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Daily Pivots: (S1) 1.3668; (P) 1.3705; (R1) 1.3745; More....

USD/CAD's fall from 1.3793 resumes by diving to as low as 1.3600 so far. Based on accelerating downside momentum, intraday bias is cautiously on the downside for 1.3534 resistance turned support. Break there should confirm completion of the rise from 1.2968 and target 1.3222 support next. On the upside, above 1.3721 will turn bias back to the upside and target 1.3793 and above. However, as noted before, choppy rise from 1.2460 is seen as a corrective move. In case of an extension, upside should be limited by 1.3838 fibonacci level to bring reversal.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and would end at around 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. Nonetheless, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

USD/CAD - 1.3620

 
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 up

 
Original strategy       :

Buy at 1.3570, Target: 1.3770, Stop: 1.3510

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.3535, Target: 1.3735, Stop: 1.3475

Position: -

Target:  -

Stop:-

The greenback has slipped again after meeting resistance at 1.3770, retaining our view that further consolidation below recent high at 1.3794 would be seen and near term downside risk remains for retracement to 1.3590-00, however, reckon downside would be limited to support at 1.3530 and bring another rise later, above 1.3725-30 would bring test of 1.3770 resistance but break there is needed to signal pullback from 1.3794 has ended, bring retest of this level, break there would confirm recent upmove has resumed and extend further gain to 1.3840-50 but overbought condition should prevent sharp move beyond 1.3890-00 and price should falter below 1.3950. 

In view of this, would not chase this rise here and would be prudent to buy again on pullback as 1.3535 should limit downside and bring another rise later. Below 1.3530 would abort and suggest a temporary top is formed, bring retracement of recent upmove to 1.3500 and later towards 1.3450-60 but support at 1.3411 should remain intact, bring another upmove later.

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) 1.0878; (P) 1.0906 (R1) 1.0957; More....

EUR/USD rebounds strongly today but it's staying below 1.1020 resistance so far. Intraday bias remains neutral first. Break of 1.1020 will resume the corrective rise from 1.0339. In the case, we'd expect upside to be limited by 100% projection of 1.0339 to 1.0828 from 1.0569 at 1.1058 to bring near term reversal. On the downside, break of 1.0838 will argue that the corrective rise from 1.0339 has completed. In such case, intraday bias will be turned back to the downside for 55 day EMA (now at 1.0770).

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate long term reversal.

Daily Pivots: (S1) 1.2850; (P) 1.2875; (R1) 1.2908; More...

GBP/USD is staying in tight range below 1.2987 and intraday bias stays neutral first. With 1.2830 minor support intact, another rise could be seen. However, firstly, price actions from 1.1946 are viewed as a corrective pattern. Secondly, bearish divergence condition is seen in 4 hour MACD. Hence, in case of another rise, we'd start to look for reversal signal again above 1.2987. Meanwhile, break of 1.2830 will indicate short term topping. In such case, intraday bias is turned back to the downside for 1.2614 resistance turned support first.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Daily Pivots: (S1) 0.9967; (P) 1.0026; (R1) 1.0066; More.....

USD/CHF's fall from 1.0099 accelerate lower today. Break of 0.9977 minor support dampened the original bullish view. Intraday bias is now back on the downside for 0.9858 support first. Break of 0.9858 should then extend the correction from 1.0342 through 0.9812 before completion. Meanwhile, above 1.0099 will revive that case that correction from 1.0342 has completed and target a test on this high.

In the bigger picture, we're still maintaining that firm break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. However, the corrective nature of the fall from 1.0342 is starting to give the medium term outlook a bullish favor. Hence, in stead of looking for topping signal around 1.0342, we'd now pay closer attention to upside acceleration as USD/CHF approaches this level again.

Daily Pivots: (S1) 113.03; (P) 113.49; (R1) 113.78; More...

USD/JPY's consolidation pattern from 114.36 is still in progress and intraday bias remains neutral first. In case of deeper pull back, downside should be contained by 112.08 cluster support (38.2% retracement of 108.12 to 114.36 at 111.97) and bring rally resumption. We're holding on to the view that corrective fall from 118.65 is completed with three wave down to 108.12. Above 114.36 will target 115.49 resistance first. Break there should resume whole rise from 98.97 to 125.85 high.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Meanwhile, break of 115.49 resistance will extend the rise from 98.97 to retest 125.85. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

The surge in oil price is the main focus today after Saudi Arabia and Russia agreed to extend production cut. WTI crude oil is now having 50 handle back in sight. Meanwhile, rise in oil price takes FTSE 100 to new record high at 7460.20. DAX also follow to record high at 12832.29. But both indices cannot ride on the initial strength and quickly pare back gains. Nonetheless, in the forex markets, commodity currencies follow and trade broadly higher. USD/CAD's dip is now putting near term support at 1.3534 in focus. Elsewhere in the FX markets, Euro strengthens clearly against Dollar, Sterling and Yen.

Oil price surges on Saudi-Russia production deal

Oil price jumps today after Saudi Arabia and Russia agreed to extend the current production cut deal by another nine-month. Saudi Energy Minister Kahlid Al-Falih said at a joint press briefing that, "the agreement needs to be extended as we will not reach the desired inventory level" by the end of June. Meanwhile, Russian Energy Minister Alexander Novak emphasized that "everyone is committed" and there is no reason for any country to "quit". Under the current agreement, OPEC and other oil producers pledged to lower output by 1.8mbpd during the first half of 2017. With the new deal, production cut will be extended to March 2018. WTI crude oil hits as high as 49.52 so far today, comparing to last week's close at 47.84 and this month's low as 43.76. Canadian Dollar finally follows with USD/CAD dropping to as low as 1.3605 so far.

On the data front...

US Empire State manufacturing index dropped to -1 in May. Swiss PPI dropped -0.2% mom, rose 0.8% yoy in April. Japan machine tools orders rose 34.7% yoy in April. Domestic CGPI rose 2.1% yoy in April. Australia home loans dropped -0.5% in March. New Zealand retail sales rose 1.2% qoq in Q1.

The batch of data released from China today is generally weaker than expected. Retail sales rose 10.7% yoy in April, down from prior month's 10.9% yoy and missed consensus of 10.8% yoy. Fixed asset investment rose 8.9% yoy, down from prior 9.2% and missed consensus of 9.1%. Industrial production rose 6.5% yoy, down from prior 7.6% yoy and missed expectation of 7.0% yoy. The set of data is in-line with recent PMIs, which showed loss of momentum in Q2 after a solid Q1.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3668; (P) 1.3705; (R1) 1.3745; More....

USD/CAD's fall from 1.3793 resumes by diving to as low as 1.3600 so far. Based on accelerating downside momentum, intraday bias is cautiously on the downside for 1.3534 resistance turned support. Break there should confirm completion of the rise from 1.2968 and target 1.3222 support next. On the upside, above 1.3721 will turn bias back to the upside and target 1.3793 and above. However, as noted before, choppy rise from 1.2460 is seen as a corrective move. In case of an extension, upside should be limited by 1.3838 fibonacci level to bring reversal.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and would end at around 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. Nonetheless, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

Economic Indicators Update

USD/CHF - 0.9978

New strategy  :

Sell at 1.0035, Target: 0.9935, Stop: 1.0070

Position : -

Target :  -

Stop : -

As the greenback has fallen again after brief recovery, suggesting the fall from 1.0100 top is still in progress and further weakness to 0.9950-55 (61.8% Fibonacci retracement of 0.9859-1.0100) would be seen, break there would add credence to this view, bring subsequent fall to 0.9930-35 but price should stay well above previous resistance at 0.9903, bring rebound later.

In view of this, would be prudent to sell dollar on recovery as 1.0035-40 should limit upside. Above previous support at 1.0056 would defer and risk a stronger rebound to 1.0080 but price should falter below resistance at 1.0100-08, bring retreat later.

GBP/USD - 1.2918

Original strategy :

Sold at 1.2900, stopped at 1.2935

Position : - Short at 1.2900

Target :  -

Stop : - 1.2935

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite falling marginally to 1.2844 on Friday, the subsequent stronger-than-expected rebound suggests the fall from 1.2991 has ended there, hence consolidation with mild upside bias is seen for test of 1.2949 resistance but break there is needed to add credence to this view, bring further gain to 1.2970 but said resistance at 1.2991 should hold from here. Only a break of 1.2999-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance) would revive bullishness and extend recent upmove to 1.3040-50 first.

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below the Kijun-Sen (now at 1.2893) would bring weakness to 1.2860-65 but only break there would revive bearishness for test of 1.2844 support, break there would extend the fall from 1.2991 top to 1.2831 support, then 1.2805.

The DAX index has started the new trading week with gains. In the Monday session, the DAX is trading at 12,757. 50. The index has taken advantage of stronger oil prices on Monday. On the release front, there are no eurozone events on the schedule. On Tuesday, there are two key events – Eurozone Flash GDP and German ZEW Economic Sentiment. As well, the eurozone releases ZEW Economic Sentiment and trade balance.

Despite a lack of eurozone fundamentals on Monday, the DAX has posted slight gains, taking advantage of a sharp rise in oil prices. Brent crude has jumped 3 percent on Monday, and the DAX briefly touched a high of 12,833.00, a new record. The first quarter of 2017 has seen improved numbers in the euro area, largely due to strong numbers from Germany, the largest economy in the eurozone. Germany's economy expanded 0.6% in the first quarter, compared to a 0.4% gain in Q4 of 2016. What was particularly encouraging was that the expansion was broadly based, with strong consumer and state spending, and an upsurge in the construction and manufacturing and export sectors. However, inflation levels continues to recede, after some strong numbers in the first quarter. In April, German Final CPI dropped to 0.0%, marking a 3-month low. This trend has also characterized inflation in the eurozone, as weaker inflation levels has lessened pressure on the ECB to tighten monetary policy.

The EU released its Spring 2017 Economic Forecast, and the report gave the eurozone a passing grade. The report noted that the European economy is in its fifth year of recovery, and forecast eurozone GDP growth of 1.7% in 2017 and 1.8% in 2018. On the inflation front, the report stated that inflation had risen in recent months, but this was mainly due to an increase in oil prices. Still, inflation was expected to reach 1.6% in 2017 and 1.3% in 2018, compared to just 0.2% in 2016. Stronger growth has led to lower unemployment, and the report projected that eurozone unemployment rate would drop to 9.4% in 2017 and 8.9% in 2018. At the same time, economic risks remain tilted to the downside, including US economic and trade policy under President Trump, the European banking sector and Brexit. This forecast was considerably more optimistic than the Winter 2017 forecast, as is apparent from the captions in the press releases for these two reports: The Winter forecast was entitled "Navigating through choppy waters", while the caption for the Spring forecast reads "Steady growth ahead".

US consumer spending and inflation numbers improved in April, but still fell short of estimates. CPI came in at 0.2%, short of the estimate of 0.3%. Core CPI, which excludes the most volatile items, posted a small gain of 0.1, shy of the estimate of 0.2%. Retail Sales came in at 0.3%, compared to the forecast of 0.5%. Retail Sales rose 0.4%, short of the estimate of 0.6%. Consumer confidence remained strong, as the reading of 97.7 beat the forecast of 97.0 points. These numbers underscored a troubling trend where strong consumer confidence has failed to translate into increased consumer spending.