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Daily Pivots: (S1) 0.9075; (P) 0.9106; (R1) 0.9151; More....

Intraday bias in USD/CHF remains on the upside for the moment. Decisive break of 0.9146/60 cluster resistance will carry larger bullish implication, and target 0.9439 resistance next. On the downside, break of 0.8930 support is needed to confirm short term topping. Otherwise, outlook will stay bullish in case of retreat.

In the bigger picture, rebound from 0.8551 medium term bottom is currently seen as a correction to the downtrend from 1.0146 (2022 high). Further rally would be seen to 0.9146 cluster resistance (38.2% retracement of 1.0146 to 0.8551 at 0.9160). Strong resistance could be seen there to limit upside, at least on first attempt. However, decisive break of 0.9146/60 will indicate trend reversal, and target 61.8% retracement at 0.9537.

Daily Pivots: (S1) 148.43; (P) 148.70; (R1) 149.15; More...

Intraday bias in USD/JPY remains on the upside for the moment. Current rise from 127.20 is in progress to retest 151.93 high. On the downside, however, firm break of 147.31 support will should confirm short term topping, and turn bias to the downside for 145.88 support and below.

In the bigger picture, while rise from 127.20 is strong, it could still be seen as the second leg of the corrective pattern from 151.93 (2022 high). Rejection by 151.93, followed by break of 137.22 support will indicate that the third leg of the pattern has started. However, sustained break of 151.93 will confirm resumption of long term up trend.

Dollar, although retaining its strength, is witnessing mild deceleration in upside momentum as US session starts. The spotlight now shines on any potential progress within the US Congress to prevent a partial government shutdown looming this Sunday. While the notion of a shutdown isn't unfamiliar in the US, having occurred 14 times since 1981, this instance carries heightened significance. Moody's recent warning accentuates this, indicating that a shutdown now could underline how escalating political divides are deteriorating the nation's fiscal position.

Focusing on other currencies, Euro emerges as today's frontrunner, with the Yen and Dollar trailing closely. On the other end of the spectrum, Canadian Dollar appears to be the most underwhelming performer, with Sterling and Aussie not faring much better. Swiss Franc and Kiwi present a mixed picture for the time being.

Technically, EUR/GBP is having another take on 0.8700 structural resistance today. Decisive break there will strengthen the case that whole corrective fall from 0.9267 has completed with three waves down to 0.8491. That would turn near outlook bullish for further rise to 0.8874/8977 resistance zone. Any upside acceleration in EUR/GBP could help cushion Euro's decline against Dollar.

In Europe, at the time of writing, FTSE is up 0.21%. DAX is down -0.62%. CAC is down -0.66%. Germany 10-year yield is down -0.020 at 2.780. Earlier in Asia, Nikkei dropped -1.11%. Hong Kong HSI dropped -1.48%. China Shanghai SSE dropped -0.43%. Singapore Strait Times dropped -0.01%. Japan 10-year JGB yield rose 0.0150 to 0.746.

ECB's Muller expects steady interest rates for the time being

ECB Governing Council member Madis Muller said today he does not anticipate any further hikes in interest rates for the time being.

The significant question is on the duration for which borrowing costs might remain at heightened levels. Expounding on this, he mentioned, "will depend on how the euro-area economy develops over the year and how the slowing of inflation plays out."

Highlighting the current economic climate, Muller stated, "Right now, we see that the economic situation is relatively weak in the euro area as a whole."

He, however, expressed a cautious optimism about the region's economic future, noting the potential for modest improvements. "

Looking forward, it could start improving slightly. If the recovery is slower, then that means smaller pressures in terms of inflation," Muller added.

Japanese officials weigh in on Yen's slide as it approaches 149 against Dollar

This week's decline of Yen against Dollar, which seems poised to breach 149 mark, has brought remarks from Japanese officials into sharp focus. Market participants are keen to decipher indications of when Japan might transition from verbal caution to active intervention, even though it's clear that Japan wouldn't pre-announce such a move.

Finance Minister Shunichi Suzuki, reiterating his consistent position, stated today, "Foreign exchange rates should be determined by market forces, reflecting fundamentals."

Suzuki emphasized that "Excessive volatility is undesirable," and assured that the government is monitoring the currency fluctuations with a "high sense of urgency". "We will respond as appropriate to excessive volatility without ruling out any options," he added.

Echoing Suzuki's sentiments, the newly appointed Economy Minister, Yoshitaka Shindo, stressed the significance of stable currency movements that mirror economic realities.

Pointing out the multifaceted impact of the Yen's position, Shindo elaborated, "Weak Yen has various effects on economy such as raising import costs for consumers, improving competitiveness of exporters."

With these comments, the stage is set for a heightened scrutiny of Japan's potential interventions in the currency market. Market participants will no doubt remain vigilant to further remarks and actions by Japanese officials in the coming days.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 148.43; (P) 148.70; (R1) 149.15; More...

Intraday bias in USD/JPY remains on the upside for the moment. Current rise from 127.20 is in progress to retest 151.93 high. On the downside, however, firm break of 147.31 support will should confirm short term topping, and turn bias to the downside for 145.88 support and below.

In the bigger picture, while rise from 127.20 is strong, it could still be seen as the second leg of the corrective pattern from 151.93 (2022 high). Rejection by 151.93, followed by break of 137.22 support will indicate that the third leg of the pattern has started. However, sustained break of 151.93 will confirm resumption of long term up trend.

Economic Indicators Update

Hello fellow traders. In this technical article we’re going to take a look at the Elliott Wave charts charts of AUDUSD forex pair published in members area of the website. As our members know AUDUSD has recently made recovery against the 0.6520 peak that has unfolded as Elliott Wave Double Three Pattern. It made clear 7 swings from the lows and completed correction at the extreme zone . In further text we’re going to explain the Elliott Wave pattern and trading strategy

Before we take a look at the real market example, let’s explain Elliott Wave Double Three pattern.

Elliott Wave Double Three Pattern

Double three is the common pattern in the market , also known as 7 swing structure. It’s a reliable pattern which is giving us good trading entries with clearly defined invalidation levels.
The picture below presents what Elliott Wave Double Three pattern looks like. It has (W),(X),(Y) labeling and 3,3,3 inner structure, which means all of these 3 legs are corrective sequences. Each (W) and (Y) are made of 3 swings , they’re having A,B,C structure in lower degree, or alternatively they can have W,X,Y labeling.

AUDUSD 1 Hour Elliott Wave Analysis 09.20.2023

AUDUSD made 5 waves down from the 0.652 peak and now correcting that cycle. The pair is giving us (ii) blue recovery that is unfolding as Elliott Wave Double Three Pattern. Correction has wxy red inner labeling. The extreme zone has been already reached at 0.64718-0.64938. However, we expect to see another leg up to complete 7 swings. It’s important that correction ends below 0.65207 peak. We can see either decline toward new lows or larger 3 waves pull back at least. Invalidation for the current count would be break above 0.65207

AUDUSD 1 Hour Elliott Wave Analysis 09.20.2023

AUDUSD made proposed leg up and complete 7 swings structure. Previous high: 0.65207 held well during the correction. The pair found sellers at the extreme area and we got decline as expected. Current view suggests ((iv)) black recovery completed at 0.65101 high. As far as the price holds below that peak, further weakness should follow.

ECB Governing Council member Madis Muller said today he does not anticipate any further hikes in interest rates for the time being.

The significant question is on the duration for which borrowing costs might remain at heightened levels. Expounding on this, he mentioned, "will depend on how the euro-area economy develops over the year and how the slowing of inflation plays out."

Highlighting the current economic climate, Muller stated, "Right now, we see that the economic situation is relatively weak in the euro area as a whole."

He, however, expressed a cautious optimism about the region's economic future, noting the potential for modest improvements. "

Looking forward, it could start improving slightly. If the recovery is slower, then that means smaller pressures in terms of inflation," Muller added.

The British Pound lost ground against the Dollar for the fifth consecutive session, falling below the 1.2200 level. GBPUSD is down 4% since the beginning of the month, when pressure on the Pound intensified, and 7.3% from July’s peak.

Fundamentally, the latest phase of the Pound’s sell-off is due to the Bank of England’s softer-than-expected response to the latest inflation report. The technical reason is the break below the 200-day moving average, which has prompted some key market participants to revise their long-term outlook.

The last time the GBPUSD was this oversold on the RSI was about a year ago. This indicator has fallen as low as 20% on a daily timeframe. Last year, it was only lower for three days at the end of September, followed by an impressive reversal.

However, the situation is not directly comparable. Then, there was a real exodus from the Pound, with a fall to historic lows of just over 1.03. The current decline is similar to what we saw in May 2018 or October 2016. GBPUSD then temporarily recovered 40-50% of the initial losses before resuming the downward movement.

From current levels, a corrective bounce in the Pound could take the pair back to 1.2320, an area of previous support with a high probability of becoming resistant. A more ambitious target for the bulls is 1.2430, with a 200-day moving average and two downward reversals, in December and in January.

• Inflation data in the spotlight as the market prices in rate cuts
• The ECB kept the door open to more rate hikes, but growth remains a big thorn
• German CPI due out on Thursday; the euro area aggregate on Friday (09:00 GMT)

Has the ECB hiked for the last time?

Contrary to the other key central banks, the ECB announced another rate hike at its September meeting. The statement and the accompanying press conference did not differ much from the message coming from the recent Jackson Hole gathering as President Lagarde, and numerous hawks after the meeting, has tried to keep the door open to another rate hike if needed. However, the market does not appear convinced as the next rate move is expected to be a rate cut. Understandably, most ECB doves have also come out, insisting that the ECB has done enough.

As the September ECB staff projections showed headline inflation dropping to 2.1% by 2025, and core inflation a tad higher at 2.2%, one can say that the ECB is probably not there yet. And at this point, the discussion about the growth outlook comes in. The market believes that a stagnant economy, and potentially a short-term recession, will persist, increasing the possibility of inflation slowing down even more aggressively. This expectation is mostly confirmed by the most recent PMI figures.

ECB is aware of the grim growth outlook

However, Lagarde made it clear that the ECB is aware that the rough patch will continue in the fourth quarter of 2023, spilling over into 2024 as well. And despite this grim outlook, the ECB opted to hike, potentially fearing that the current inflation deceleration could be temporary. Considering the oil price performance over the past two months, these fears could materialize going forward. Additionally, a couple of weeks ago we got an interesting comment from Bank of Japan member Tamura. He commented that Japan's inflation is likely to slow for the time being, and then accelerate moderately again. If this applies to the euro area economy as well, then the ECB is probably sensible in keeping an open mind at this juncture.

Inflation still matters

In this context, on Thursday we will get the preliminary print for German inflation with the euro area aggregate figures released on Friday. Regarding Germany, the market is currently forecasting a significant deceleration at the annual pace of increase from 6.1% in August to just 4.6% in September. If confirmed, this will be the lowest headline figure since October 2021, a strong sign that the ECB’s monetary policy stance is working. Consequently, the euro area aggregate print is also expected to record a slowdown but less dramatic. The headline figure is seen easing to a 4.5% YoY growth from 5.2% in August, with the core component forecast to slow to an annual growth of 4.8%.

What does that mean for the ECB and the euro?

Unfortunately for the hawks, the ECB has reached the stage where an upside surprise in inflation is not sufficient justification for a rate hike at the next meeting. Other pieces of the economic puzzle i.e. growth outlook, wage developments and oil price action must align in order to increase the possibility of an inflation overshoot and eventually force the ECB to react. However, in the case of a stronger inflation print this week, the euro stands to benefit against the US dollar. A move towards the 1.0720 area could clearly please the euro bulls but these gains might prove short-lived if the incoming data continue to paint a grim growth picture.

On the flip side, the barrier for rate cuts remains high. However, certain ECB members have started to mention the word “cut” which suits the market’s intentions. We will gradually see more "rate cut" comments if there is a downside surprise at this week’s CPI figures. This outcome could bring forward the currently priced-in rate cuts and thus allow the euro-dollar pair to continue its aggressive downward trend. A break of the busy 1.0481-1.0571 area could open the door to a more protracted move towards 1.0315.

After the recent strong turn down on gold we adjusted the wave count and think that the price action from the July low is wave B, but can still meet higher prices if we consider a running flat or possibly even running triangle scenario since a drop from 1990 can be a complex w-x-y in subwave (B). Because of a recent sharp drop in the 4-hour chart from around 1950 at the start of September, it's a higher probability for a bearish running triangle pattern within wave B rather than a flat. In fact subwave (D) is also finished now followed by wave (E) that stoped at the 61.8% Fib resistance from here we can see nice turn, towards the lower side of a pattern. Keep an eye on the red trendline support now and the 1900 area; break below that zone will confirm a new drop for wave C, possibly even to around 1850 or lower.

• BoJ Ueda says 2% inflation target not yet achieved
• USD/JPY pushes above 149

The Japanese yen is unchanged on Tuesday, trading at 148.85.

BOJ’s Ueda says monetary policy to continue

The Bank of Japan maintained its policy settings on Friday, which really should not have been all that surprising, given the dovish messages that BoJ Governor Ueda and other BoJ members have been sending out for weeks. The BoJ does not appear to be in any rush to phase out its ultra-loose stimulus, given the weakness in Japan’s economy. Domestic consumption remains weak and the slowdown in the global economy is hurting the critical export sector.

BoJ Governor Ueda reiterated this stance on Monday, stating that the 2% target of “stable, sustainable” inflation was not yet in sight. Ueda acknowledged that inflation had exceeded 2% for a “prolonged period”, but that was not enough to indicate that the target of stable and sustainable 2% inflation had been achieved. Ueda added that the BoJ would continue to patiently maintain its monetary stance.

Inflation has remained above 2% for close to 1.5 years, but that does not seem sufficient for the BoJ. Earlier today, the BoJ Core CPI index, which is closely monitored by the central bank, remained unchanged at 3.3% in August, above the market consensus of 3.2%.

The yen has paid the price for the BoJ’s insistence on maintaining an ultra-loose policy and has had only one winning week against the dollar since July. The US/Japan rate differential continues to rise as Japanese yields stay put while US Treasury yields continue to move higher. USD/JPY broke above the 149 line on Tuesday and the symbolic 150 level seems very close at hand. Japanese officials have responded with some rhetoric about their concern over the depreciating yen and the threat of intervention is rising as the yen falls lower.

USD/JPY Technical

• There is resistance at 149.19 and 149.93
• USD/JPY tested support at 148.79 earlier. Below, there is support at 148.05

The yield on 10-year bonds exceeded 4.5% per annum – a 16-year high. The demand for them was promoted by:

→ tough statements from the Fed last week that the high base interest rate will remain as long as necessary. Moreover, Minneapolis Fed President Neel Kashkari said he expects another increase;

→ concerns related to the likelihood of a US government shutdown on October 1. At the same time, Moody's issued a stern warning, jeopardizing the country's triple-A rating.

It can be assumed that investors choose bonds when forming a portfolio of protective assets. This puts pressure on the gold, which “loses its shine” in their eyes.

Thus, the XAU/USD daily chart shows that the price of gold continues the downward trend that has been going on since spring. Wherein:

→ the price of gold actively interacts with the level of 1,947. In July, this level acted as support, but in August this status changed. And the candle of September 20 confirms the dominance of the bears — the price failed to stay at the achieved heights. It was more like an intraday emotional movement that did not reflect the intrinsic value of gold;

→ so far, the price is near the median line of the channel, where supply and demand tend to balance, so this reduces the likelihood of sharp spikes in volatility;

→ But the psychological level of USD 1,900 per ounce is getting closer. But if in July the price rebounded sharply from it, then in August it made a delay, falling below 1,900. If the pressure on gold continues, then the bears may attempt a new attack on the psychological level and it is possible that the price may drop to the lower limit by the end of the year downward channel.

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