Sample Category Title

USD/CHF - 0.9951

Original strategy :

Buy at 0.9840, Target: 0.9940, Stop: 0.9805

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.

• European stock markets gained around 0.5%, supported by the ECB's extension of its ultra-easy monetary policy. Spanish assets outperformed after Puigdemont seemed to backtrack from his Catalan independence claim, steering towards new elections (confirmation needed). US stock markets opened positive with NASDAQ lagging Dow & S&P.
• The ECB decided to extend its asset purchase programme from December 2017 to September 2018 while cutting monthly purchases in half, to €30 bn, from January onwards. Forward guidance still states the possibility to increase purchases during APP's life span and the possibility to prolong duration past September. Policy rates remain unchanged.
• Sweden's central bank has stuck to its dovish outlook in the face of rapid growth and more hawkish moves among its peers, resisting calls to end quantitative easing or bring forward plans for an interest rate rise and instead waiting to hear more information on the ECB's tapering plans. They kept their policy rate unchanged at -0.5%.
• Norway's central bank kept its benchmark interest rate at a record low to help support an economic rebound from the worst oil-industry crisis in a generation. The bank left the key deposit rate at 0.5%, without giving updates on its forecasts since it's a so-called interim meeting.
• EMU lending growth to businesses, a key plank in euro zone's recovery, rose to 2.5% in September from 2.4% in August while household lending was steady at 2.7%. The annual growth rate of the M3 measure of money supply, a precursor of economic activity, rose to 5.1% last month from 5%, beating expectations.
• Catalan President Carlos Puigdemont may call regional elections this week, rather than declaring independence from Spain, as authorities in Madrid finalize plans to oust his rebel administration, according to two people familiar with his thinking.
• US eco data printed very close to expectations. Weekly jobless claims bounced slightly from multi-decade lows, from 223k to 233k. The September trade deficit widened from $63.3 bn to $64.1 bn.

Rates

Dovish ECB supports Bund, but no start of new rally

The ECB didn't surprise with its APP decisions and delivered a very dovish outcome. They buy sufficient time to prepare the final turn in the normalization process: ending APP in 2018 and probably hiking rates in 2019.

-) The APP purchase programme will be prolonged by 9 months to the end of September 2018 at least, but can be prolonged if necessary.

-) The monthly amount of net purchases will be halved to €30B starting Jan. 18.

-) The forward guidance regarding the APP remains in place: the APP can be increased in size and/or duration if the outlook becomes less favourable or if financial conditions becomes inconsistent with further progress towards a sustained adjustment in the path of inflation. The decision to keep the program open ended was not unanimous (a large majority)

-) Forward guidance on interest rates remains unchanged: Rates will remain unchanged at their present level for an extended period of time and well past the horizon of the net asset purchases.

-) re-investment proceeds of maturing assets well beyond end net asset purchases

The German Bund gained ground after the decisions and outperformed a sideways moving US Note future. Bund gains remain modest though as consensus had been building over the past weeks about today's outcome. We don't expect today's decision to be the start of a new Bund rally higher. At the time of writing, German yields decline by 2.3 bps (2-yr) to 4.7 bps (10-yr). Changes on the US yield curve range between -0.2 bps (30-yr) and -0.8 bps (5-yr). On intra-EMU bond markets, 10-yr yield spread changes versus Germany are nearly unchanged with Greece underperforming (+5 bps) and Spain (see headlines) & Italy (approval new election law) outperforming (-5 bps).

The significance of the actual decisions marginalized ECB President Draghi's press conference afterwards. President Draghi stressed the importance of very favourable financial conditions necessary for inflation to return to target. Moderate upticks in underlying inflation warrant a recalibration to €30 bn starting next year, but core CPI still has to show a convincing upward trend. Headline CPI is expected to edge lower into year-end. Risks to the economic outlook are broadly balanced with sentiment indicators suggesting continued growth momentum. Draghi referred to the euro once by saying that FX developments cause one of the downside risks to growth. It's the first time that used such specific comments on the single currency.

Currencies

'Soft' ECB decision triggers modest euro setback

Today, the extension in duration and reduction of the size of the ECB's APP programme was on the soft side of market expectations, supported with the safe-guarding of the forward guidance on APP and rates. EUR/USD dropped from the 1.18+ area and trades currently around 1.1760. So, The ECB decision was unable to push EUR/USD out of the established trading range.

Overnight, Asian investors awaited the ECB policy decision. EUR/USD traded with a slightly positive bias in the low 1.18 area. The dollar also lost a few ticks against the yen and traded in the mid 113.50 area. (USD at 113.45).

EUR/USD touched an intraday top in the 1.1835/40 area just before the open of the European markets. During the morning session European yields trended cautiously lower and so did the euro. Interest rate differentials also evolved slightly in favour of the dollar. Around noon there were also plenty of rumours/headlines on Catalonia president Puigdemont calling snap elections. However, there is still a lot of uncertainty/chaos on the issue. Spanish equities jumped higher on the news, but there was no direct impact on the euro. EUR/USD traded just north of 1.18 going into the ECB policy announcement.

The ECB acted more or less in line with the consensus. It prolonged the APP to September next year, but halved the amount of monthly purchases from € 30 bln to €60 bln. The forward guidance on APP and on interest rates remained unchanged. This scenario could be considered as dovish. Regarding FX, the ECB president mentioned foreign exchange developments as a risk factor to inflation. European yields declined a few bps and EUR/USD dropped to the 1.1740 area. However, the sell-off already petered out during the press conference. EUR/USD trades currently in the 1.1750 area. USD/JPY showed no clear trend and hovered in the upper halve of the 113 big figure. Potentially unexpected developments in Spain are still a wildcard for trading later on today.

Conclusion: the soft ECB approach blocked the upside of the euro. However, the down-move remains very modest and keeps EUR/USD in its tight established range.

Brexit uncertainty prevents further sterling comeback

Sterling came gradually under pressure against the euro and the dollar as the positive impact from yesterday's better than expected UK Q3 GDP faded. There were again plenty of divergent views reported on how to address Brexit negotiations within the UK conservative party. This was a sterling negative. EUR/GBP tried to regain the 0.8950 area, but the gains could not be sustained. At noon, the CBI retail sales gauge dropped from +42 to -36, the lowest level since 2009. However, the (volatile) report had again only limited impact on sterling. During the afternoon, sterling continued to trade with a negative bias against (a broadly stronger) dollar. Cable trades currently in the 1.32 area. EUR/GBP declined in line with the overall performance after the ECB policy announcement. EUR/GBP returned to the 0.8900 area.

Daily Pivots: (S1) 1.5174; (P) 1.5263; (R1) 1.5420; More....

Sharp fall from 1.5392 indicates temporary topping. Intraday bias in EUR/AUD is turned neutral first. Outlook will remain bullish as long as 1.1494 support holds. Break of 1.5392 will resume medium term rise from 1.3624 and target 61.8% projection of 1.3624 to 1.5226 from 1.4949 at 1.5939 first.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term top has completed at 1.3624. Rise from 1.3624 is expected to extend to retest 1.6587. The corrective structure of the price actions from 1.5226 is affirming this view. Sustained trading above 1.5226 will target a test on 1.6587 key resistance. However, break of 1.4421 support will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.

GBP/USD - 1.3192

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.

Daily Pivots: (S1) 133.90; (P) 134.20; (R1) 134.64; More...

EUR/JPY's sharp fall suggests rejection from 134.39 key resistance. That is, rise from 131.65 could have completed. Intraday bias is turned back to the downside for 131.65. Overall outlook will remain bullish as long as 131.65 holds and another rise is still in favor. But firm break of 131.65 will suggest reversal and turn focus to 127.55 key support. On the upside, sustained trading above 134.39 will confirm up trend resumption and and target 141.04 long term resistance.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will argue that the medium term trend has reversed and will turn outlook bearish for deeper fall.

EUR/USD - 1.1719

Original strategy  :

Bought at 1.1785, stopped at 1.1750

Position : - Long at 1.1785

Target :  -

Stop : - 1.1750

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.

Daily Pivots: (S1) 0.9864; (P) 0.9901; (R1) 0.9934; More....

USD/CHF's rise resumes after brief consolidation and hits as high as 0.9955 so far. Intraday bias is back on the upside. Current rise from 0.9420 should target 61.8% retracement of 1.0342 to 0.9420 at 0.9990. Sustained break there will pave the way to retest 1.0342 high. In any case, near term outlook will remain bullish as long as 0.9736 support holds.

In the bigger picture, current development suggests that USD/CHF has defended 0.9443 (2016 low) key support level again. Rise from 0.9420 could develop into a medium term move and target a test on 1.0342 high. This represents the upper end of a long term range that started back in 2015. On the downside, break of 0.9587 support is now needed to indicate completion of the rise from 0.9420. Otherwise, further rally will remain in favor in medium term.

Daily Pivots: (S1) 1.3157; (P) 1.3214; (R1) 1.3319; More....

GBP/USD is still bounded in range of 1.3026/3337 and intraday bias stays neutral at this point. On the downside, break of 1.3026 will resume the decline from 1.3651 and target 1.2773 key support level. This will also revive the case of medium term reversal. Meanwhile, on the upside, break of 1.3337 will resume the rebound from 1.3026 to 61.8% retracement of 1.3651 to 1.3026 at 1.3412 and above.

In the bigger picture, while the medium term rebound from 1.1946 was strong, GBP/USD hit strong resistance from the long term falling trend line. Outlook is turned a bit mixed and we'll stay neutral first. On the downside, decisive break of 1.2773 key support will argue that rebound from 1.1946 has completed. The corrective structure of rise from 1.1946 to 1.3651 will in turn suggest that long term down trend is now completed. Break of 1.1946 low should then be seen. On the upside, break of 1.3835 support turned resistance will revive the case of trend reversal and target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466.

Daily Pivots: (S1) 113.39; (P) 113.81; (R1) 114.16; More...

Intraday bias in USD/JPY remains neutral for consolidation below 114.23 temporary top. Consolidation might extend for a while. Still, outlook stays bullish as long as 111.64 support holds. Decisive break of 114.49 resistance will confirm that correction pattern from 118.65 has completed at 107.31 already. And USD/JPY should then target a test on 118.65. However, break of 111.64 will dampen this bullish view and suggests that rebound from 107.31 has completed.

In the bigger picture, medium term rise from 98.97 (2016 low) is not completed yet. It should resume after corrective fall from 118.65 completed. Break of 114.49 resistance will likely resume the rise to 61.8% projection of 98.97 to 118.65 from 107.31 at 119.47 first. Firm break there will pave the way to 100% projection at 126.99. This will be the key level to decide whether long term up trend is resuming.

USD/JPY - 113.77

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Despite yesterday’s rise to 114.24, the subsequent stronger-than-expected retreat suggests a temporary top has possibly been formed there and consolidation with mild downside bias is seen for test of 113.24-25 (previous support and 38.2% Fibonacci retracement of 111.65-114.24), break there would add credence to this view, bring further fall to 112.95-00 (50% Fibonacci retracement) but reckon downside would be limited to 112.60-65 (61.8% Fibonacci retracement) and support at 112.30 should remain intact.

On the upside, whilst recovery to 113.90-95 cannot be ruled out, said yesterday’s high at 114.24 should hold and bring another retreat later. Above this level would revive bullishness and extend recent rise from 107.32 low to 114.45-50 (50% projection of 111.65-114.10 measuring from 113.24), then towards 114.75-80 (61.8% projection). As near term outlook is mixed, would be prudent to stand aside in the meantime.