp (30-yr). The US curve bull steepened with yields down by 2.2 bps (2-yr) to 0.2 bp. Intra-EMU spreads versus Germany (10-yr) were nearly unchanged with exception of the Greek spread which narrowed about 20 bps on an agreement to pay out the second tranche of the bailout package, allowing Greece to redeem maturing bonds in July.

Currencies

Post-USD rebound already running into resistance?

In technical trading, EUR/USD reversed part of yesterday's post-Fed decline. The move was supported by poor US housing data. USD/JPY initially profited from a constructive equity sentiment, but the momentum also eased during the US session. EUR/USD trades in the 1.1175 area. USD/JPY tries to stay north of 111. So, the dollar trades off the recent lows, but it's too early to call a sustained USD comeback.

Asian stock markets traded mixed. Japan outperformed, profiting from the post-Fed USD/JPY rebound. This rebound continued this morning. The BOJ left its policy unchanged as expected. The BOJ slightly raised its assessment on the Japanese economy, but BOJ governor Kuroda indicated that it is too early to discuss any concrete steps on the exit policy as this exit is still far away. The dollar also maintained gains against the euro. EUR/USD hovered near 1.1150.

There was little news to guide EUR/USD trading during the European morning session. Yield changes were modest. If anything, spreads between the US and Germany narrowed marginally. Yesterday's post-Fed USD rebound slowed and EUR/USD reversed part of yesterday's decline in technical trading. USD/JPY remained better bid. The BOJ policy decision being out of the way maybe gave some comfort to JPY bears. The pair was also supported by a constructive equity sentiment. The pair filled offers in the 111.40 area.

The US housing data disappointed again in May (see headlines) Housing data are usually no market mover, but time US yields, the dollar and even US equity futures declined a bit. Markets still feel unease with disappointing US data. USD/JPY drifted back to the low 111 area. EUR/USD returned close to the intraday highs, currently trading in the 1.1175 area. The Michigan consumer confidence release might still amend the end of week FX positioning.

No follow-through gains on the BOE sterling rally

Sterling entered calmer waters. Yesterday, the UK currency received BOE support. However, there were no follow-through sterling gains. The eco calendar was empty and there was also no high profile news from the political scene. Cable was locked in a tight sideways range in the upper half of the 1.27 big figure. EUR/GBP rebounded slightly off the overnight correction low (0.8720 area), but this move mostly mirrored a modest rebound of the euro after yesterday's EUR/USD decline. EUR/GBP hovers in the 0.8750 area. Sterling maintains most of yesterday's gains but political uncertainty remains high as UK PM May is still trying to strike a deal with the DUP to support her minority government. At the same time, the Brexit negotiations are scheduled to start next week. Press headlines suggest that the UK would be prepared to discuss the terms of the divorce first, which would be a concession to the EU at the start of the negotiations. Is this a precursor for a less hard Brexit?

Market movers ahead

• In the US, we will look out for any comments in speeches by FOMC members about what drove the decision on the June rate hike, which in our view was not justified by the data. On the data front, we get PMI figures and we continue to believe that the moderate growth will primarily be driven by the service sector.
• Consumer confidence stood at the highest level since 2007 in May. We expect it to keep increasing in June on the back of rising employment and fading political uncertainty.
• In China, we expect the recent increases in rates and yields are likely to feed into a slowdown in housing for the rest of the year and a moderation in house-price inflation.
• On Thursday, we expect Norges Bank to keep rates unchanged and remove its 'easing bias' from the interest rate path.

Global macro and market themes

• The Fed strikes a hawkish tone, hiking rates and setting out its balance sheet reduction...
• ..rating the tightening labour markets as more important than recent weak inflation prints.
• Further flattening of the US yield curve likely.
• We maintain our equity call of 'sell-on-rallies' near-term...
• ..as well as our tactical bearish EUR/USD trade recommendation.
• We see rising risk from China to the global outlook.

Full Report in PDF

EUR/GBP - 0.8751

 
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  :

Buy at 0.8660, Target: 0.8860, Stop: 0.8620

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.8660, Target: 0.8860, Stop: 0.8620

Position : -

Target :  -

Stop : -

 
Euro’s retreat after meeting resistance at 0.8836 has retained our view that further consolidation below this week’s high at 0.8866 would be seen and initial downside risk remains for correction to 0.8700, however, reckon support at 0.8652 would limit downside and bring another rise later, above 0.8836 would signal the pullback from 0.8866 has ended, bring retest of this level first. A break above this resistance would extend recent erratic upmove from 0.8304 low to 0.8880, then 0.8900, having said that, as broad outlook remains consolidative, reckon current c leg of larger degree wave b should be limited to 0.8950 and price should falter well below 0.9000, bring retreat later.

In view of this, we are looking to buy euro on further subsequent pullback but one should exit on such rise. Below 0.8680 would defer and risk test of 0.8650-55 support but break there is needed to signal top is formed instead, bring further fall to 0.8620, then 0.8600 which is likely to hold from here.

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.

Homebuilding took a nosedive in May, marking a third consecutive monthly decline and erasing the gains made at the start of the year. Starts fell 64k to 1092k in May from a downwardly revised 1156k print for April. The number was below market expectations that anticipated a 1220k pace of starts.

Single-family homebuilding posted a 32k decline on the month, with the multi-family segment down by the same amount. This performance will be detrimental to growth in Q2 with residential investment expected to be a modest drag on activity during the quarter.

Building permits also came in well below expectations, falling to 1168k in May, while markets had anticipated a 1249k print. This month, the volatile multi-family segment accounted for the majority of the decline, while the single-family segment subtracted a more modest 15k from building intentions relative to April.

Activity in the South has been consistently weak, and this region accounted for the majority of the decline, falling by 51k in May. The Midwest weighed (-17k) but declined from a stellar reading last month. The Northeast maintained its pace of building from April at 87k, while the West posted a meagre 4k increase in builds.

Key Implications

Housing has been a key contributor to growth during the recovery, but after a strong start to the year the robust performance will not be repeated this quarter. Rising mortgage rates and new home prices have weighed on affordability even as the labor market gains traction. Moreover, the weakness in permit activity offers no consolation, suggesting that a quick bounceback is not in the cards.

Builders have faced challenging conditions related to a shrinking pool of labor, land availability, and rising material prices - including wood - which have resulted in rising new home prices. Many of these will continue to weigh on the sector, but some rebound later this year should materialize as demand for homes rises. In particular, we expect the building of single-family homes to pick up in the coming months, allowing housing to contribute to growth later this year. Overall, builders remain optimistic, with the June NAHB survey reporting a healthy level of confidence.

This report adds to the string of disappointing releases in recent weeks. Still, despite the modest drag from residential investment this quarter, we expect economic growth to clock in at just over 3%.

US oil bounced on Friday from $44.22 low where the price found temporary footstep. Recovery was signaled by reversal of daily RSI from oversold territory and is seen as consolidation ahead of final push towards key support at $43.74 (05 May low). Strong bearish sentiment on concerns over global oversupply and another disappointing crude stocks release keep oil price under increased pressure. Bearish technical studies support negative scenario which requires weekly close below $45.32 (Fibo 61.8% of $39.20/$55.22) for confirmation. Meantime, bears could be interrupted by corrective action on oversold studies. Limited correction is seen ahead of fresh push lower, with strong barriers at $45.08/60 ( Fibo 38.2% / 61.8% of $46.46/$44.22) and $45.82 (falling 10SMA) expected to ideally cap.

Res: 45.08; 45.34; 45.60; 45.82

Sup: 44.22; 44.00; 43.74; 43.06

USD/CAD - 1.3241

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term down

 
Original strategy       :

Sell at 1.3350, Target: 1.3130, Stop: 1.3410

Position: -

Target:  -

Stop: -

 
New strategy             :

Sell at 1.3350, Target: 1.3130, Stop: 1.3410

Position: -

Target:  -

Stop:-

The greenback found support at 1.3165 earlier this week and rebounded, retaining our view that consolidation above this level would be seen and recovery to 1.3330 cannot be ruled out, however, reckon 1.3360-65 would limit upside and bring another decline later, below 1.3220 would suggest the rebound from 1.3165 has ended, bring retest of this level but break there is needed to signal recent decline from 1.3794 has resumed for weakness towards 1.3100 and possibly towards previous support at 1.3078.

In view of this, would be prudent to sell again on subsequent recovery as 1.3350-60 should limit upside. Above previous support at 1.3387 (now resistance) would defer and suggest low is possibly formed, bring a stronger rebound to 1.3420-25 but break there is needed to provide confirmation. 

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.

Daily Pivots: (S1) 1.1109; (P) 1.1168 (R1) 1.1205; More....

At this point, EUR/USD is still holding above 1.1109 support and outlook is unchanged. Intraday bias remains neutral with focus on 1.1298 key resistance. Decisive break there will carry larger bullish implication and target 1.1615 resistance next. On the downside, break of 1.1109 support will indicate short term topping and rejection from 1.1298. In such case, intraday bias will be turned to the downside for 1.0838 support.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD staying far above 55 week EMA (now at 1.0922). Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

Daily Pivots: (S1) 1.2697; (P) 1.2746; (R1) 1.2803; More...

Intraday bias in GBP/USD remains neutral for the moment. Also, near term outlook stays bearish with 1.2977 resistance intact. We continue to favor the case that consolidation pattern from 1.1946 has completed at 1.3047 already. Decisive break of 1.2614 resistance turned support would confirm our bearish view and target a test on 1.1946 low next. However, break of 1.2977 will dampen our view and turn bias back to the upside for 1.3047 and above.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. Price actions from 1.1946 medium term low are seen as a consolidation pattern, which could have completed after hitting 55 week EMA. Break of 1.1946 low will target 61.8% projection of 1.5016 to 1.1946 from 1.3047 at 1.1150 next. In case the consolidation from 1.1946 extends, outlook will stay remain bearish as long as 1.3444 resistance holds.

Daily Pivots: (S1) 0.9654; (P) 0.9694; (R1) 0.9749; More.....

USD/CHF is staying in range of 0.9613/9807 and intraday bias remains neutral, with bearish near term outlook. Break of 0.9613 will extend the whole decline from 1.0342 to 0.9548 support and below. We'd start to look for bottoming signal again as it approaches 0.9443 key support level. However, considering bullish convergence condition in 4 hour MACD, break of 0.9807 will indicate near term reversal and turn outlook bullish for 1.0099 resistance next.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.