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The USD/JPY wave 3 (purple) is part of a larger bearish correction of wave C (pink) of a wave E (purple) triangle within wave B (red).

The USD/JPY will eventually completethe wave 3 (blue) and make a bullish retracement within the downtrend. The Fibonacci retracement levels of wave 4 (blue) are expected to act as resistance. Especially the 23.6% and 38.2% Fibs are usually bouncing spots for a wave 4.

Ethereum is attempting to recover higher in early Wednesday trading, after finding strong weekly technical resistance from the $158.00 level. The ETHUSD pair still retains an intraday bullish bias while trading above the $126.00 level, which represents neckline support from an inverse head and shoulders pattern. If buyers can surpass the $142.00 level, a further test of the $158.00 level appears possible.

The ETHUSD pair is bullish while trading above the $126.00 level, key resistance is now found at the $142.00 and $158.00 levels.

If ETHUSD pair falls below the $126.00 level, sellers may test the $120.00 and $100.00 support levels.

The British pound is gaining bullish momentum against the US dollar on Wednesday, following a sustained break above the 1.2700 resistance level. The GBPUSD pair is also trading above its key one-hundred period moving average on the four-hour time frame, which has provided strong technical resistance since November. The former weekly trading high, at 1.2738, remains the next upside hurdle for intraday buyers.

The GBPUSD pair is strongly bullish while trading above the 1.2700 level, buyers may now test towards the 1.2738 and 1.2770 levels.

If the GBPUSD pair trades below the 1.2700 level, sellers may test the 1.2680 and 1.2666 support levels.

The US dollar remains under downside pressure against the Japanese yen on Wednesday, following Monday’s steep drop towards the 110.26 support level. The sentiment surrounding the USDJPY pair is extremely bearish while price trades below the 110.80 level. The 109.76 support level is the most important technical level to watch if the 110.00 support level is broken.

The USDJPY pair is strongly bearish while trading below the 110.80 level, key technical support is now found at the 110.26 and 109.76 levels.

If USDJPY pair trades above the 110.50 level, buyers may test towards the 110.80 and 111.00 levels

Daily Pivots: (S1) 138.78; (P) 139.87; (R1) 140.86; More...

GBP/JPY drops to as low as 139.59 so far and intraday bias remains on the downside for 139.29/47 key support zone. Decisive break there will carry larger bearish implication. On the upside, above 141.17 support turned resistance will turn intraday bias neutral first. But near term outlook will stay bearish as long as 143.93 resistance holds.

In the bigger picture, as long as 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) holds, up trend from 122.36 (2016 low) could still extend beyond 156.69 high. However, decisive break of 139.29/47 will suggest that such up trend is completed and turn outlook bearish. In that case, next target is 61.8% retracement at 135.43.

Daily Pivots: (S1) 125.32; (P) 125.71; (R1) 126.06; More....

EUR/JPY's decline is in progress and reaches as low as 125.52 so far. Intraday bias remains on the downside at this point. Current fall from 133.12 should target 124.08/89 support zone next. On the upside, break of 126.74 minor resistance will turn intraday bias neutral and bring consolidations first.

In the bigger picture, with the current decline, focus would be back on 124.08 key resistance turn supported holds. As long as 124.08 key resistance turn supported holds, larger up trend from 109.03 (2016 low) could still resume. Firm break of 137.49 structural resistance will target 141.04/149.76 resistance zone next. However, decisive break of 124.08 will argue that such rise from 109.03 has completed and turn outlook bearish. In that case, deeper fall would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90.

General Trend:

• Equities markets opened mixed with Australia, New Zealand and Hong Kong still closed. S&P futures fell 0.8% in the first hour of trade following their re-open. Currencies were mixed.
• BoJ Oct meeting minutes show a divide over the effects of easing, while the minutes from the bond market group showed they want to see BOJ accelerate JGB purchase reduction
• Chinese press processed information that came out of latest official meetings including support for private sector, equalizing regulation for domestic and foreign companies and shortening Market Access Negative List significantly
• China PBoC adviser Sheng Songcheng: China will not resort to large scale monetary stimulus in 2019, doing so would risk re-heating the property market; room to further cut the reserve requirement ratios (RRR) but not likely to lower the benchmark interest rates - 21st Century Business Herald
• Japan officials released Nissan board member Greg Kelly—a key lieutenant of former chairman Carlos Ghosn—on bail five weeks after he was arrested with Ghosn on allegations of financial impropriety
• Hong Kong wine dealer, Madison Holdings (trades on GEM board), acquires 67.2% stake in Japan regulated cryptocurrency platform BitOcean from independent 3rd parties for ¥1.68B and ~¥1.68B in additional fees - SCMP
• President Donald Trump dug in and said lawmakers must approve funding for his border wall if they hope to end the government shutdown, a sign the impasse may not be quickly resolved when Congress returns to session after the holidays
• US stock market experienced sharp losses the day before Christmas after investors reacted negatively to Treasury secretary Steven Mnuchin’s unusual effort to reassure the market about Wall Street banks’ liquidity

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.8%
• (JP) Bank of Japan (BOJ) Gov Kuroda: Must seek most appropriate policy while balancing benefits and costs of policy; affirms BOJ to do upmost to reach price target
• 8698.JP Issues statement to explain cryptocurrency exchange business investors are concerned about
• 6753.JP Said to be planning to spin off chip unit in Spring – Nikkei (later denied being source of report)
• (JP) Bank of Japan (BOJ) Oct 30-31st Meeting Minutes: Most members shared view momentum toward achieving 2% inflation is being maintained
• (JP) Japan Currency Head Asakawa: FX turbulence has been rising; Govt is ready to curb yen volatility; will closely watch to see if speculative activity is behind volatility - US press
• 7201.JP Updates corporate governance code, considering selling stake in Renault
• (JP) Bank of Japan (BOJ) meeting minutes from Dec 5-7th bond market group meeting: Want BOJ to speed up JGB purchase reduction
• (JP) Japan PM Abe: No change in stance of treating economy as top priority; economic policies created situation that is not deflation
• (JP) Japan MoF sells ¥2.1T v ¥2.1T indicated in 0.10% 2-yr JGBs, avg yield: -0.127% v -0.134% prior, bid to cover 5.36x v 4.66x prior

Korea

• Kospi opened -1.0%
• (KR) South Korea Financial Services Commission (FSC): small business owners to have easier access and lower rates on loans in 2019, total loans to small business expected at KRW1.8T – Yonhap
• (KR) President Trump: Christmas Eve briefing with my team working on North Korea – Progress being made. Looking forward to my next summit with Chairman Kim! – tweet
• (KR) North Korea leader Kim expected to reaffirm his denuclearization commitment and call for the sincere implementation of June's summit agreement with US President Trump in his New Year’s address – Yonhap
• (KR) South Korea Fin Min Hong: To make efforts to reduce impact from minimum wage hike; planning to extend grace period for shorter working hour system – press
• (KR) Bank of Korea (BOK): Global market instability rose sharply and authorities will take stabilizing action if needed
• 005930.KR Have not discussed cutting production in China - email statement
• (KR) South Korea Finance Ministry reiterates to stake stern measures in case of market instability, closely monitoring financial and FX markets
• (KR) Bank of Korea (BOK) keeps open ended inflation (CPI) target unchanged at 2% for 2019 and 2020; to review every 2-yrs; to keep accomodative monetary stance to prop up the economic recovery – annual monetary report
• (KR) Bank of Korea (BOK Deputy Gov Chung: We've been resetting the inflation target rate every three years for a decade; now the inflation has moved steadily for the 10-yr period like advanced countries, will not change 2% inflation target rate unless there is a particular reason - press conference after annual report

China/Hong Kong

• Hang Seng closed, Shanghai Composite -0.2%
• (CN) China PBoC adviser Sheng Songcheng: China will not resort to large scale monetary stimulus in 2019, doing so would risk re-heating the property market; room to further cut the reserve requirement ratios (RRR) but not likely to lower the benchmark interest rates - 21st Century Business Herald
• (CN) China National Development and Reform Commission and the Ministry of Commerce announces shortened Market Access Negative List as part of further move to standardize regulations in a transparent way and help level the playing field for foreign enterprises and private firms - China Daily
• (CN) China State Council reiterates will support private sector in 2019: Will make greater efforts to reduce taxes, fees, and financing costs, accelerate IPOs
• (CN) China PBoC sets yuan reference rate: 6.8845 v 6.8919 prior
• (CN) China PBoC Open Market Operation (OMO): Injects CNY30B in 7-day and 14-day reverse repos v CNY50B injected in 14-day reverse repos prior; Net: CNY10B drain v CNY90B drain prior
• 600221.CN To use up to CNY1.55B in unused funds to replenish working capital within the next 12-months after board approval
• (CN) China Association of Automobile Manufacturers official: China will cut electric vehicle (EV) subsidy by 30% in 2019 - China Securities Times

Australia/New Zealand

• ASX 200 closed
• (AU) Australia shopping on Boxing day expected to reach A$2.49B, a fresh record – AFR
• (AU) Hailstorm in Sydney last Thursday likely to be the most expensive weather event in 2018, expected to cost hundreds of millions - AFR

Other Asia

• (ID) Bank Indonesia standing ready to intervene in bond market if needed; continues to intervene in spot currency market
• (SG) Singapore Nov Industrial Production M/M: 2.8% v 0.7%e; Y/Y: 7.6% v 4.2%e

North America

• (US) President Trump said to be getting increasingly frustrated with Treasury Sec Mnuchin, while still publicly supporting him - US press

Europe

• (RU) Russia Fin Min Siluanov: Planning to issue euro bonds and maybe yuan bonds in 2019

Levels as of 12:50ET

• Hang Seng closed; Shanghai Composite -0.4%; Kospi -1.6%; Nikkei225 -0.4%; ASX 200 closed
• Equity Futures: S&P500 +0.5%; Nasdaq100 -0.7%, Dax closed; FTSE100 closed
• EUR 1.1420-1.1382; JPY 110.67-110.14 ; AUD 0.7054-0.7033;NZD 0.6738-0.6721
• Feb Gold +0.3% at $1,276/oz; Feb Crude Oil +0.2% at $42.62/brl; Mar Copper -0.4% at $2.65/lb

Daily Pivots: (S1) 0.8913; (P) 0.8978; (R1) 0.9055; More...

EUR/GBP is staying in consolidation from 0.99086 and intraday bias remains neutral first. Downside should be contained by 0.8931 resistance turned support to bring another rise. On the upside firm break of 0.9098 resistance will extend the whole rise from 0.8655 to 0.9304 key resistance next. However, considering bearish divergence condition in 4 hour MACD, firm break of 0.8931 will indicate near term reversal and target 0.8810 support and below.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). It should be in medium term rising leg for 0.9304. Meanwhile, in case of another fall, down side should be contained by 0.8620/55 support zone to bring rebound.

Daily Pivots: (S1) 1.6130; (P) 1.6180; (R1) 1.6240; More....

EUR/AUD's rally resumed after brief consolidate. Despite diminishing upside momentum as seen in 4 hour MACD, there is no sign of topping yet. Intraday bias is now on the upside for retesting 1.6357 high. At this point, we'd be cautious on topping around there to bring pull back. On the downside, break of 1.6024 support will now indicate short term topping and bring lengthier consolidation.

In the bigger picture, no change in the view that 1.6357 is a medium term top. But the strong rebound ahead of 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313) suggests price actions from 1.6357 are developing into sideway consolidation, rather than a deep correction. The range of 1.5271/6357 is likely set for the consolidation. And we don't expect a break of the range any time soon. But decisive break of 1.6357 will resume the larger up trend from 1.3624 (2017 low) to 1.6587 (2015 high).

Daily Pivots: (S1) 1.1151; (P) 1.1285; (R1) 1.1397; More...

EUR/CHF is staying above 1.1224 low and intraday bias remains neutral first. But current development now suggests that fall from 1.1501 is still in progress. On the downside, break of 1.1224 will resume such decline for 1.1173 low. On the upside, though, break of 1.1348 resistance should confirm near term reversal and target 1.1501 resistance.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.