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Trade Idea Wrap-up: USD/CHF – Buy at 0.9900
USD/CHF - 0.9958
Most recent candlesticks pattern : N/A
Trend : Up
Tenkan-Sen level : 0.9929
Kijun-Sen level : 0.9919
Ichimoku cloud top : 0.9911
Ichimoku cloud bottom : 0.9889
Original strategy :
Buy at 0.9900, Target: 1.0000, Stop: 0.9865
Position : -
Target : -
Stop : -
New strategy :
Buy at 0.9900, Target: 1.0000, Stop: 0.9865
Position : -
Target : -
Stop : -
As the greenback has surged again after finding renewed buying interest at 0.9869, adding credence to our bullish view that recent rise from 0.9421 low is still in progress and may extend further gain to 0.9970, having said that, overbought condition should limit upside to psychological resistance at 1.0000 and reckon 1.0030-40 would hold, bring retreat later.
In view of this, we are looking to buy dollar again on pullback as 0.9900-05 should limit downside and bring another rise later. Below said support at 0.9869 would abort and suggest a temporary top is formed instead, bring correction of recent rise to another previous support at 0.9838.
Trade Idea Wrap-up: GBP/USD – Stand aside
GBP/USD - 1.3180
Most recent candlesticks pattern : N/A
Trend : Near term down
Tenkan-Sen level : 1.3208
Kijun-Sen level : 1.3220
Ichimoku cloud top : 1.3191
Ichimoku cloud bottom : 1.3191
New strategy :
Stand aside
Position : -
Target : -
Stop : -
Despite rising to 1.3279, as cable has retreated after faltering below indicated resistance at 1.3287, suggesting further choppy trading would take place and weakness to 1.3155-60 cannot be ruled out, however, reckon yesterday’s low at 1.3110 would hold and bring another bounce later. Only a break of this level would revive bearishness and signal decline has resumed for retest of 1.3088 first.
On the upside, whilst recovery to 1.3235-40 cannot be ruled out, reckon upside would be limited and said resistance at 1.3279-87 would hold, bring further choppy consolidation. Only a break of said resistance area would signal the fall from 1.3338 has ended at 1.3088, bring further gain to 1.3300-05 but said resistance at 1.3338 should remain intact. As near term outlook is still mixed, would be prudent to stand aside for now.
Trade Idea Wrap-up: EUR/USD – Sell at 1.1755
EUR/USD - 1.1702
Most recent candlesticks pattern : N/A
Trend : Sideways
Tenkan-Sen level : 1.1759
Kijun-Sen level : 1.1763
Ichimoku cloud top : 1.1778
Ichimoku cloud bottom : 1.1763
Original strategy :
Sell at 1.1755, Target: 1.1655, Stop: 1.1790
Position : -
Target : -
Stop : -
New strategy :
Sell at 1.1755, Target: 1.1655, Stop: 1.1790
Position : -
Target : -
Stop : -
Current selloff on dollar’s broad-based strength together with the breach of previous support at 1.1725 signals the fall from 1.1880 has resumed and may extend further weakness to 1.1700, break there would extend weakness to previous support at 1.1669, however, break there is needed to retain bearishness and extend recent fall from 1.2093 top to 1.1650, then towards 1.1615-20.
In view of this, we are looking to turn short on recovery as 1.1750-55 should limit upside.Above 1.1790 would abort and signal an intra-day low is formed instead, then further choppy trading would take place and recovery towards resistance at 1.1837 cannot be ruled out.
Trade Idea Wrap-up: USD/JPY – Stand aside
USD/JPY - 113.87
Most recent candlesticks pattern : N/A
Trend : Near term up
Tenkan-Sen level : 113.80
Kijun-Sen level : 113.70
Ichimoku cloud top : 113.94
Ichimoku cloud bottom : 113.74
New strategy :
Stand aside
Position : -
Target : -
Stop : -
Although dollar has rebounded after finding support at 113.34, break of this week’s high at 114.24 is needed to revive bullishness and signal recent upmove from 107.32 low has resumed for further gain to 114.45-50 (50% projection of 111.65-114.10 measuring from 113.24), then towards 114.75-80 (61.8% projection), however, loss of momentum should cap price below 115.00.
In view of this, would not chase this rise here and would be prudent to stand aside for now. Below 113.55-60 would prolong consolidation, bring another test of said support at 113.34, below there would bring retracement of recent rise to 113.24-25 (previous support and 38.2% Fibonacci retracement of 111.65-114.24), then towards 112.95-00 (50% Fibonacci retracement) but price should stay above 112.60-65 (61.8% Fibonacci retracement).
US Third Quarter GDP Dominates Attention; Durable Goods Orders Spur Hopes for Data Beat
The advance estimate of third quarter GDP growth in the US will be released tomorrow at 1230 GMT with forecasts projecting a slowdown from the second quarter's 3.1% expansion on an annualized basis to 2.5%. Economic activity, as reflected by the rise in Gross Domestic Product, grew by 1.2% in the first quarter of the year.
Expectations for slower growth relative to the preceding quarter are in large part based on the fact that the world's largest economy suffered the negative effects of devastating hurricanes storming its soil during the third quarter of the year.
Still, should expectations materialize, annualized growth in the order of 2.5% is a "decent" figure given the recent history of GDP releases in the US (see five-year history below). Also, one should not forget that major natural disasters have a tendency to only temporarily act as a detriment to growth, failing to hamper economic activity in the longer-term. Not only that, but activity in quarters following a natural disaster is likely to accelerate as the public and private sector enters into "restoration mode", increasing spending.
Yesterday's upbeat figures on durable goods orders for the month of September pointed to robust business investment, spurring hopes that the impact on the economy from the hurricanes will not be as detrimental as some have initially feared. Further adding to positive sentiment where numbers on new home sales for the same month which rose to a near 10-year high, growing by double digits on a monthly basis and storming past projections for a mild contraction in sales. It should be mentioned however, that other indicators on housing activity have not been as strong.
Should numbers on economic activity indeed surprise to the upside, then they would likely serve as a fresh catalyst for the US currency to gain. Dollar/yen yesterday rose to the three-and-a-half-month high of 114.24 before retreating to finish the day lower by a bit more than 0.1%. A data beat is likely to see the pair challenging the aforementioned high which might act as resistance to the upside.
On the way down, the area around the 113 handle was fairly congested recently and could be of significance, providing support should activity slow down by more than analysts project. Further below the pair would eye the current level of the 200-day moving average at 111.73 as another potentially important mark. Notice that the area around this level also encapsulates the one-month low of 111.64 that was recorded on October 16.
Further ahead, themes driving economic growth in the US are the Trump administration's ability to deliver on key legislation, with tax reform efforts dominating attention in recent weeks, as well the interest rate environment further ahead. Last week, Senate Republicans passed a crucial budget resolution for fiscal-year 2018, taking a big step on the way to tax reform as they now have the "luxury" to pass a tax bill without Democratic support. However, Republican infighting this week suggests that a tax push is far from a done deal. Regarding the future path of interest rates, indications have been that President Trump will announce his Fed chair pick before his trip to Asia on November 3. The latest reports point to Republicans favoring Stanford University economist John Taylor, a perceived inflation-hawk favoring higher rates. The US President has recently said that the top three contenders are current Fed chief Janet Yellen, Fed Board of Governors member Jerome Powell and John Taylor. The former two are viewed as dovish options by the markets.
Euro Slips as ECB Halves QE But Keeps it Open Ended; Dollar Firms on Reports Yellen is Out of...
The euro reversed lower from a near one-week high after the ECB pledged to maintain easy monetary policy even as it announced a reduction in its monthly asset purchases. The single currency slipped back below $1.18, while the US dollar was once again eyeing the 114 yen level amid reports that incumbent Fed chief Janet Yellen was out of the race to lead the central bank.
The European Central Bank announced it is extending its asset purchase program (APP) for a further nine months until September 2018, at a reduced pace of €30 billion from €60 billion per month, when the current one expires in December. The announced size and duration of the extended program was one of the scenarios being anticipated by the markets. However, the ECB took a much more dovish tone than expected by pledging to extend the APP beyond nine months if necessary, keeping it in effect open ended, as well as updating its forward guidance on reinvestments. The central bank said in its statement it will reinvest the proceeds from maturing bonds "for an extended period of time after the end of its net asset purchases". It also maintained its guidance to keep interest rates at present levels for "well past the horizon of the net asset purchases".
The euro dropped sharply immediately after the announcement, hitting a low of $1.1705 soon after ECB President Mario Draghi's press conference ended. The euro's losses deepened after Draghi said the majority of Governing Council members preferred to keep the APP open ended and refused to label the move as tapering, saying "This is not tapering. It's just a down-size.".
The single currency was mixed against other currencies. It fell 0.8% against the yen at 133.31, having earlier hit a 2-year peak of 134.48 yen. It was also weaker versus the Swiss franc, coming off a fresh 33-month high of 1.1710 francs to around 1.1655. Against sterling, the euro was marginally lower at 0.8893 pounds, but managed to post gains against the Swedish krona and the Norwegian krone.
The Nordic currencies lost ground to the euro after the Norges Bank and the Riksbank kept their policies unchanged earlier in the day, allowing for a divergence in policy after the ECB's tightening. The euro was 0.4% firmer against the Swedish currency at 9.7430 kronor and 0.5% firmer versus the Norwegian krone at 9.512.
The pound gave up more than half of yesterday's impressive gains following the stronger-than-expected UK GDP figures. It came under pressure after survey data from the CBI showed a surprise plunge in British retail sales in October. The CBI's index measuring the balance of retail sales volume fell to -36 from +42 in September and compares with an expected figure of +15. Sterling was trading 0.7% lower versus the dollar in late European session at $1.3170.
In other currencies, the Australian and New Zealand dollars maintained their downtrend. The aussie hit a fresh 3-month low of $0.7675 at the start of the session but was later attempting to reclaim the $0.77 handle. The kiwi had no respite either as it ploughed to a 5-month low of $0.6843. The Canadian dollar was also weaker, weighed by yesterday's less hawkish statement by the Bank of Canada after it kept rates on hold. Dollar/loonie was on track for a sixth straight day of gains, hitting a three-month high of C$1.2826.
The greenback meanwhile was having a better day, helped in part by reports by Politico suggesting that President Trump was no longer considering reappointing Janet Yellen as Fed Chair when her term expires in February 2018, making Fed Governor Jerome Powell and Stanford University economist John Taylor as the remaining frontrunners. The prospect of a more hawkish policymaker heading the Fed has been one of the factors driving the dollar in recent days. The fresh speculation lifted the greenback from an intra-day low 113.33 yen to around 113.85, though this was below yesterday's three-month high of 114.24 yen.
Also supporting the dollar today were better-than-expected weekly jobless claims. Initial claims for unemployment benefits in the US rose to 233k in the week of October 16 from a revised 223k in the prior week, but this was better than forecasts of 235k. Pending home sales disappointed however, as they were unchanged in September, missing expectations of a 0.2% rise.
The focus now moves to the budget resolution vote in the House of Representatives later today, which if approved, would be another step forward for the passing of Trump's tax reform plans, while tomorrow's preliminary estimates of Q3 GDP will be watched closely ahead of next week's FOMC meeting.
Trade Idea: EUR/GBP – Sell at 0.8920
EUR/GBP - 0.8890
New strategy :
Sell at 0.8920, Target: 0.8820, Stop: 0.8960
Position : -
Target : -
Stop : -
As the single currency ran into renewed selling interest at 0.8957 and has retreated again, consolidation with downside bias is seen for weakness to support at 0.8856, break there would add credence to our view that top has been formed at 0.9033 earlier, bring further fall to 0.8820-25, then towards 0.8800 which is likely to hold from here due to near term oversold condition.
In view of this, we are looking to sell euro again on recovery as 0.8920-30 should limit upside. Above said resistance at 0.8957 would shift risk to upside for test of 0.8976 but reckon upside would be limited to 0.9000 and said resistance at 0.933 should remain intact, bring another retreat later.
Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.
Trade Idea: USD/CAD – Buy at 1.2720
USD/CAD - 1.2818
Trend: Down
Original strategy :
Buy at 1.2670, Target: 1.2870, Stop: 1.2610
Position: -
Target: -
Stop: -
New strategy :
Buy at 1.2720, Target: 1.2900, Stop: 1.2660
Position: -
Target: -
Stop:-
As the greenback has risen again after yesterday’s rally, adding credence to our bullish view that the rise from 1.2061 low is still in progress and upside bias remains for this move from there (wave iii trough) to extend further gain to1.2850 and later towards 1.2900, having said that, as we are still treating this rebound from 1.2061 as wave iv, reckon 1.2975-80 (61.8% Fibonacci retracement of wave iii) would remain intact, bring selloff later in wave v. We are keeping our count that wave v as well as wave (C) ended at 1.3794 and impulsive wave (i ii, i ii) is now unfolding with minor wave iii ended at 1.2414, followed by wave iv correction ended at 1.2778, wave v has reached our indicated downside target at 1.2100 and may extend to 1.2000.
In view of this, we are looking to reinstate long on pullback but at a higher level as 1.2715-20 should limit downside and bring another rise. Below support at 1.2635-40 would abort and suggest top is possibly formed instead, bring weakness to 1.2610-15, then test of 1.2591 but downside should be limited to 1.2520.
To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.
ECB to Halve Monthly Pace of Asset Purchases to €30 Billion Starting in January 2018
As widely anticipated, this morning the ECB announced a reduction in its monthly pace of asset purchases to €30 billion a month starting January 2018 (current pace: €60 billion/month). Moreover, the ECB also announced that asset purchases would end in September 2018 or beyond, conditional on how Governing Council judged the evolution of inflation toward target. Similarly, principal payments from maturing securities will continue to be reinvested for an extended period of time after asset purchases end, with no end date set.
Interest rates were left unchanged: the interest rates on the main refinancing operations, marginal lending facility, and deposit facility remain at 0%, 0.25%, and -0.4% respectively. Moreover, the ECB kept its forward guidance on interest rates unchanged, reiterating its expectation to keep interest rates at current levels for an extended period of time, and well past the end of asset purchases.
There was little additional information provided in the press conference that followed. ECB President Mario Draghi denied discussing any alternative scenarios other than the announced reduction of asset purchases, and reiterated that this was not a taper, but an adjustment to asset purchases consistent with the feedback rules followed in the past as risks to the inflation outlook evolved.
Financial markets initially interpreted the announcement a bit dovish, sending the euro down about 0.6% vs the U.S. dollar, weakening further after the conclusion of the press conference. Core Euro Area bonds also experienced a small bid this morning, however a small part of the move may be related to news in Spain that the government of Catalonia is planning on calling for elections in order to stall a takeover by Spain's central government.
Key Implications
The broadening economic recovery in the Euro Area, notable for three consecutive quarters of economic growth at double the trend pace, has given monetary authorities enough confidence in the economic outlook to announce a reduction in asset purchases. This change will come nine months after the monthly pace of asset purchases were reduced to a €60 billion from €80 billion. Moreover, although the pace of asset purchases are set to slow, the size of the ECBs balance sheet will remain at elevated levels for the foreseeable future, and as such maintains the highly accommodative monetary policy supporting the strengthening economic recovery.
As with other advanced economy central banks, the ECB is struggling to explain why wage and price inflation remains so weak despite above trend economic growth and falling unemployment rates. During the press conference, President Draghi explained that the focus remains on monitoring and supporting domestic drivers of wages and prices, mentioning that the ECB cannot affect global forces that may be exerting downward pressure on prices. Overall, the ECB believes that its announced policy changes today remains consistent with a gradual uptick in underlying wage and inflation pressures over the next few years.
Elliott Wave Analysis: GBPJPY Can Face A Bearish Reversal
Hello traders and welcom to the US session. Here we are going to take a look at GBPJPY and its recent developments.
GBPJPY has been trading very complex for the last few sessions, however maybe now it is time for a change. We see that price has moved lower from the upper channel resistance line and is now appraoching the 149.10 swing low, where a drop beneath it would confirm a potential reversal to the downside. Break of the mentioned region and later the lower channel line could take us to new temporary lows on the pair.
GBPJPY, 1H
