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Fed minutes made dollar weaker
Jamie Dimon bets on Trump's one term of presidency
Hammond delivered a poor budget
ECB reviews corporate bond buying

European markets are trading lower despite the fact that the German GDP YoY number matched the forecast of 2.3%. The German export number, the backbone of the country, has endorsed once again that it is the primary driver of the GDP growth. Thanks to the recovery in the global growth demand and lower euro which are providing a tailwind for this. The economic engine of the eurozone is in excellent order and given the gridlock around the Brexit negotiations and the new lower growth forecast in yesterday's budget, it gives Germany a much stronger competitive edge in the eye of the investors. Moreover, the French Nov. business confidence also came ahead of the forecast. It printed the reading of 111 while the forecast was 109.

Two pairs, the EUR/USD and the EUR/GBP, are enjoying their gains today while traders are keeping an eye on the outcome of the meeting between President Steinmeier and SPD leader Schulz. German party leaders do feel that they have a responsibility to form a government and the SPD leader has said that he is open for another round of talks with Merkel. If we do see more tangible progress which helps Merkel to finally form a coalition, we do think that the Euro could move higher and the EUR/GBP could surpass the mark of 0.90.

Overall, traders are debating about the dovish Fed minutes and this is dragging the markets lower today. We do expect the volume to be on the lower side as traders over the US side have hit their homes for the Thanksgiving break.

The dollar bears have one more reason to enjoy Thanksgiving because the Fed minutes brought good news for them. The Fed minutes confirmed that the path of the interest rate may not be that steeper for the next year as compared to this year because some Fed members are offbeat about inflation. Even though another rate hike in December looks like a done deal, but it was more of the future path of the interest rate hike which took the wind out of the dollar rally. The Fed is surely optimistic and confident about the job market and the general economic activity hasn't deviated much from their expectations. To predict the future projection of rate hike path has become even more difficult path and this is primarily due to the new upcoming composition of the Fed members. Having said all this, it does appear that the dollar index is holding its losses at current level

The weakness in the dollar index has provided a fresh catalyst for commodities to continue to move higher. The theme which would support the commodity price in 2018 is that companies around the globe have become less cautious and a vast number of them ramping up their investment expenditure and this would support the commodity price in 2018.

Cable is consolidating under fresh high at 1.3337 on Thursday after Wednesday's strong bullish acceleration eventually broke above daily cloud and cracked key barriers at 1.3320/37 (01 Nov / 13 Oct peaks). Longs remain firmly in play and eye next target at 1.3415 (Fibo 61.8% of 1.3655/1.3026 bear-leg) with bulls expected to consolidate before resuming. Broken trendline which connects 1.3320/37 tops is now acting as initial support at 1.3305 and so far holding the downside. However, deeper dips cannot be ruled out, with broken daily cloud top (1.3261) expected to ideally contain.

Res: 1.3337, 1.3341, 1.3401, 1.3415
Sup: 1.3305, 1.3261, 1.3214, 1.3199

The Dollar found itself vulnerable to heavy losses on Wednesday evening, after minutes from the latest FOMC meeting illustrated concerns among policymakers over the inflation outlook.

Although Federal Reserve official expressed optimism over economic growth and expected interest rates to be raised in the 'near term', there was still growing concerns over the prolonged periods of stubbornly low inflation in the U.S. The anxiety over low inflation questions the central bank’s ability to raise interest rates three times in 2018,consequently clouding the prospects of higher rates beyond this year. With expectations saturated over the Fed pulling the trigger before year-end, there is likely to be an increasing focus on economic data ahead of December’s policy meeting. There is a suspicion that investors will closely scrutinize December’s FOMC meeting for fresh insights on monetary policy in 2018 and whether economic projections are trimmed down.

Taking a look at the technical picture, the Dollar was already gasping for air into the Thanksgiving holiday, with the dovish FOMC minutes dealing the knockout blow. The Dollar Index is under pressure on the daily charts with resistance found at 94.00. Bears have broken below the 93.50 level, with the next levels of interest at 93.00 and 92.80, respectively.

Sterling snoozes through UK budget

Sterling traded within a modest range on Wednesday afternoon, after traders simply snoozed through the U.K. budget statement.

Some bearish action was seen after the Office for Budget Responsibility (OBR) downgraded growth forecast for this year as well as coming years through 2022. With gross domestic product forecasted to grow by 1.5% in 2017, compared with the 2.0% forecast in March, this was a blow to sentiment towards the U.K. economy. Interestingly, losses on Sterling were swiftly erased after Hammond announced stamp duty for first-time buyers on properties of up to £300,000 would be scrapped. With the Brexit related uncertainty impacting economic growth and weighing on sentiment, Sterling still has a tough path to navigate.

Today’s main event risk for Sterling will be the second estimate of the third quarter U.K. GDP which is expected to remain unchanged at 0.4%. A reading below market estimates may invite bears back into the party.

Taking a careful look at the British Pound, investors should be under no illusion that the appreciation witnessed yesterday, had anything to do with a change of sentiment towards the currency. The culprit behind the GBPUSD’s sharp appreciation was a vulnerable U.S. Dollar. Although prices have broken above the 1.3300, it may take more than a weaker Dollar for the current upside to continue long term. Technically, an intraday breakout above 1.3340 could trigger an incline towards 1.3370. Alternatively sustained weakness below 1.3300 should open a path back towards 1.3230.

Commodity spotlight – Gold

Gold prices marched above the $1289 level during Wednesday’s trading session, after the U.S. Dollar weakened. With investors now questioning the Federal Reserve’s ability to raise rates further in 2018 amid inflation concerns, Gold which is zero-yielding-has received a boost. Taking a look at the technical picture, the breakout above $1289 could encourage a further incline towards the $1300 psychological level. Alternatively, a failure for bulls to keep above $1289 may open a path lower towards $1280.

EUR/JPY - 131.75

Original strategy:

Bought at 132.95, stopped at 132.35

Position: - Long at 132.95
Target: -
Stop: - 132.35

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Although the single currency slipped again to 131.23 earlier today, as price has rebounded again after holding above previous support at 131.17 (this week’s low), suggesting further consolidation would take place and another bounce to 132.15-20 cannot be ruled out but upside should be limited to resistance at 132.47 and bring another decline later. Below 131.17 would signal the fall from 134.50 top is still in progress, then this erratic decline may extend weakness to 130.60-65 and possibly towards psychological level at 130.00 which is likely to hold from here.

On the upside, only break of said resistance at 132.47 would abort and signal a temporary low has been formed at 131.17, bring further gain to 133.15-20 but break there is needed to signal the entire correction from 134.50 top has ended, bring further gain to 133.50, then towards resistance at 133.89 (last week’s high) which is expected to cap euro’s upside. As near term outlook is mixed, would be prudent to stand aside for now.

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.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

AUD/USD – 0.7610

Original strategy:

Sold at 0.7620, Target: 0.7470, Stop: 0.7680

Position: - Short at 0.7620
Target:  - 0.7470
Stop:- 0.7680

New strategy :

Exit short entered at 0.7620

Position: - Short at 0.7620
Target:  -
Stop:-

Aussie found renewed buying interest at 0.7555 yesterday and has staged another strong rebound, suggesting further consolidation above this week’s low at 0.7532 would be seen and corrective bounce to 0.7645-50 cannot be ruled out, however, break there is needed to signal a temporary low has been formed, bring retracement of recent decline to 0.7670, then towards resistance at 0.7701 which is likely to hold from here.

In view of this, would be prudent to exit short entered at 0.7620 and stand aside in the meantime. Below 0.7580 would bring test of said support at 0.7555 but only break there would revive bearishness and signal the rebound from 0.7532 has ended, then retest of this level would follow. A drop below this support would signal recent decline from 0.8125 top is still in progress for further weakness to 0.7500, then 0.7470. 

On the 4-hour chart, recent upmove from 0.7329 is unfolding as an impulsive rise with wave 3 as well as smaller degree wave (iii) extending, only minor wave v of (iii) has ended at 0.8125, hence bullishness remains for this move to extend headway to 0.8200, then towards 0.8300, however, reckon upside would be limited to 0.8400 and the final wave 5 should falter below 0.8500, bring correction later.

As the Asian session was nearing completion, the dollar was little changed on the day relative to major rival currencies after yesterday posting sizable losses following the release of the minutes of the Federal Reserve’s October 31-November 1 meeting which showed differing views within the FOMC, casting doubts about the timing of delivery of future rate hikes. Trading activity is relatively thinner today as Japan is closed for Labor Thanksgiving Day and US markets will also be closed for the Thanksgiving holiday.

The dollar index, which gauges the greenback’s strength versus the currencies of six major US trading partners, was flat on the day at 93.19 at 0824 GMT. Yesterday it lost 0.8%, while at its lowest today it fell to the one-month low of 93.12. The minutes from the Fed’s latest meeting showed some policymakers expressing worries about persistently low inflation, with future data on price pressures determining whether they will support future rate increases. However, the minutes supported that the Fed remains firmly on track to deliver a rate hike during the December meeting with markets almost completely pricing in that move.

Dollar/yen was little changed at 111.23 after losing 1.1% during yesterday’s trading and touching a two-month low of 111.05 earlier in the day.

German third quarter GDP data showed the eurozone’s (and Europe’s) largest economy expanding by 0.8% q/q as expected and by 2.3% y/y versus forecasts of 2.6%. Euro/dollar didn’t react much within the first minutes of data release. The pair last stood 0.1% higher on the day at 1.1831 after also experiencing considerable advancing during yesterday’s trading. Eurozone November preliminary PMI data – manufacturing, services and the composite measure – are due at 0900 GMT (the respective figures for Germany are due at 0830 GMT). Also euro-related, the ECB minutes pertaining to the meeting completed on October 26 will be released at 1230 GMT.

Pound/dollar was 0.1% lower at 1.3312, though the pair was holding up the bulk of yesterday’s gain. The UK will see the release of the second estimate of third quarter GDP figures at 0930 GMT.

Dollar/loonie was 0.1% down, trading near the 10-day low of 1.2681 recorded earlier in the day ahead of Canadian retail sales data due at 1330 GMT.

The New Zealand dollar posted some short-lived gains versus its US counterpart following the release of retail sales data out of the country, rising to an eight-day high of 0.6893. The pair, which also gained on the back of dollar weakness yesterday, was last flat on the day and not far below the aforementioned peak. Aussie/dollar was also little changed, trading close to an eight-day high of 0.7624 recorded earlier in the day.

In commodities, gold was 0.2% lower at $1,289.31 per ounce following yesterday’s advance. WTI and Brent crude were down by 0.3% and 0.5%, at $57.84 and $63.02 per barrel respectively. Despite being down on the day, the two benchmarks were not far below the recently recorded more than two-year highs.

Weekly
    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 31 Jul 2017
    •    Trend bias: Down

Daily
    •    Last Candlesticks pattern: Morning star
    •    Time of formation: 25 Aug 2017
    •    Trend bias: Near term up

GBP/USD – 1.3308

The British pound has surged again this week, suggesting the erratic rise from 1.3039 is still in progress and consolidation with mild upside bias remains, a daily close above 1.3338 resistance would confirm low has been formed at 1.3027 earlier, bring subsequent rise to 1.3400, then test of previous resistance at 1.3455, however, near term overbought condition should prevent sharp move beyond 1.3510-15 and reckon 1.3550 and price should falter below resistance at 1.3596, bring retreat later. 

On the downside, whilst initial pullback to 1.3260-70 cannot be ruled out, reckon the Tenkan-Sen (now at 1.3200) would contain downside and bring another rise later. Below 1.3170 would prolong consolidation and bring weakness to 1.3100 but support at 1.3062 (last week’s low) would limit downside and indicated strong support area at 1.3027-39 should remain intact, bring rebound later. In the event sterling is able to penetrate 1.3027-39 support area, this would shift risk back to downside and confirm the fall from 1.3658 top has resumed for further weakness to 1.3000, then towards 1.2940-50 later but minor support at 1.2852 would contain downside.

Recommendation: Buy at 1.3200 for 1.3400 with stop below 1.3100.  




On the weekly chart, sterling extended last week’s rebound and has continued moving higher this week, suggesting a test of previous resistance at 1.3338 would be seen, however, above there is needed to retain bullishness and suggest the retreat from 1.3658 has ended instead, bring a stronger rebound to 1.3400-05 and possibly towards 1.3490-00 but price should falter well below said resistance at 1.3658. In the event sterling breaks above 1.3571 resistance, this would bring a retest of this last month’s high at 1.3658, break there would extend recent erratic rise from 1.1986 low to 1.3750-60 and 1.3800 but overbought condition should prevent sharp move beyond 1.3860 (61.8% Fibonacci retracement of 1.5018-1.1986).

On the downside, expect pullback to be limited to 1.3260-60 and 1.3200 should hold, bring another rebound. Below last week’s low at 1.3062 would abort and risk test of indicated support area at 1.3027-39 but only break there would revive near term bearishness and signal a temporary top has been formed at 1.3658 earlier, bring retracement of recent rise to 1.3000, then towards support at 1.2909 but anticipated near term oversold condition should prevent sharp fall below previous chart support at 1.2774 and price should stay well above another previous chart support at 1.2589, bring rebound later.

XAUUSD (1289.93): Gold prices closed on a bullish trend yesterday marking two consecutive days of gain. Price action broke above the resistance level of 1285.00 once again before easing back. We expect that this breakout to hold this time and any declines will see a correction back to the breached resistance level. Establishing support here could signal further upside in price towards the 1304 level of resistance. Alternately, to the downside, failure to establish support at 1285 will signal continued consolidation above the lower support level of 1274 region.

USDJPY (111.34): The USDJPY extended the declines as price action fell below the 111.74 support level. The strong declines posted resulted in a doji candlestick on the 4-hour chart. A bullish reversal here could signal a short-term retracement back towards the 111.74 price level where resistance could be established. On the downside, the next main support is seen at the 111.00 level. We expect the declines to continue down towards this support with the potential to briefly break below the 111.00 support level in the short term.

EURUSD (1.1836): The EURUSD posted strong gains by yesterday's close. This comes following the spinning bottom pattern formed the day before. As a result, EURUSD is now seen testing the previous resistance level of 1.1843 - 1.1822 region. We expect the gains to hold out here. However, a breakout above this resistance will put the EURUSD back on a bullish path with a test towards the 1.1900 level being quite likely. However, in the event that the resistance level holds out, EURUSD could be seen falling back from this resistance level to trade within the previously established range.