Sample Category Title

EUR/JPY - 122.53

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 at 121.80, Target: 123.80, Stop: 121.20

Position: -
Target:
Stop: -

New strategy :

Buy at 121.80, Target: 123.80, Stop: 121.20

Position: -
Target:  -
Stop:-

As the single currency retreated after marginal rise to 122.89, suggesting minor consolidation below this level would be seen and pullback to 122.00-05 cannot be ruled out, however, reckon downside would be limited to 121.70-80 and bring another rise later, above said resistance at 122.89 would signal the rise from 118.24 low is still in progress and may extend further gain to 123.30-35. Looking ahead, a sustained breach above this level is needed to retain bullishness and signal early erratic fall from 124.10 top has ended at 118.24, bring further rise to 123.85-90 first.

In view of this, would not chase this rise here and would be prudent to reinstate long on pullback as 121.70-80 should limit downside and bring another rise. Below 121.30 would abort and signal top is formed instead but only break of previous resistance at 121.13 would confirm and bring further fall to 120.45-50 first. 

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 – 0.7551

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

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Although aussie has retreated after meeting resistance at 0.7592 and initial downside bias is seen for weakness to 0.7520-25, break of indicated support at 0.7491 is needed to signal recent decline from 0.7741 has resumed and extend weakness to previous support at 0.7543 which is likely to hold on first testing.

On the upside, expect recovery to be limited to 0.7570-75 and said resistance at 0.7592 should hold, bring further consolidation later. Only break of said resistance at 0.7592 would suggest a temporary low has been formed there and consolidation with mild upside bias is seen for further gain to resistance at 0.7633, break there is needed to add credence to this view, bring a stronger rebound to 0.7665-70, above there would suggest the fall from 0.7741 top has ended, then gain to 0.7700 would follow.

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 pair is facing an increasingly volatile week ahead as the US Fed gets ready to deliver their verdict on rate hikes.' - Steven Knight, Blackwell Global (based on investing.com)

Pair's Outlook

During the early hours of Tuesday's trading session the common European currency retreated against the US Dollar. The fall of the currency exchange rate has been stopped by the combined support of the 23.60% Fibonacci retracement level at 1.0639 and the monthly pivot points at 1.0633. From the upside the rate is being pressured by the 100-day SMA at 1.0654. From a technical perspective it can be seen that the rate is gathering pressure before a larger move. That is consistent with the fact that the Federal Reserve short term rate is about to be revealed.

Traders' Sentiment

SWFX traders remain bearish, as 53% of open positions are short on Tuesday. Meanwhile, 51% of trader set up orders are set to sell the Euro.

'I definitely see sterling as vulnerable after Article 50 is triggered because there is a significant risk that when the negotiations start with the EU, the EU could certainly play quite a difficult hand for the UK to respond to.' – Jane Foley, Rabobank (based on Business Recorder)

Pair's Outlook

On Monday, the monthly S1 prevented British Pound from appreciating further, resulting in another spark of bearish momentum earlier today. Investors swiftly sold the Sterling amid latest news that Article 50 could be triggered by the end of the month. Nevertheless, the tough demand cluster circa 1.21, formed by the monthly S2, the weekly S1 and the lower Bollinger band, is expected to limit today's losses. Moreover, a close under 1.2150 implies that more weakness this week could follow, leading to a drop even under 1.20, rather than the retest of the trend-line around 1.24. Technical indicators are also in favour of the negative outcome today.

Traders' Sentiment

Today 66% of traders are long the Pound (previously 69%), whereas all pending orders are equally divided between the buy and the sell ones.

'The latest rise in Treasury yields is underpinning the dollar, but it is a wait-and-see mood that is mostly prevailing in the market ahead of the Fed's decision.' – Barclays (based on Reuters)

Pair's Outlook

The USD/JPY currency pair behaved in accordance with expectations yesterday, being that it managed to remain above the immediate support area and avoid substantial gains. Nevertheless, the pair remains close to its ascending channel's upper border; at this point positive US fundamental could trigger an upside breach, with the resistance around 115.60 expected to prevent the Buck from edging further up. Disappointment in the data, on the other hand, is to force the US Dollar to erase most if not all gains against the Yen today. According to technical studies the bullish momentum is to prevail, while we still believe the channel's resistance is to remain intact.

Traders' Sentiment

There are 59% of traders holding long positions today (previously 55%). Meanwhile, the share of sell orders inched up from 52 to 56%.

'At this moment, an interest rate hike will not be a surprise, so any overreaction (to a hike in rates) is unlikely.' - Mark To, Wing Fung Financial Group (based on Reuters)

Pair's Outlook

During the previous trading session the bullion failed to move even higher, as the commodity price has retreated back to the 1,200 level, where it remained rather flat on Tuesday morning. However, the bullion's price was positioned to fall, as the closest support level was located at the 1,186.87 mark, where the weekly S1 is located at. In addition, the weekly S1 is strengthened by the lower Bollinger band, which was located at 1,187.74. Moreover, a decline of the price is likely because the 100-day SMA is providing resistance just above the price, as it is located at the 1,205.63 level.

Traders' Sentiment

Traders have not changed their opinion, as 52% of open positions are long. Meanwhile, 69% of trader set up orders are set to buy the bullion.

EUR/USD

Current level - 10644

The intraday outlook is bearish, for a test and break through 1.0620 support, towards 1.0490 lows. Key resistance lies at 1.0680.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 114.98

Yesterday's slide completes the corrective pattern below 115.50 and my outlook is bullish, for a rise towards 115.70 resistance area. The latter should be the final leg of the whole rebound above 111.60 lows.

GBP/USD

Current level - 1.2164

The recent break through 1.2185 signals a negative bias, for a slide towards 1.2080, en route to 1.2000 sentiment zone. Crucial on the upside is 1.2250 high.

Sunrise Market Commentary

• Rates: More consolidation on bond markets?
  Today's eco calendar won't inspire trading ahead of Dutch elections and key central bank meetings (Fed, BoE, BoJ). We expect more consolidation on bond markets. US dealing desks will probably be thinly staffed because of the blizzard. Traded volumes could be lower than usual.
• Currencies: Post-payrolls USD softness short-lived. Sterling feels Brexit-headwinds
  Yesterday, the dollar gradually found its composure after a disappointing reaction to the payrolls on Friday. The dollar is again better bid going into the FOMC policy decision. Yesterday, sterling showed remarkable strength, but this morning the UK currency is sold as PM May received the green light to start the formal Brexit negotiations.

The Sunrise Headlines

• US equities stock markets ended an uneventful session mixed. Overnight, Asian markets tread water as well with investors side-lined ahead of key policy meetings later this week (Fed, BoJ, BoE,…)
• British lawmakers removed the final hurdle to PM May's plan to start talks on the UK leaving the EU, a milestone moment that sets the stage for unwinding 40 years of close and complex cross-Channel ties.
• China's factory output (6.3%) and fixed-asset investment (8.9%) grew more strongly than expected in the first two months of the year, but retail sales (9.5%) disappointed after the government reduced a tax break on small cars.
• German FM Schaeuble sees a threat to Germany's ability to maintain a balanced budget given mounting pressures to increase government spending, the Passauer Neue Presse newspaper reported.
• US Treasury Secretary Mnuchin will push the world's top economies to abide by existing exchange-rate agreements and promote open and fair trade at a meeting of finance chiefs this week, a senior Trump administration official said.
• A classic 'nor'easter' is expected to lash the US East Coast with snow and blizzard conditions today, bringing a late blast of winter to a region where residents only recently thought spring was in the air.
• Today's calendar contains German ZEW-indicator, US small business optimism and US PPI inflation. The Netherlands taps the bond market.

Currencies: Post-Payrolls USD Softness Short-Lived. Sterling Feels Brexit-Headwinds

Post-Payrolls USD correction didn't go very far

On Monday, the euro reversed part of Friday's gain as speculation on an ECB rate hike eased. There was little news from the dollar side of the story. Even so, global bond yields moved higher during the US session, but it had only limited impact on the major USD cross rates. EUR/USD closed the session at 1.0653 (from 1.0673 on Friday). USD/JPY held in the upper half of the 114 big figure and closed near the intraday highs (114.88 from 114.79 on Friday). USD traders waited for the Fed.

Overnight, Asian equities show a mixed picture. Regional markets basically remain in a wait-and-see modus ahead of the policy decisions from the Fed (Wednesday) and the Bank of Japan (Thursday). USD/JPY hovers in t tight range slightly below 115. EUR/USD trades around 1.0655.

Today, eco calendar is only modest interesting. German ZEW investors sentiment (expectations) is expected to rebound from 10.4 to 13. Any euro impact should be very limited. In the US, the NIFB small business confidences is expected to stabilize at a historically very high level (105.6 from 105.9). US PPI data probably have most market moving potential. For the headline figure, a modest rise from 1.6 Y/Y to 1.9% Y/Y is expected. An upward surprise might cause some nervousness on the bond markets and be slightly supportive for the dollar as markets are more sensitive for price data (compared to activity data). However, we don't expect USD investors to adapt positions in a profound way one day before the FOMC policy decision. That said, the disappointing USD price action of the USD after the payrolls is apparently more or less digested. So, the dollar might regain slightly ground in case of a further rise in core bond yields or in case of USD supportive eco data. For now, the Dutch elections are no big issue for FX markets. Uncertainty might be slightly negative for the euro.

Of late, USD/JPY profited most from higher core/US bond yields. The 115.62 range top came within reach on Friday, but a real test didn't occur. Some shortterm consolidation might be on the cards ahead of the FOMC policy decision. The dollar apparently needs some additional positive news to start a new up-leg (e.g. a higher Fed rate hike path/dots). Recent gains of the dollar against the euro were less convincing. A first intermediate resistance at 1.0679 was (temporary?) broken as markets were haunted by rumours that the ECB was considering a rate hike before ending the APP. We still assume EUR/USD 1.0829/74 will be difficult to regain. A sell EUR/USD on upticks remains favoured, even as we have to admit that the USD/EUR momentum isn't convincing. At the same time, the dollar still enjoys the supported of a massive interest rate differential, discouraging USD short positions.

EUR/USD: no follow-through gains after (temporary) break of 1.0679 resistance

EUR/GBP

Sterling to feel more Brexit headwinds?

On Monday, sterling sentiment improved even as the news flow was obviously UK/sterling negative. EUR/GBP traded in the 0.8785/75 area before the start of European trading, but soon dropped back to the mid 0.87 area. The global EUR/USD decline played a role, but sterling was strong across the board. We consider it a short squeeze in a market that had become a bit too much sterling short. During the day, Scottish PM Sturgeon announced she will take steps next week for a second independence referendum which might take place between autumn 2018 and spring 2019. Later in the session, the House of Comments voted the Brexit bill that allows PM May to trigger Article 50 of the Lisbon Treaty. The reaction of sterling was remarkably mild. EUR/GBP finished the session at 0.8725 near the intraday low.

This morning, there is not much left of yesterday's constructive sterling sentiment. The UK currency is facing heavy headwinds both against the euro and the dollar. We don't see specific headlines, but markets apparently adapt positions for tough Brexit negotiations. The rift between London and Scotland on the Second independence referendum might be a negative, too. There are no important UK eco data, suggesting trading will be dominated by the Brexit headlines. Sterling sentiment softened of late. The euro was in better shape helping EUR/GBP to break the 0.8592 resistance, which improved the technical short-term EUR/GBP picture. We don't expect a sustained EUR/USD rebound , but a combination of temporary euro consolidation and ongoing sterling softness as the Brexit negotiations are nearing, might trigger some more ST EUR/GBP gains. The break north of 0.8645 reinforces the ST positive momentum. The 0.8854 correction top is the next key resistance.

EUR/GBP uptrend continues despite yesterday's pause. 0.8854 remains next key reference

Download entire Sunrise Market Commentary

The GBP rally after Scotland's independence referendum announcement appears to be over, with the Brexit Bill due to gain Royal ascent today. But was it really ever news?

Reality has met hope this morning, as early Europe and London have walked in and sold GBP from 1.2200 down to 1.2150 in short order. In the process completing the complete unwind of the rather optimistic dead cat rally in GBP after Scotland's First Minister announced her intention to hold a 2nd independence referendum in late 2018. As ever, people have looked at the headline and reacted, rather than digging a little deeper. Taking a politician at face value is usually not a good idea….(more on this below)

Today should be a momentous day for the United Kingdom, as the freshly minted and unamended Brexit Bill will pass to the Queen for Her Majestie's royal approval and then pass into law. Prime Minister May should then be free to trigger a formal Brexit announcement at any time from later today. The press now seems to believe this is a more likely now at the end of the month rather than this week having been blindsided by those pesky rebellious Scots North of the border.

We'll come back to GBP in a moment, but I feel it is necessary first to bring some hard reality to those GBP bulls out there who think Scotland's actions will either derail Brexit or actually make economic sense. I will add I have no particular opinion on it, either way, other than Ms Sturgeon's somewhat cynical timing. Starting from the top

• Scotland's Parliament must agree to hold a referendum in the first place. The Scottish National Party is a minority government, so this isn't a done deal.
• Scotland must then enact a Section 30 asking Westminster's Parliament for permission to have the referendum. PM May has already said this won't happen until Brexit is completed.
• Scotland takes GBP 128 from London for every GBP 100 it puts in as tax.
• Scotland's books won't balance with the price of oil at $50.00.
• Scotland would be outside of both the United Kingdom AND the European Union. Scotland would then have to apply for EU membership and the multi-year process this entails.
• Countries within the EU with separatist movements, such as Spain with the Basque's and the French with those unruly Corsicans, are unlikely to want to set “a precedent.”

Given the above, it is hard to see any basis for a GBP rally in all honesty. Europe seems to agree (at last on something!) and has sold the Braveheart rally accordingly to start the day. With so much event risk this week and “Big Wednesday” to come tomorrow, there is a chance that GBP could end up being swamped by the noise of the FOMC.

Reality is biting that Brexit really is upon us and from a technical perspective GBP could look a bit vulnerable in the short term.

Looking at the four-hour chart gives us the clearest short-term picture,

GBP has support at 1.2130 (breaking as I write), with clear air below until the January 16th low at 1.1985. Below here, life could get intriguing for GBP.

Resistance is clearly marked at yesterday's high of 1.2250 and then the 1.2300 regions.

Do not let the quiet session on Monday and early Tuesday fool you, volatility may be just around the corner. The Federal Reserve is meeting tomorrow, the Dutch are heading to the polls, the UK triggering Article 50 is edging closer, a group of 20 finance ministers and central bankers are meeting on Friday, and a couple of tier one data releases is fast approaching. With such extraordinary event risks scheduled this week, traders should be prepared for big moves across all financial asset classes.

Beginning with the Fed's monetary policy announcement, there seems to be a total agreement within analysts that the Fed will hike rates by 25 basis points, but the dollar is no longer reacting to the news and a 25-basis points increase isn't likely to move the dollar on either side. The question now has become “will the Fed prepare the markets for a faster tightening process in monetary policy?' This is what's likely to move the dollar going forward. Markets are currently pricing in a 60% chance of 3 rate hikes in 2017, and for this percentage to move higher we need to see the dots on the Fed's dot plot move higher with some hawkish statements from Chair Janet Yellen.

Yields on U.S. 10-year treasury bonds are still holding near 2.5 years high at 2.61%, and it requires a clear break from this level to confirm another move higher for USD. Theoretically higher bond yields are negative for U.S. stocks, but given that negative correlation didn't yet occur within these two asset classes, we need a significant push, maybe towards 3% on U.S. 10-year yields to concern equity investors. Although U.S. stocks valuations look overstretched by many metrics, still there isn't enough evidence of a sharp correction, however, I'll be very careful to consider buying into the second-longest bull run ever.

Brexit is by no doubt the hottest topic in Europe after the UK's parliament passed the Brexit bill and opened the way to triggering article 50. Prior to giving Theresa May the greenlight, there were rumors that Article 50 may be triggered as soon as today, but government representatives assured that Article 50 would not be triggered until the end of this month. Interestingly the pound was very resilient, in fact it traded on Monday higher against the US dollar and most major currencies, suggesting that the official divorce is entirely priced in, and even as Scottish First Minister Nicola Sturgeon announced plans for a second independence referendum, the pound continued to climb. Having said that, the beginning of the formal negotiations might indicate that there's still room for further drop, especially if the EU took a hard stance, so yesterday's reaction is not sufficient to indicate the pound has found the floor already.

Staying in Europe, the Netherlands' elections tomorrow will also take center stage as it effectively acts as a barometer for populist attitudes across the EU. The government of Netherlands is based on proportional representation, so even if the Party of Freedom won the largest number of seats, this won't change the countries politics a lot. However, this will confirm that populism is on the rise, and boosts the chances of Marine Le-Pen winning the French elections. What does this mean for investors? “Fasten your seatbelts, it's going to be a bumpy ride”