Sample Category Title

GBP/JPY - 149.15

Original strategy:

Sold at 150.20, Target: 148.20, Stop: 150.20

Position: - Short at 150.20
Target: - 148.20
Stop: - 150.20

New strategy :

Hold short entered at 150.20, Target: 148.20, Stop: 149.80

Position: - Short at 150.20
Target:  - 148.20
Stop:- 149.80

As sterling has rebounded after marginal fall to 148.45, consolidation above this level would be seen, however, reckon resistance at 149.70 would limit upside and bring another decline later, below said support at 148.45 would extend the fall from 151.90 top to 148.00, then test of previous support at 147.80 but oversold condition should limit downside and support at 147.30 should remain intact.

In view of this, we are holding on to our short position entered at 150.20. Only above resistance at 150.30 would defer and risk test of previous support at 150.60-65 but break there is needed to signal low is formed, bring a stronger rebound to 151.10-20, however, still reckon upside would be limited to 151.55-60 and price should falter well below said resistance at 151.90 (last week’s high), bring another retreat later. 

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.


The pair is recovery mode on Friday and reversed some of previous day's losses, but near-term action remains biased lower.

Red daily candles in past two days weigh on near term action, as the pair is stuck around 20SMA (113.48) which was broken on Thursday's dip to 113.09, but bears failed to close below it.

Firm break below 20SMA and 112.95 (31 Oct trough) is needed to confirm reversal and trigger bearish extension towards 111.90 target (Fibo 38.2% of 107.31/114.73 ascend).

Meanwhile, extended recovery attempts are expected to be capped by 10SMA (113.75) also Fibo 38.2% of 114.73/113.09 downleg).

Res: 113.63, 113.75, 114.06, 114.34
Sup: 113.19, 113.09, 112.95, 112.50

Cable remains in holding mode on Friday, entrenched between 100SMA (1.3104) and 10SMA (1.3160). Bearish setup of 10 / 20 / 30 SMA's and daily cloud above the price weigh on near-term bias, while neutral momentum studies and converged daily Tenkan-sen/Kijun-sen show lack of signal, confirming mixed picture on daily studies. Initial direction signals will be generated on break through 100SMA at the downside or 10SMA at the upside. Loss of 100SMA support would expose double-bottom at 1.3038/26 and psychological 1.3000 support. Conversely, lift above 10 and 20SMA's (1.3160/1.3173) would risk attack at daily cloud base (1.3214) and generate stronger bullish signal on break. UK data (Manufacturing production/trade balance) and US tax plans/Brexit talks are in focus for fresh signals.

Res: 1.3160, 1.3173, 1.3182, 1.3214
Sup: 1.3104, 1.3085, 1.3057, 1.3038

The Euro is holding within tight range (1.1622/54) on Friday, following strong advance the previous day.

Close above 10SMA (1.1624) which now acts as initial support, was bullish signal, but recovery is for now limited under pivotal barrier at 1.1661 (Fibo 38.2% of 1.1836/1.1553 downleg) and weighed by thick 4-hr cloud (spanned between 1.1643 and 1.1705).

Further upside requires sustained lift above 1.1661 Fibo barrier to expose key 1.1700 resistance zone, break of which would spark stronger recovery.

However, bearishly aligned daily techs suggest limited upside action (ideally to be capped 1.1661 barrier) and keep focus at 1.1510 target (Fibo 38.2% of 1.0570/1.2092 ascend).

Res: 1.1661, 1.1674, 1.1690, 1.1705
Sup: 1.1622, 1.1585, 1.1553, 1.1510

US tax legislation was the main headline during today's Asian session after the US Senate flagged a delay in corporate tax cuts on Thursday, pushing the dollar lower against its counterparts. Meanwhile, the aussie posted moderate losses after the RBA downgraded its forecasts on inflation.

While the US President continues his trip in Asia, his team back in the US faces increasing obstacles to turn the promised massive tax cuts – that could be Trump's first major legislative achievement since he took the presidential role in January – into law. Late on Thursday, the tax plans submitted by the Senate and the House of Representatives agreed to reduce corporate taxes to 20% from the current 35%, but disagreements were observed in key areas, including the time of implementation. The Senate version signalled that it would like to put its plan forward in 2019, contradicting the House bill (due to be voted next week) which plans to implement the legislation a year earlier. Moreover, the Senate increased the value of exemption of estate taxes, which mostly has to do with wealthy individuals and removed the deductibility of state and local taxes, something that could raise opposition among House lawmakers.

The dollar index retreated to a one week low of 94.41 on Thursday during US trading hours before edging up to 94.53 on Friday. Dollar/yen touched a ten-day low of 113.08 and continued fluctuating around that level in Asia. Dollar-denominated gold hit a three-week high of $1,288.38 per ounce.

In Australia, the RBA revised down its GDP growth and core inflation outlook in its quarterly statement on monetary policy released early today. According to the statement, the RBA policymakers expect core inflation to reach the low band of the 2-3% target in early 2019 as they consider that wage growth might rise only gradually despite a tightening labour market, hinting that a rate hike might take longer to emerge. Last August, the central bank predicted that inflation would reach 2% in the second semester of this year. Furthermore, the central bank reduced its growth forecasts to 2.75% in the mid-2018 from an earlier prediction of 3.0%. Regarding, household spending, it is expected to grow at a slower pace than before the 2008 financial crisis as consumers' incomes suffer from overloaded debt obligations.

The aussie posted short-lived losses following the release of the RBA statement, rebounding immediately on the back of a broadly weaker dollar. Aussie/dollar was last at $0.7678 (0.03% down on the day).

The kiwi went down by 0.17% to $0.6936, pressured by remarks delivered on Friday by New Zealand's Finance Minister, Grant Robertson. Robertson claimed that the successor of the central bank's governor must agree on the new government's plan to target employment and any opposition on this would put his role in question. The current RBNZ Governor, Grant Spencer, will be stepping down in March.

In the UK, Prime Minister Theresa May announced her determination to set an official date and time for the nation's departure from the EU at 2300GMT on 29 March 2019. According to the Brexit Secretary, David Davis this would weep confusion on what an “exit date means”. The piece of legislation has passed to the committee stage which will start next week. Pound/dollar was mainly flat around $1.3138 during the session.

The euro was moving sideways around $1.1632.

Next on the day, traders will focus on the industrial production figures out of the UK and on the Michigan consumer sentiment readings out of the US.

XAUUSD (1285.37): Gold prices managed to rally back to the 1285 level of resistance yesterday. The subdued price action within 1285 resistance and 1262 support could be seen breaking out in the near term. However, the price needs to close above 1285 in order to maintain the bullish bias towards the 1320 level of resistance. Given the strong consolidation at the 1285 handle, we expect the possibility of a fake break out near this level which could potentially trap weak long positions. The minor rising wedge pattern near the resistance level indicates a possible decline back to 1274.70 where price could retest the breakout level from the trend line.

USDJPY (113.43): The USDJPY was seen breaking past the minor trendline. On the daily chart, the breakout from the rising wedge pattern potentially indicates the downside decline in prices. Support at 113.00 is likely to be tested in the near term. A break down below 113.00 support could, however, push USDJPY lower towards the next support level at 112.04 - 111.74 area of support. A short-term bounce to the upside could see prices rising back to the breakout level, but the bias remains poised to the downside. The bearish outlook changes only on a close above 114.24.

EURUSD (1.1645): The EURUSD maintained its bullish gains yesterday marking a second consecutive day of gains. Price action rallied to a four-day high yesterday but remained well below the 1.1674 resistance level. The bearish flag pattern breakout level is being retested, but the strong bounce off the previous low suggests that the bearish pattern might be weakening. On the 4-hour chart, however, we see some bearish signs with the Stochastics oscillator posting a hidden bearish divergence. This could possibly suggest another leg to the downside if EURUSD posts a reversal at the current levels. Overall, the ranging price action between 1.1688 - 1.1574 is most likely to be maintained.

The lack of any clear macroeconomic drivers has kept the markets broadly subdued. Investors sold off the US dollar as the proposed tax reforms were rumored to be delayed. The US Senate Republican plan for delaying the corporate tax cuts to 2019 saw even the equities falling back.

On the economic front, the EU commission's economic forecasts were upbeat on the GDP as the commission said that GDP would rise at the fastest pace in nearly a decade. The Euro managed to recover on the back of the positive assessment. The RBA lowered its inflation forecasts noting that inflation might not reach the lower end of the 2% band until 2019.

Looking ahead, the UK's manufacturing, construction, and industrial production numbers will be coming out today. The economic calendar is light. Later in the afternoon, the UoM's consumer sentiment and inflation expectations data will be released.

President Donald Trump and corporate America may not be satisfied with the revised Senate Republican tax plan. The dollar and global equities received a hit on news that Republican senators are likely to delay the introduction of corporate tax cuts until 2019. The reaction in markets wasn't a surprise, given that investors have been pricing in a lot of good news and further pullback may continue for a couple of days or weeks, as many stocks look overbought at the moment.

The Senate wants to maintain the seven tax brackets, rather than the four proposed by the house. They also want to tax foreign profits held by offshore U.S. companies at a different rate. However, the timing of the corporate tax cuts will likely determine how markets move for the remainder of 2017.

The dollar traded in very tight ranges early Friday after falling on Thursday. While the delay in tax cuts isn't good news for the U.S. currency, the rise in U.S. Treasury yields prevented the dollar from falling further. The U.S. economic calendar is light today with only November's Michigan Consumer Sentiment Index due for release, so I don't expect much action unless the Senate reveals a detailed tax reform plan.

Sterling is the only currency in play, with manufacturing and industrial production, trade balance, and NIESR GDP estimates, due for release later today. Brexit negotiations also resumed on Thursday, but according to officials there was no major breakthroughs. If talks in Brussels end in a similar way to previous negotiations, expect Sterling gains to remain capped.

Oil prices were also moving in narrow ranges after rallying sharply at the beginning of the week. High demand, falling inventories, and confidence that OPEC will extend production cuts, will likely keep the prices elevated in the short run, but the geopolitical risk premium due to tensions in the Middle East, has undoubtedly been responsible for a large portion of the recent surge in prices. I still believe that current fundamentals aren't sufficient to keep Brent above $60-$62, however geopolitical tensions will continue to be the main driver in the days and weeks to come.