Despite falling sharply to 0.7401 in early 2015, the subsequent quick and strong rebound retained our view that further consolidation above major low at 0.7069 (2011 low) would take place and mild upside bias remains for the erratic rise from there (wave v as well as larger degree wave (C) trough) to bring major correction of intermediate downtrend from 1.8222 (Wave (B) top), hence further gain to 1.0350, then 1.0500 would be seen, next upside target is 1.0620-30 (100% projection of 0.7069-1.0296 measuring from 0.7401), however, reckon upside would be limited to 1.0800 and 1.1000 should hold on first testing. Looking ahead, the greenback shall head towards 1.1320-30 (38.2% Fibonacci retracement of entire wave (B) from 1.8222-0.7069) but previous 4th at 1.1731 should remain intact.

On the downside, whilst initial pullback to 1.0100 and 1.0010-20 cannot be ruled out, reckon downside would be limited to 0.9900 and 0.9800 should hold, bring another rise to aforesaid upside targets. Below 0.9800 would defer and suggest a temporary top is formed instead, risk weakness to 0.9700 but only a sustained breach below support at 0.9550 would signal the corrective rise from 0.7069 low has ended and bring further fall to support at 0.9444, having said that, only a firm break below there would shift risk to the downside and further fall to 0.9300, then 0.9200 would follow but psychological support at 0.9000 should hold from here.

The greenback did retreat in H1 of 2016, adding credence to our view for further consolidation below 2015 high of 125.86 and indicated retracement targets at 116.16, 113.30, 112.00 and 110.00 had all met met, although the correction was a bit deeper than expected and pressed the pair to as low as 99.01 in mid-2016, dollar found renewed buying interest there and staged a strong rebound in Q4 2016, suggesting the correction from 125.86 has possibly ended at 99.01, hence consolidation with upside bias is seen for gain to 119.00 and 120.00, however, reckon 121.65-70 would hold on first testing. Only a break of resistance at 123.76 would confirm correction from 125.86 has ended, bring resumption of medium term rise from major low of 75.57 (formed back in 2011), then retest of 125.86 would follow. Looking ahead, a break above this level is needed to extend headway to 127.00, then 129-130.00 level but near term overbought condition should limit upside to 133.00 and price should falter below previous chart resistance at 135.18 (2002 high).

On the downside, whilst initial pullback to 115.00 cannot be ruled out, reckon downside would be limited to 112.90-00 and bring another rise later. Below 112.00 would bring pullback to 110.00 but downside should be limited to 107.00 and bring another rise later. Only a drop below 105.50-55 would defer and prolong choppy trading below 2015 high of 125.86, then weakness to 103.00 and then 102.00 would follow but still reckon downside would be limited to 101.00-10 and price should stay above said 2016 low of 99.01, bring another rise later. In the event dollar drops below 99.01 support, this would shift risk back to downside for the retreat from 125.86 to bring a stronger correction of the aforesaid rise from 75.57 low to 97.00 and possibly 95.80-85 but downside should be limited 94.75-80 (61.8% Fibonacci retracement of 75.57-125.86) and support at 93.79 should remain intact.

The single currency did spend most of 2016 within indicated established range of 1.0462-1.1714 and the pair met renewed selling interest at 1.1616 in mid-2016 then started to fall late last year, euro finally broke below 2015 low at 1.0462 last month in line with our bearish expectation, adding credence to our bearish count for an impulsive decline unfolding from 1.6040 top (2008 high), hence downside bias remains for further weakness to 1.0350, then 1.0200, however, a sustained breach below psychological support at 1.0000 is needed to signal wave 3 of larger degree wave III has commenced for further decline to 0.9945-50 (50% projection of 1.3993-1.0462 measuring from 1.1714). Our bearish count remains that the major wave C with circle ended at 1.6040 back in July 2008, the series of (I)(II), I II, 1-(1.2042) 2-(1.3993) impulsive wave structure from 1.6040 is unfolding, bearishness remains for further decline to 1.0300, then 1.0150 but reckon psychological support at 1.0000 would limit downside and 0.9945-50 (50% projection of 1.3993-1.0462 measuring from 1.1714) would hold on first testing. Eventual downside targets are pointing at 0.9530-35 (61.8% projection of 1.3993-1.0462 measuring from 1.1714) and later towards 0.9300-05 (1.618 times projection of 1.4940-1.2042 measuring from 1.3993) but next psychological support at 0.9000 should hold.

On the upside, whilst initial recovery to 1.0900 or even 1.1000 cannot be ruled out, upside should be limited and price should falter well below resistance at 1.1300, bring another decline to aforesaid downside targets. A sustained breach above 1.1300 would defer and suggest a minor wave v of 3 has ended instead and risk a stronger rebound to 1.1500 and then towards resistance at 1.1616 but still reckon resistance at 1.1714 would remain intact and bring another decline later. Only a firm break above 1.1714 resistance would defer and risk a stronger retracement of the fall from 1.3993 to 1.1800-10 and then towards 1.1900, however, reckon upside would be limited to previous support at 1.2042 (wave 1 trough) and bring another decline later.

Euro spiked higher in Asian session on ultra thin market condition but quickly retreated. EUR/USD hit as high as 1.0653 but is back at 1.0530 at the time of writing. The pair is also limited well below 1.0669 resistance so far which maintains near term bearishness. EUR/JPY jumped to 122.14 but failed to take out 124.08 near term resistance and is back at 122.70. EUR/JPY is still seen as engaging in sideway consolidation. The more important move is in EUR/GBP which took out 0.8577 resistance and is staying above for the moment. It's seen as a sign that recent pull back from 0.9304 is completed and we'd probably seen more upside in the cross soon. The development is in line with the outlook in EUR/AUD which suggests some near term bullishness. We'd be paying attention to whether Euro would gain additional momentum against Sterling and commodity currencies.

Dollar, on the other hand, continues to pull back on position rebalancing. The post election rally in the greenback was built on expectation of Donald Trump's expansive policies, including cutting tax and raising spending. Stocks surged with DJIA closing 20000 handle as the policies would be a boost to the economy. Yields jumped as the policies mean US would have to raise debts with a surge supply in bonds. And, Dollar rose on expectation that Fed would hike rate faster in 2017 due to better economy, higher yield and inflation. So, expectations on Trump's policies are high and eyes will be closely on what he will deliver in January.

Happy new year to our readers! We'll be back on January 3.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8513; (P) 0.8548; (R1) 0.8587; More...

EUR/GBP jumped to as high as 0.8666 and the break of 0.8577 resistance is seen as a sign of reversal. Recent decline from 0.9304 is seen as a corrective move and could have completed at 0.8303 after breaching 0.8332 support briefly. Intraday bias is back on the upside. Break of 38.2% retracement of 0.9304 to 0.8303 at 0.8685 will pave the way to 61.8% retracement at 0.8922 and above. On the downside, below 0.8488 minor support will likely extend the fall from 0.9304 through 0.8303. But in that case, we'd look for bottoming around 0.8116.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support around 55 weeks EMA (now at 0.8219) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

Economic Indicators Update

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Dollar stays soft in early US session but selling momentum is limited so far. Indeed, the greenback has pared back some losses against Yen, which is the relatively stronger one. Released from US, trade deficit widened to USD -65.3b in November, larger than expectation of USD -61.5b. Exports rose 1.0% to USD 121.7b while imports rose 1.2% to USD 187.0b. Initial jobless claims dropped 10k to 265k in the week ended December 24, below expectation of 277k. Continuing claims rose 63k to 2.1m in the week ended December 17.

Eurozone M3 money supply grew 4.8% yoy in November, much higher than expectation of 4.4% yoy. Meanwhile, leading to non-financial corporations rose 2.2% yoy, highest since mid-2009. Lending to households also grew 1.9%, highest since mid-2011. Staying in Eurozone, Italy finance minister Pier Carlo Padoan criticized ECB for not giving any detail sin the decision to request the troubled Banca Monte Dei Paschi Di Siena SpA to boost the balance sheet by EUR 8.8b. And he also said that ECB's demand didn't take into consideration of the decree passed by the Italian cabinet for its "capability and relevance".

BoJ governor Haruhiko Kuroda said today that "both the global and Japan's economies are moving in a positive and more desirable direction." In particular, "Japan's exports and production are picking up, and private consumption is showing signs of strengthening". And, " the excessive strength in the yen is being corrected". Though, he also emphasized that "uncertainties remain over what policies Trump will actually pursue, how Europe's political landscape could change given a number of upcoming elections there, or whether emerging economies and resource-based countries can continue accelerating their growth."

USD/JPY Daily Outlook

Daily Pivots: (S1) 116.92; (P) 117.37; (R1) 117.69; More...

USD/JPY's consolidation from 118.65 is still in progress and intraday bias stays neutral. In case of deeper fall, downside of retreat should be contained by 114.76 minor support and bring another rise. Above 118.65 will extend the current rally from 98.97 to test 125.854 high. We'd be cautious on topping at 125.85 on first attempt.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the corrective is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance.

Economic Indicators Update

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US equities closed lower overnight as DJIA suffered the second triple digit loss since presidential election. DJIA closed down -111.36 pts, or -0.56%, at 19833.68. S&P 500 lost -18.96 pts, or -0.84%, to close at 2249.92. NASDAQ also dropped -48.88 pts, or -0.89%, to close at 5438.56. While a day of decline in thin holiday trading is not enough to warrant reversal in trend, the synchronous move with other markets suggest that the markets overall is turning into a consolidation phase. To be more specific, 10 year yield closed down -0.057 to 2.506. 30 year yield also lost -0.055 to close at 3.084. Dollar index is back at 102.90 after edging higher to 103.63. Gold breaches 1150 again, comparing to recent low at 1124.3. We'd probably see more consolidative trading ahead, at least before US non-farm payroll to be released on January 6.

10 year yield's sharp fall now raises the chance of short term topping at 2.621, on bearish divergence condition in daily MACD. Focus is back on 2.424 near term support. As long as 2.424 holds, price actions from 2.621 are viewed as a brief consolidation and recent up trend should resume soon. Break of 2.621 will extend recent rise to next key resistance level at 3.036. However, break of 2.424 will confirm topping and bring pull back to 55 day EMA, now at 2.221, or even further to 38% retracement from 1.336 to 2.621 at 2.130.

S&P 500 could have also topped at 2277.53 after hitting medium term channel resistance. Focus in back on 2248.44 near term support level. Sustained break there would at least bring pull back to 55 day EMA (now at 2205.57) or even further lower to channel support. Nonetheless, firm break of 2277.53 will accelerate recent trend to 61.8% projection of 1074.77 to 2134.71 from 1810.10 at 2465.14.

Pull back in stocks and yield could drag down the Dollar in near term. The dollar index is having a similar technical picture, with bearish divergence condition seen in daily MACD. Near term focus is on 102.52 support. Break there would open up deeper pull back towards 55 day EMA (now at 100.55). Nonetheless, firm break of near term high at 103.65 will re-accelerate near term up trend to next projection target at 105.19.

As for today, Eurozone will release M3 money supply in European session. US will release trade balance and jobless claims.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3530; (P) 1.3564; (R1) 1.3590; More...

USD/CAD breached 1.3588 briefly to 1.3598 but failed to sustain. Intraday bias is turned neutral first. We'd stay cautious on strong resistance from 1.3588 to limit upside and bring near term reversal. Break of 1.3471 support should confirm near term topping, with bearish divergence condition in 4 hours MACD. In that case, intraday bias will be turned back to the downside for 1.3080 support. Sustained break of 1.3588, though, will target next fibonacci level at 1.3838. Overall, price actions from 1.2460 low are still viewed as a corrective move.

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. The second leg is possibly finished at 1.3588 too after hitting 50% retracement of 1.4689 to 1.2460 at 1.3575. Break of 1.3005 would likely resume the fall from 1.4689 through 1.2460 to 50% retracement of 0.9406 to 1.4689 at 1.2048. We'd start to look for reversal signal below 1.2460 to complete the correction. In case of another rise, we'll look for topping sign at 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

Economic Indicators Update

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Trading in financial markets are generally subdued in holiday mood. DJIA closed up 11.23 pts, or 0.06%, overnight at 19945.04, still struggling to take out 20000 handle. S&P 500 also closed up 5.09 pts, or 0.22%, at 2268.88, but stays in recent range. Asian markets are mixed with little movements. US yields closed higher with 10 year yield up 0.02 to 2.563 but like others, stayed in tight range. Notable strength is seen in gold this week, hitting as high as 1151.7, comparing to recent low at 1124.3. There is prospect of a stronger rebound in gold in near term. WTI crude oil also strengthened mildly this week and breached 54 handle. But recent price actions suggest that it's staying in consolidation since hitting 54.51 and more sideway trading is in favor.

In the currency market, Canadian Dollar is notably weaker than others, expect Yen, despite mild strength in oil price. USD/CAD is set to take on key near term resistance at 1.3588. While Canadian dollar outperformed other commodity currencies this month, there is prospect of a pull back in near term. Daily MACD in the AUD/CAD chart has turned above signal line, indicating short term bottoming at 0.9677. Rebound from there would now extend higher towards 55 days EMA (now at 0.9912). However, we'd expect strong resistance from 38.2% retracement of 1.0396 to 0.9677 at 0.9952. Fall from 1.0396 is expected to extend to medium term channel support at a later stage.

A short term bottom was also formed in EUR/CAD at 1.3817. Rebound from there is expected to extend to 55 days EMA (now at 1.4278). We'd be cautious on strong resistance from 38.2% retracement of 1.5279 to 1.3817 at 1.4375 to limit upside and bring another decline next medium term support at 1.3019. However, bullish convergence is seen in daily MACD. Sustained trading above 1.4375 fibonacci level will raise the chance of reversal. That is, whole corrective pattern from 1.6103 has completed and will turn focus back to trend line resistance (now at 1.5166).

On the data front, Japan industrial production rose 1.5% mom in November, below expectation of 1.8% yoy. Japan retail sales rose 1.7% yoy in November, above expectation of 0.9% yoy. Swiss UBS consumption indicator, UK BBA mortgage approvals will be released in European session. US will release pending home sales.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3532; (P) 1.3556; (R1) 1.3598; More...

USD/CAD's rally continues to as high as 1.3579 so far. We'd stay cautious on strong resistance from 1.3588 to limit upside and bring near term reversal. Break of 1.3471 support should confirm near term topping, likely with bearish divergence condition in 4 hours MACD. In that case, intraday bias will be turned back to the downside for 1.3080 support. Sustained break of 1.3588, though, will target next fibonacci level at 1.3838. Overall, price actions from 1.2460 low are still viewed as a corrective move.

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. The second leg is possibly finished at 1.3588 too after hitting 50% retracement of 1.4689 to 1.2460 at 1.3575. Break of 1.3005 would likely resume the fall from 1.4689 through 1.2460 to 50% retracement of 0.9406 to 1.4689 at 1.2048. We'd start to look for reversal signal below 1.2460 to complete the correction. In case of another rise, we'll look for topping sign at 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

Economic Indicators Update

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The Japanese Yen edges mildly lower in very quiet holiday trading today. A bunch of weak economic data is weighing slightly on the currency. Japan national CPI core dropped -0.4% yoy in November, unchanged from October's reading and missed expedition of -0.3% yoy. That's also the ninth straight month of decline in prices. Tokyo CPI core dropped -0.6% yoy, worsened from October's reading of -0.4% yoy and missed expectation of -0.4% yoy. Nonetheless, it's hopeful that the sharp depreciation in Yen since November would eventually provide some inflationary effect on prices that help lift the burden from BoJ for additional stimulus. Also from Japan, unemployment rate rose to 3.1% in November, above expectation of 3.0%. Household spending dropped -1.5% yoy in November, much worse than expectation of 0.2% yoy rise. Housing starts rose 6.7% yoy in November, much lower than expectation of 9.6% yoy.

Yen remains the weakest major currency this month, followed by Euro. NZD/JPY's breach of 83.36 resistance is seen as an indication that medium term decline from 94.01 has completed at 68.88. NZD/JPY received strong support from 50% retracement of 44.19 to 94.01 at 69.10. Further rise would stay in favor as long as 77.68 support holds. Sustained trading above 83.36 would pave the way to retest 94.01. We're not anticipating a break there on first attempt. Meanwhile, break of 77.68 will argue that the cross is developing into range trading between 68.88 and 83.36 instead.

On the other hand, Dollar remains the second strongest major currency for the month, next to Sterling. The greenback has been boosted by expectation of Donald Trumps's expansive policies, surging yield and FOMC's forecast of fast rate hike in 2017. Trump is scheduled to take office as the 45th president of US on January 20, 2017. And Dollar's fate will depend on what policies would Trump actually deliver. Dollar index turned into sideway consolidation after hitting 103.65. But near term outlook will stay bullish as long as 102.05 resistance turned support holds. The index is expected to target 61.8% projection of 78.90 to 100.39 from 91.91 at 105.1.9 next.

USD/JPY Daily Outlook

Daily Pivots: (S1) 117.24; (P) 117.55; (R1) 117.85; More...

USD/JPY is still bounded in consolidation from 118.65 and intraday bias stays neutral for sideway trading. In case of deeper fall, downside of retreat should be contained by 114.76 minor support and bring another rise. Above 118.65 will extend the current rally from 98.97 to test 125.854 high. We'd be cautious on topping at 125.85 on first attempt.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the corrective is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance.

Economic Indicators Update

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The financial markets are generally steady ahead of holiday weekend. Dollar index is back below 103 handle but is staying in tight range between 102.50/103.50. Gold follows and stays in range between 1125/1140 for the moment. Meanwhile, crude oil is engaging in consolidative in a relatively wider range between 50/54. Trading in stock markets are also subdued with FTSE and DAX trading nearly flat in European morning. In the currency markets, bigger movement is found in Sterling today which trading broadly lower except versus Aussie and Lonnie. In particular, GBP/USD's break of 1.2301 support should confirm completion of recent corrective rise from 1.1946. And deeper fall would likely be seen back to 1.1946 in near term.

On the data front, UK Q3 GDP growth was finalized at 0.6% qoq, revised up from prior estimate of 0.5% qoq. Current account deficit widened to GBP -25.5b in Q3. Index of services rose 1.0% 3mo3m in October. Swiss KOF leading indicator was unchanged at 102.2 in December, below expectation of 103.1. German Gfk consumer sentiment rose 0.1 pts to 9.9% in January.

Canada GDP, US new home sales and U of Michigan sentiment final will be released later today.

Happy holidays to our readers, we'll be back on December 27.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2249; (P) 1.2313; (R1) 1.2350; More...

GBP/USD's fall from 1.2774 continues day. Break of 1.2301 support confirms that corrective rise from 1.1946 has completed at 1.2774 already. Intraday bias stays on the downside for retesting 1.1946 first. Decisive break there will confirm larger down trend resumption. On the upside, above 1.2390 minor resistance will turn bias neutral and bring consolidations first, before staging another decline.

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 bottoming 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.

Economic Indicators Update

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Dollar stays in tight consolidation against European majors but strengthens against commodity currencies in holiday trading. In particular, Canadian dollar is weighed down by the dip in oil price. Released in US, initial jobless claims rose to 274k in the week ended December 17, above expectation of 255k. Durable goods orders dropped -4.6% mom in November, slightly better than expectation of -4.9%. Ex-transport orders rose 0.5% mom, above expectation of 0.2% mom. Q3 GDP was finalized at 3.5% annualized, GDP price index at 1.4%. From Canada, retail sales rose 1.1% mom in October while ex-auto sales rose 1.4% mom. Both were above expectation. But headline CPI slowed to 1.2% yoy and BoC core CPI slowed to 1.5% yoy, missing expectations.

ECB said in its monthly bulletin that "the medium-term outlook for global activity remains one of strengthening growth, albeit below its pre-crisis pace." And, "overall, growth appears to be holding up in advanced economies and seems to have bottomed out in emerging market economies." ECB expected inflation to exceed 1% at the turn of the year. However, the central cautioned some risks to outlook including policy uncertainty in US, rebalance in Chinese economy and low raw material prices.

In UK, Gfk consumer confidence rose to -7 in December, above expectation of -8. Gfk noted that consumers "remain relatively confident about their personal financial situation." However, "confidence in the general economic situation...has collapsed in the face of uncertainty about the future both at home and abroad." And, "looking ahead to 2017, against a backdrop of Brexit negotiations, the decline in the value of sterling, and the prospect of higher inflation impacting purchasing power, we forecast that confidence will be tested by the storm and stress...of the year to come."

New Zealand GDP grew 1.1% qoq in Q3, up from prior quarter's 0.7% qoq, and beat expectation of 0.8% qoq. Statistics New Zealand noted that the data points to "broad-based growth" with 13 of 16 industries up. Main weakness came from agriculture. Household spending "continued its strong growth" and jumped 1.6%. Exports volumes "remain high" even though growth fell over the quarter. Manufacturing activity also rose "on the back of food beverage, and tobacco manufacturing; and transport equipment, machinery and equipment manufacturing." Also from New Zealand, current account deficit widened to NZD -4.89b in Q3.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0386; (P) 1.0419 (R1) 1.0455; More.....

Intraday bias in EUR/USD remains neutral for consolidation above 1.0351 temporary low. Upside of recovery should be limited below 1.0669 resistance and bring another fall. Below 1.0351 will extend the larger down trend to 100% projection of 1.1298 to 1.0518 from 1.0872 at 1.0092, which is close to parity.

In the bigger picture, break of 1.0461 key support indicates that consolidation from there has completed as a triangle at 1.1298. And, the down trend from 1.6039 (2008 high) is resuming. Current downtrend is now expected to target 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update

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