Sample Category Title

In accordance with expectations, until release of information on the US PPI the currency rate was slowly fluctuating near the 55- and 100-hour SMAs. But since the data was better than analysts' expected the pair broke through the 38.2% Fibonacci retracement level and once again ended up in support zone located between the 1.1730 and 1.1722 marks.

Until release of an update on the American inflation the rate is expected to continue fluctuating near the upper boundary of a minor descending channel. In case of disappointing result, depreciation of the buck might elevate the pair up to the 1.1800 level.

However, the rate is still expected to plunge to the area between the 23.6% retracement level at 1.1681 and the monthly S2 at 1.1652 due to alleged interest rate hike.

Until release of data on the American PPI, the cable was moving below the monthly PP, as expected. But then publication of better than anticipated result led to active appreciation of the buck, which pushed the rate through support zone located between the 1.3338 and 1.3331 marks.

Accordingly, yesterday's trading session the pair ended near the 1.3300 psychological level. As this support line crosses the bottom boundary of a senior descending channel, the Pound should try to restore some value today.

However, the fact that it is simultaneously moving in other two descending channels makes such scenario unlikely. Moreover, the pair constantly experiences pressure from the slipping 55- and 100-hour SMAs. But most importantly is that expectations of the upcoming interest rate hike increases bearish sentiment that might result in a deep plunge to the 1.3230 mark.

Despite release of better than expected US PPI data, bulls could not push the pair through resistance zone located between the 113.67 and 113.74 marks. Accordingly, this barrier triggered a rebound that lasted until the pair reached the 100-hour SMA.

Until publication of an update on the American inflation, the currency rate is expected to move horizontally between the 55- and 100-hour SMAs. In case of a negative result, the pair is likely to plunge to support zone located near the 50% Fibonacci retracement level at 113.00.

However, the subsequent Fed decision is likely to lead to aggressive acquisition of the buck, which will drive the rate above the 114.00 mark. In best case scenario the currency rate might end up this trading session near July maximum located at 114.50.

Due to anticipation of the upcoming decision on the interest rate hike, the exchange rate continued to move horizontally between the 55-hour SMA and the monthly S2 from the top as well as the 50% Fibonacci retracement level and the weekly S1 from the bottom.

Until release of data on the American inflation the rate is expected to continue its steady movement around the 1,244.00 mark. Subsequently, the pair might temporarily surge to the 100-hour SMA located near the 1,250.00 level.

However, the fact that southern side is practically barrier-free and the rate is fluctuating in a two-week long descending channel suggests that the further advance to the top is unlikely.

The British Pound received only temporary support from the UK data indicating the country's inflation at the six-year high in November. The GBP/USD exchange rate rose 17 pips or 0.12%, but weakened rapidly and failed to sustain the position, continuing trading in the 1.3320 area.

Britain's inflation accelerated growth pace unexpectedly, causing a tighter squeeze of household incomes. The Office for National Statistics stated that consumer inflation hit a yearly rate of 3.1% in November, driven by computer games, air fares and chocolate prices, reflecting the Sterling's plunge after the Brexit vote. The current rate, being more than 1% above the BoE target, would force the Bank's Governor to write a letter about further steps to the UK Finance Minister.

The Euro slipped against the US Dollar on the report, revealing some signs of pessimism among the German investors this month. The EUR/USD currency pair lost 13 base points or 0.11%, to touch the presumed level of support at 1.1770.

German investors' mood worsened more than anticipated in December, reflecting uncertainties over the regulations of a government to be formed, reforms in the EU and Britain's quit from the bloc. The Mannheim-based Centre for European Economic Research stated that its German Economic Sentiment Index came in at 17.4 points for the current month, compared with 18.7 in November. Meanwhile, a separate gauge of the current conditions' assessment rose to 89.3.

Big blow to Trump pushed dollar lower
Fed's interest rate hike already priced
Oil moved higher on back of inventary data
Gold under pressure ahead of Fed announcement

Getting anything meaningful across the line and facing failures may become even more regular routine for President Trump due to the victory of Doug Jones, a Democrat and a winner of the Alabama Senate race.

President Trump has faced many failures throughout this year mainly because his own party has not supported his views. Investors have even more negative views about the prospects of any GOP’s economic agenda changing into a law under the newly developed situation. Jone’s win would only bring more complications for president Trump because this is going to bring another blow for GOP Senate majority down to 51 seat. The tax overhaul deal, which has been the primary reason in the recent week behind the rally for the US equity markets, could start to see some gas coming out.

European futures are trading somewhat flat and the Asian session has failed to provide any clear direction and the projected win of Democrats in Alabama is not providing any aid either. Investors are going to remain mostly on the side lines as they await the decision from the Federal Reserve Bank. Although, it is widely known and priced in the market that the Fed is going to increase the interest rate by another twenty five basis points. However, what really matters for the dollar bulls and the equity markets is the future path of interest rate in 2019 which is currently divided between two or three rate hikes.

Investors would also like to know some information from the Fed if they are going to allow any room in their monetary policy if the tax overhaul does become a law.

In the commodity space, investors have jumped back in to the oil trade as the inventory data has suggested that the stock piles have dropped more than indicated. But we do not expect any major upside here because the US supply of oil in 2019 may outpace the demand, and it would impact the OPEC’s efforts to fade the global oil glut.

Precious metal is also trading mostly flat and we expect no major moves ahead of the Fed announcement. If the Fed comes out of the gate with more hawkish views on the economy and see inflation improving, it could impact the dollar index. Any further strength in the dollar index would push the gold price lower.

GBP/USD – 1.3350
 

Although cable rebounded last week to as high as 1.3521, renewed selling interest emerged there and the British pound has slipped again, retaining our view that further consolidation below 1.3550 would be seen and mild downside bias remains for weakness to 1.3300, then 1.3470, however, a break of indicated support at 1.3221 is needed to signal top has been formed at 1.3550, bring further fall towards 1.3250-60 later.

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has possibly ended at 1.7192, below support at 1.4232 would add credence to this count, then further fall to 1.4000 level would follow but reckon downside would be limited to 1.3655 support and price should stay above previous support at 1.3500.

On the upside, whilst initial recovery to 1.3400-10 cannot be rude out, reckon 1.3430-40 would limit upside and bring another decline later. Above said resistance at 1.3521 would abort and bring retest of 1.3550, break there would signal the rise from 1.3027 is still in progress for gain to 1.3595-00 but break there is needed to confirm early upmove has resumed for retest of 1.3658 resistance first.

 
Recommendation: Hold short entered at 1.3470 for 1.3270 with stop lowered to break-even. 

 
Longer term - Cable's rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver with wave (A) ended at 1.3500 (23 Jan 2009), wave (B) itself is labeled as A: 1.6733, triangle wave B: 1.4813 and wave C as well as top of wave (B) ended at 1.7192 (2014), hence the selloff from there is an impulsive wave (C) with wave I : 1.4566, wave II 1.5930, an extended wave III is unfolding and already exceeded our downside target at 1.3500 and 1.3000, hence weakness to 1.2500 and possibly 1.2000 cannot be ruled out, however, price should stay well above psychological level at 1.0000.

Cable stands at the back foot on Wednesday and pressuring strong support at 1.3300 zone (Tuesday's low / daily Kijun-sen) which contained Tuesday's weakness.

Bearish daily candles with long upper wicks, left on Mon / Tue, weigh on the price for break through 1.3300 handle and extension towards top of widening daily cloud 55SMA (1.3253), which marks strong support.

Daily techs are losing traction and building more support for bears, however, strongly oversold slow stochastic on daily chart requires caution.

UK jobs data are key event for sterling today. Jobless claims are expected to rise in November (3.2K f/c vs 1.1K in Oct) while unemployment is forecasted to dip to 4.2% in Oct from 4.3% previous month.

Focus is on average earnings which are expected to rise to 2.5% in Oct from 2.2% previous month.

Cable could come under increased pressure if UK earnings fall below forecast today, while upbeat numbers would boost pound for stronger bounce from 1.3300 support zone.

Res: 1.3335, 1.3352, 1.3379, 1.3415
Sup: 1.3300, 1.3253, 1.3233, 1.3190

The Euro remains in red in early Wednesday's trading and keeps near-term risk skewed to the downside, following limited upside attempts in late Asian and subsequent easing in early European trading. Tuesday's weakness tested daily cloud base which marks key near-term support, but without break lower. Close below 55SMA on Tuesday was bearish signal for renewed attack at 1.1709/06 (Fibo 61.8% of 1.1553/1.1961 upleg/daily cloud base), break of which would generate strong signal for continuation of bear-leg from 1.1961 (27 Nov high). Daily MA's are full bearish setup, momentum studies are in the negative territory and slow stochastic turned sideways after emerging from oversold zone, supporting bearish scenario. Broken 55SMA capped overnight's recovery attempts and marks strong resistance at 1.1758, followed by 100SMA (1.1802) and falling 10SMA (1.1807) which guard the upper breakpoint at 1.1823/28 (daily cloud top/Tenkan-sen). Fed rate decision is in focus as key event, with markets having high expectations that the US central bank will raise interest rates today for the third time this year.

Res: 1.1758, 1.1792, 1.1807, 1.1823
Sup: 1.1734, 1.1706, 1.1661, 1.1650