Sample Category Title

EUR/JPY - 133.10

Original strategy:

Buy at 132.70, Target: 134.30, Stop: 132.20

Position: -
Target: -
Stop: -

New strategy :

Buy at 132.70, Target: 134.30, Stop: 132.20

Position: -
Target:  -
Stop:-

As the single currency has retreated after rising to 133.89, suggesting consolidation below this level would be seen and pullback to 133.00 is likely, however, reckon 132.60-70 would limit downside and bring another rise later, above said resistance would extend the rebound from 132.26 to 134.00-05, break there would add credence to our view that the pullback from 134.38 has ended at 132.26 and extend gain to said resistance. Looking ahead, only a break of recent high at 134.50 would retain bullishness and signal a resumption of early upturned has occurred, bring headway to 135.00-10 first.

In view of this, we are looking to buy euro again on dips. as 132.60-70 should limit downside. Only break of said support at 132.26 would abort and shift risk back to the downside for the fall from 134.38 towards 131.90-00, then test of support at 131.72 which is likely to hold on first testing.

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.

The British Pound's appreciation against the Dollar was short lived during Tuesday's trading session as investors evaluated the likely impact of UK inflation climbing to its highest level in almost six years.

Consumer price inflation rose 3.1% in November, up from 3.0% in October, on the back of rising costs of food, transportation, and clothing. With inflation checking in at more than 1% above the Bank of England's 2% target, Mark Carney will have to pen out an explanatory letter to Chancellor Philip Hammond. Taking a closer look at Sterling's price action following the release, there is a suspicion that the depreciation was based on investor expectations over November's inflation figures having little impact on the BoE rate path.

Today's main event risk for the British Pound will be the UK labour report which is expected to show the unemployment rate hitting a new 42 year low, at 4.2% in the three months to October and average earnings jumping to 2.5% from 2.2%. Although Britain's unemployment rate remains encouraging, sentiment could easily take a hit if wage growth fails to meet market estimations. A situation where pay growth fails to pick up is likely to continue squeezing consumers, especially in view of inflation jumping to its highest level in almost six years at 3.1%.

Sterling was slightly shaky against the Dollar during Wednesday's trading session, with prices trading around 1.3320 as of writing. A disappointing UK jobs report may encourage bears to challenge 1.3300 which could result in a further decline towards 1.3230. Alternatively, bulls need to break back above 1.3380 to open a path to 1.3430.

Commodity spotlight – Gold

Gold was thoroughly pummelled by sellers last week, thanks to a growing sense of optimism over US tax reforms. The yellow metal extended losses during Tuesday's trading session, with prices tumbling towards a near five-month low at $1237 as the US Dollar stabilized. With investors marching into the trading week with a risk-on attitude, Gold remains susceptible to further losses.

Much attention will be directed towards the FOMC policy statement on Wednesday, which has the ability to impact Gold's trajectory this week. While it is widely expected that the Federal Reserve will be raising US interest rates, much focus is likely to be directed towards the tone of the meeting. A hawkish Fed meeting may expose the zero-yielding metal to further losses, with $1230 acting as a level of interest. Alternatively, a statement which expresses concerns over low inflation and a failure to offer fresh insight into the policy outlook beyond 2017, may offer Gold a boost.

From a technical standpoint, the yellow metal remains bearish on the daily charts as there have been lower lows and lower highs. Prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. Previous support around $1250 could transform into a dynamic resistance that opens a path lower towards $1230.

Here are the latest developments in global markets:

FOREX: The dollar was losing ground relative to majors after Republicans lost a Senate seat in Alabama, resulting in a narrower Senate majority for them. Still, there were no sharp movements amongst majors as European traders were starting their trading day, with markets awaiting fresh catalysts to place their positions on a data-busy day.

STOCKS: Japanese equities retreated with the Nikkei 225 losing 0.5%; major Asian benchmarks outside Japan were posting gains though with the Hang Seng being last up by 1.6%. Euro Stoxx 50 futures were little changed at 0805 GMT with the same holding true for contracts on the Dow, S&P 500 and the Nasdaq 100.

COMMODITIES: WTI and Brent crude were rising, trading not far below $58 and $64 a barrel and adding 0.7% and close to 1.0% respectively. Gold was down, though not by much, trading around $1242 per ounce. Yesterday, the precious metal fell to its lowest since July 20, touching $1235.92.

Major movers: Dollar falls as Republicans’ Senate majority narrows; markets await fresh catalysts

The dollar’s index against a basket of currencies was 0.1% down but still not far below yesterday’s four-week high of 94.22. Democrats winning a seat in Alabama, a traditionally conservative state, is troubling Republicans who will now hold a narrower two-person majority in the Senate. This is likely to make it more challenging for them to push through the Trump administration’s agenda into law, though it is not likely to have much repercussions for tax reforms currently deliberated in Congress. Attention for the dollar now shifts to a patch of data as well as the Fed meeting which is to be completed later in the day.

The greenback was down relative to the yen, euro and sterling, though all three currencies’ gains versus the greenback were limited, with the US currency still trading not far away from multi-week highs tracked against the three rival currencies in recent days.

The antipodeans continued gaining ground relative to the greenback though their gains were not as strong as in previous days; aussie/dollar was up by 0.15% and kiwi/dollar higher by 0.1%. At its highest, aussie/dollar tracked a one-week high of 0.7580 and kiwi/dollar a one-month high of 0.6961. Australia also saw the release of some positive data on consumer sentiment earlier in the day.

Day ahead: Fed policy meeting concludes; UK wage growth might improve

The two-day Fed policy meeting concludes today with investors projecting the central bank to raise rates by 0.25 percentage points to 1.25-1.50%. However, the focus would not be on the rate announcement which is priced in by the markets, but on the monetary policy statement following the rate decision at 1900 GMT as well as on the Fed chair Janet Yellen’s last press conference at 1930 GMT; her term expires in February. Investors will be paying close attention to the central bank’s latest economic projections and will be eager to hear any updates on the path of rate increases in the coming years.

Earlier in the day, the US Bureau of Labor Statistics will publish figures on consumer prices for the month of November at 1330 GMT. The headline CPI is expected to stand at 2.2% y/y compared to 2.0% seen in the previous month. Excluding food and energy, the core index will likely remain flat at 1.8% y/y. Note that the Fed compares its inflation target of 2.0% with the core PCE index instead and adjusts its monetary strategy accordingly, as this includes a wider range of consumer products.

In the UK, employment data will be available at 0930 GMT. Analysts anticipate the claimant count to stand at 3,200 in November compared to 1,100 in October. On the other hand, October’s unemployment rate is expected to inch down to 4.2%, hitting a fresh 42-year low. Good news for British consumers would also arise from average weekly earnings including bonuses if the measure increases from 2.2% y/y to 2.5% in October, as is forecasted by analysts.

In the eurozone, growth in industrial production is anticipated to recover to 3.5% y/y in October, up from 3.3% seen previously (1000 GMT).

In oil markets, the EIA weekly report due at 1530 GMT is expected to indicate a smaller decrease in US crude oil stocks for the week ending December 8 relative to the preceding week – the decrease is estimated at 3.759 million barrels versus the previous week’s decline by 5.610m million barrels (the biggest fall in two months). Gasoline and distillate inventories are expected to rise at a softer pace by 2.457 million and 0.902 million barrels respectively.

Technical Analysis: Gold oversold and increasingly bearish

The dollar-denominated yellow metal tumbled to a five-month low of 1236.34 on Tuesday, extending its medium-term downleg from September’s high of 1357.41. Currently it is trading at oversold levels but signs of potential upside movements in the short-term are missing as the RSI is moving sideways in bearish territory below 50.

But gold bulls might drive prices higher if FOMC members adopt a dovish stance on the US economic outlook. In this case, gold could climb towards 1260.43, the 61.8% Fibonacci of the upleg from 1204.67 to 1357.41. A close above this area would turn the bias from bearish to neutral, opening the scope for a re-test at the 1281 key level (50% Fibonacci).

Alternatively, optimism on the US economy could lead to dollar strength and push the metal down to the 1230 key level, while steeper decreases would shift focus to the nine-month low of 1204.67.

Weekly
    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 7 Mar 2017
    •    Trend bias: Sideways

Daily
    •    Last Candlesticks pattern: Morning star
    •    Time of formation: 9 May 2017
    •    Trend bias: Near term up

USD/CHF – 0.9920

As the greenback found good support at 0.9735 earlier this month and has staged a strong rebound, adding credence to our view that low has possibly been formed there and consolidation with mild upside bias is seen for another test of resistance area at 0.9978-87, however, above there is needed to signal the fall from 1.0039 has ended at 0.9735, bring test of indicated resistance at 1.0018, break there would provide confirmation and bring retest of this level first.

On the downside, whilst pullback to the Tenkan-Sen (now at 0.9857) can not be ruled out, reckon 0.9830-35 would limit downside and bring another rise later. Below 0.9795-00 would risk retest of said support at 0.9735 but only a drop below this support would shift risk back to downside and signal top has been formed at 1.0039 earlier, bring retracement of recent upmove from 0.9421 to minor support at 0.9670, then 0.9642 (another support) but reckon downside would be limited to 0.9590-00 and support at 0.9565 should remain intact.

Recommendation: Buy at 0.9835 for 1.0035 with stop below 0.9735.

On the weekly chart, last week’s rebound formed a long white candlestick on the weekly chart, adding credence to our view that low has been formed at 0.9735 last month and mild upside bias remains for test of 0.9978-87 resistance, break there would confirm the pullback from 1.0039 has ended, bring a retest of 1.0039, above there would extend the rise from 0.9421 low to previous resistance at 1.0100-08, having said that, overbought condition should prevent sharp move beyond previous resistance at 1.0171 and 1.0200-10 should hold from here.

On the downside, although initial pullback to 0.9855-60 cannot be ruled out, price should stay well above support at 0.9730-35 and bring another rise later. A weekly close below there would defer and signal top is formed instead, this also suggest first leg of rebound from 0.9737 has ended and bring weakness to 0.9690-00, however, reckon support at 0.9642 would limit downside and price should stay above support at 0.9565 and the greenback shall stage another strong rebound next month.

Sunrise Market Commentary

• Rates: Corrective steepening, even if Fed holds scenario?
  We expect the US central bank to continue its tightening cycle and keep a more hawkish tone with (small) upside risks to the 2019 dot and to growth forecasts. The impressive sell-off on the front end of the yield curve suggests that some short term profit taking is possible while immediate losses at the longer end of the curve seem more likely given current positioning.
• Currencies: Fed to solidify USD downside protection
  Today, the focus for USD trading is on the Fed policy decision. A scenario of 3 rate hikes in 2018 should further protect the USD downside. However, the market as already moved in that direction of late. So, any further USD gains might remain modest.

The Sunrise Headlines

• US stock markets closed yesterday's session mixed with Nasdaq underperforming (-0.2%) and Dow Jones outperforming (+0.5%). Asian risk sentiment is positive overnight with Japan underperforming.
• Democrat Doug Jones of Alabama scored an upset win in a deeply Republican state, capturing the US Senate seat here in a special election that drove a wedge within the Republican party and gave Democrats another burst of momentum ahead of the 2018 midterm races.
• The EU warned the UK against rowing back on the agreements it made last week as leaders prepare to hand Britain its first reward in the Brexit negotiations.
• Crucial details of the Republican tax plan, including the proposed corporate rate, were in flux late on Tuesday as negotiators from the US Congress rushed to finalize the plan ahead of a self-imposed Wednesday deadline.
• A bitter EU row over imposing refugee quotas on member states has reignited, leaving leaders struggling to reach agreement on how to handle the next migrant surge.
• Japanese machinery orders bounced back in October with a faster increase than expected (5% M/M), re-affirming the resilience of capital spending - a key driver in the economy's near two-year expansion.
• Today's eco calendar contains EMU industrial production, the UK labour market report, US CPI and the Fed meeting. The FOMC is expected to raise its policy rate to 1.25%-1.50% and will release new projections for 2018, 2019 and 2020.

Currencies: Fed To Solidify USD Downside Protection

Fed to support further USD comeback?

Markets showed no clear trend in Europe yesterday. A strong NFIB small business confidence and a higher than expected PPI finally tilted the intraday balance in favour of the dollar. EUR/USD even touched a minor ST correction low but moves remained modest ahead of today's Fed decision. The dollar rally slowed at the end of the day as the US equity rally stalled. EUR/USD closed the day at 1.1742. USD/JPY failed to sustain earlier gains and finished almost unchanged at 113.55.

Asian equities opened mixed, but found a better bid later in the session. Most indices are currently trading in positive territory. Japan core October machine orders were strong (5.0% M/M), but it doesn't help Japanese equities. They underperform as USD/JPY lost further ground. The US currency is in the defensive across the board as the Republican party lost the Senate vote in Alabama, reducing its majority in the Senate to a slim 51-49. USD/JPY spiked to the 113.15 area upon the US election headlines. The pair trades currently again near 113.30. EUR/USD also rebounded overnight and trades near 1.1760.

The eco calendar contains EMU production data and US CPI. US headline CPI is expected to rise 0.4% M/M and 2.2% Y/Y (from 2.0%). Core CPI is expected at 0.2% M/M and 1.8% Y/Y (unchanged from October). The report might cause some intraday jitters in case of a surprise, but investors will remain cautious to place directional bets just hours before a key Fed meeting. The Fed is largely expected to raise its policy rate by 25 bps. We expect the dots to confirm a scenario of 3 rate hikes 2018 and 2 hikes in 2019. We don't see a strong reason for Fed governors to lower their rate expectations. Eco data remain strong and the chances on additional fiscal stimulus are growing. Dots indicating three rate hikes next year should be slightly supportive for the dollar. However, of late, interest rate markets already moved closer to this Fed scenario. It might nevertheless help to solidify USD downside protection. However, we don't expect a spectacular jump higher. For that the happen, markets probably need further confirmation on a next rate hike in March. Even so, EUR/USD should be able to break 1.1713 support. Aside from the Fed decision, there will be plenty of headlines on the outcome of the Senate vote in Alabama. We don't expect this issue to have a lasting impact on markets.

From a technical point of view: EUR/USD set a post-ECB low mid-November, but the dollar's momentum wasn't strong enough. EUR/USD settled in a directionless sideways consolidation pattern in the 1.17/19 area. A return below 1.1713 would signal an improvement in the ST USD momentum. The payrolls were unable to force this break. EUR/USD still gives no clear directional signal. Next support comes in at 1.1554 (November low). USD/JPY's momentum deteriorated early November, dropping below the 111.65 neckline. No aggressive follow-through selling occurred though. Over the previous two weeks, the pair succeeded a nice rebound, calling off the downside alert and returning to the 110.84/114.73 consolidation range. We amended our ST bias from negative to neutral. We maintain the view that a sustained break north of 115 won't be easy.

EUR/USD: USD to extend gradual rebound after Fed decision?

EUR/GBP

EUR/GBP settled in the 0.88 area

Sterling showed a diffuse picture yesterday. Headlines from UK government members suggesting that last week's Brexit was not legally binding caused quite some nervousness amongst EU officials. Sterling started with a slightly negative bias, but the move had no strong momentum. UK headline inflation was higher than expected at 3.1% Y/Y. Sterling showed some nervous swings after the publication of the report, but still didn't capture a clear trend. EUR/GBP finally declined to the 0.88 area, partially inspired by the intraday decline of EUR/USD. The pair closed the session little changed at 0.8816. Cable developed an erratic trading pattern in in the mid-1.3318.

Politics/Brexit will continue to create headlines today. UK policy makers apparently turn a bit more cautious in their comments ahead of this week's EU summit. In the UK Parliament, the voting on the UK separation bill continues. It will be interesting to see whether the UK Parliament will get a more important role in the final approval of the Brexit agreement. UK labour market data will be published. Employment is expected to decline (-40k). Average earnings ex-bonus are still expected at a low 2.2%. Sterling momentum eased since Friday's Brexit deal. We don't see a trigger from a sustained GBP-rebound anytime soon.

Recent developments pushed EUR/GBP lower in the 0.8690/0.9033 consolidation pattern. EUR/GBP tested 0.8693 support (62% retracement) on Friday, but the test was rejected. Next support comes in at 0.8653. We assume that the 0.8653/90 area won't be easy to break short-term. We hold a neutral bias on EUR/GBP short-term. We consider a return to the bottom of this range as an opportunity to reduce sterling long exposure against the euro

EUR/GBP rebounds in the established trading range despite Brexit deal

Download entire Sunrise Market Commentary

USD/CHF - 0.9919

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9906

Kijun-Sen level                    : 0.9913

Ichimoku cloud top                 : 0.9938

Ichimoku cloud bottom              : 0.9913

Original strategy :

Buy at 0.9860, Target: 0.9970, Stop: 0.9825

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9860, Target: 0.9970, Stop: 0.9825

Position : -

Target :  -

Stop : -

Although the greenback has rebounded after holding above support at 0.9890, reckon upside would be limited to 0.9950 and risk remains for another corrective fall, below said support would bring retracement of recent rise to 0.9885 (38.2% Fibonacci retracement of 0.9735-0.9978) is likely, however, downside should be limited to 0.9855-60 (50% Fibonacci retracement) and bring another rise later, above 0.9950 would suggest the retreat from 0.9978 has ended, bring retest of this level, break there would signal recent upmove has resumed and extend gain to 1.0000 but price should falter below recent high at 1.0038.

In view of this, would not chase this rise here and we are looking to buy dollar on subsequent pullback as 0.9855 support should contain downside. Only below 0.9825-30 (61.8% Fibonacci retracement of 0.9735-0.9978) would abort and signal top has been formed, bring further fall to 0.9800.

GBP/USD - 1.3320

Most recent candlesticks pattern   : N/A

Trend                                 : Sideways

Tenkan-Sen level                 : 1.3324

Kijun-Sen level                    : 1.3342

Ichimoku cloud top              : 1.3426

Ichimoku cloud bottom        : 1.3363

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although cable has remained under pressure after recent selloff and near term downside risk remains for weakness towards 1.3300, as broad outlook remains consolidative, reckon downside would be limited to 1.3280 and reckon 1.3250 would hold from here, near term oversold condition should prevent sharp fall below there and previous support at 1.3221 should remain intact.

In view of this, would not chase this fall here and would be prudent to stand aside for now. On the upside, expect recovery to be limited to 1.3380 and 1.3400 should hold, bring another decline later. Above resistance at 1.3432 would bring a stronger rebound to 1.3475–80 but still reckon resistance at 1.3521 would hold from here.

EUR/USD - 1.1743

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1750

Kijun-Sen level                  : 1.1755

Ichimoku cloud top             : 1.1780

Ichimoku cloud bottom      : 1.1771

Original strategy  :

Sell at 1.1835, Target: 1.1735, Stop: 1.1870

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1825, Target: 1.1720, Stop: 1.1860

Position : -

Target :  -

Stop : -

As the single currency rebounded after falling to 1.1717 yesterday, suggesting consolidation above indicated key support at 1.1713 would be seen and corrective bounce to the lower Kumo (now at 1.1755) is likely, however, reckon upside would be limited to resistance at 1.1812-15 and bring another decline later, below said support at 1.1713-17 would extend recent fall from 1.1961 top to 1.1695-00, then towards 1.1660-70.

In view of this, we are looking to sell euro on further subsequent recovery as said resistance at 1.1815 should limit upside and bring another decline. Above 1.1845-50 would defer and suggest low is formed, bring a stronger rebound to 1.1875-80 first.

NZDUSD (0.6948): The New Zealand dollar extended gains for three consecutive days. Price action managed to remain supported above the short term price level of 0.6911. Resistance is seen at 0.6981 which could be the near term upside target in price. The breakout to the upside from the triangle consolidation pattern potentially suggests further scope for gains in NZDUSD. This will however change in the event that the kiwi slips back below the 0.6911 level. We expect to see support being formed near this level ahead of further gains towards 0.6981.

USDJPY (113.29): The USDJPY formed another doji pattern on the daily chart yesterday. A bearish close below the doji's low today could potentially signal further downside in price. USDJPY is seen trading just below the previously established resistance level of 114.31 - 114.07 region. To the downside, price is pending retest of the support level near 110.70. On the 4-hour chart, the immediate support near 113.06 - 112.90 remains in focus. A break down below this support could potentially turn USDJPY's bias to the downside as price will then likely slide towards the 112.05 level of support. To the upside, the gains could be limited towards the previously established resistance level.