Sample Category Title

EUR/USD - 1.1747

Most recent candlesticks pattern   : N/A

Trend                      : Sideways

Tenkan-Sen level              : 1.1748

Kijun-Sen level                  : 1.1762

Ichimoku cloud top             : 1.1812

Ichimoku cloud bottom      : 1.1801

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite last week’s strong rebound to 1.1858, lack of follow through  buying and the subsequent sharp retreat suggest further choppy trading within recent established range would be seen and weakness to 1.1730 support cannot be ruled out, however, break there is needed to retain bearishness and signal another leg of decline from 1.1880 is underway for weakness to 1.1700 and possibly towards said support at 1.1669.

In view of this, would not chase this fall here and would be prudent to stand aside for now. Above 1.1780-90 would bring recovery to 1.1820-25, however, said resistance at 1.1858 should limit upside and price should falter well below said resistance at 1.1880. Only a break above there would signal another leg of erratic upmove from 1.1669 low is underway for gain to 1.1900-10, then towards 1.1940-50 later. As near term outlook is mixed, would be prudent to stand aside for now.

1. The Liberal Democratic Party won the early parliamentary elections in Japan.
2. "Abenomics" will remain the priority for the Japanese government.
3. Due to this, the Japanese Yen will tend to continue weakening.

"Abenomics" will continue. The Liberal Democratic Party led by the current Japanese Prime Minster, Shinzō Abe, secured a victory during the elections that took place last weekend. However, such results were expected: frankly speaking, the Opposition has nothing to offer instead of the current fiscal and monetary policy. Hardly anybody is ready to take responsibility for the weak inflation and the gradual increase of the national debt, but Abe, for example, is staying in power and continues being responsible for country's financial and economic system together with the Bank of Japan.

It is quite possible that there will be a new coalition in the parliament including liberal democrats and Buddhists. In this case, they will have 310 seats out of 465. It will be enough to continue promoting their financial and economic ideas programs with no hassle.

What is "Abenomics"? It's quite new market term, which includes all key aspects of the monetary policy carried out by the Japanese Cabinet of Ministers lead by Abe. This program is 5 years old and its primary goals are to make the country's economy improve steadily, stabilize the inflation numbers, and weaken the Yen. "Abenomics" was criticized on many occasions, for example, for a "side effect" resulting in the national debt increase. However, there weren't any other ideas that might be good enough for improving the country's economy and the GDP without wasting decades.

For the Yen, Abe's winning the elections means that the previous monetary policy carried out by the BoJ will remain the same. In general, it's not good for the Japanese currency, which has updated its four months' lows. On Monday morning, the USD/JPY pair was breaking the high at 114.00 it reached on July 11th, but a bit later the instrument moved a little lower. In the meantime, there are enough reasons for the pair to grow, because the currency market is not in need of "safe haven" assets right now.

From the point of view of the technical analysis, the long-term trend of the USD/JOPY pair is bearish. At the moment, the pair is expected to test the upside border of the current descending channel. If it succeeds and breaks the border, the price may try to resume the uptrend.

If we take a look at the previous rising impulse inside the descending channel, we can see that it has been corrected by 61.8%, which means that the correction is over and the pair may start a new ascending impulse. The closest target of this impulse may be inside the post-correctional extension area between the retracements of 138.2% and 161.8% at 122.960 and 125.650 respectively. However, to confirm this scenario the instrument has to break the resistance level at 114.700 and the local high at 118.600. We should note that 125.650 is the multi years' high and breaking it will be a serious test for investors.

In the short-term, the pair may grow quite steadily. Breaking 115.250 may result in reaching 117.300.

USD/JPY - 113.75

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 113.81

Kijun-Sen level                  : 112.68

Ichimoku cloud top             : 113.11

Ichimoku cloud bottom      : 112.91

Original strategy  :

Buy at 113.20, Target: 114.20, Stop: 112.85

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 113.20, Target: 114.20, Stop: 112.85

Position :  -

Target :  -

Stop : -

Although the greenback opened higher and rose to 114.10, current retreat suggests consolidation below this level would be seen and pullback to 113.40-45 (38.2% Fibonacci retracement of 112.30-114.10) cannot be ruled out, however, reckon 113.15-20 (previous resistance and 50% Fibonacci retracement) would hold and bring another rise later, above said resistance at 114.10 would extend recent rise from 111.65 to 114.40-50 but reckon 114.75-80 would hold from here due to oversold condition. 

In view of this, we are looking to buy dollar again on pullback as 113.15-20 should limit downside and bring another rise. Below the lower Kumo (now at 112.72) would defer and suggest top is possibly formed instead, risk test of indicated support at 112.30 which is likely to hold from here.

The US dollar held on to most of its Asian session gains in European trading on Monday as the yen remained weak after Abe's landslide victory in Japan. The euro slipped further into losses as the stand-off between Madrid and the Catalan authorities intensified, while sterling also lost ground amid worries about the British economy.

The yen maintained its broad weakness against most major currencies following Japanese prime minister Shinzo Abe's election win on Sunday, which signalled policymakers in the country would continue to support fiscal spending and easy monetary policy. The dollar scaled a three-month high of 114.09 yen earlier in the day and the euro and the pound also reached multi-week highs. The euro hit a four-week high of 134.12 yen before retreating to around 133.60 yen in late session. The pound also pulled back after rising to a three-week high 150.49 yen, but managed to stay up on the day.

The dollar index, which measures the greenback against a basket of six major currencies, was 0.3% firmer at 93.99. The dollar got a boost last week after the US Senate passed a budget blueprint for fiscal year 2018, paving the way for a deal on the Trump administration's tax reforms. Also driving the greenback higher in recent days has been speculation that the next Fed chair will be a more hawkish one. President Trump suggested today in an interview with Fox Business that the main contenders for the position are Fed Governor Jerome Powell, Stanford University economist John Taylor, and incumbent Chair Janet Yellen. Trump said he will make a decision "very shortly".

The prospect of tax cuts and a hawk at the helm of the US Federal Reserve have led to a sell-off of Treasury Notes. The yield on two-year treasuries reached another nine-year high today, reaching 1.589%.

The euro looked set to post a second straight day of sharp losses as developments in Spain continued to stoke concerns about the region's stability. Spain's cabinet met for an emergency meeting on Saturday to invoke Article 155 of the constitution, stripping Catalonia of its autonomy and forcing new elections for the regional parliament. However, Catalan leaders said they would not accept direct rule from Madrid and parliament will meet on Thursday to discuss how to respond to the Spanish government's decision.

The single currency headed back towards last week's low of $1.1729, but the $1.1730 area once again proved a strong support level as the euro firmed to around $1.1750 after the release of Eurozone consumer confidence data. The flash reading of the euro area's consumer confidence gauge for October rose from -1.20 to -1.00, beating forecasts of -1.10.

Sterling was not having a very good session either as it was unable to retain its earlier gains of above $1.32 when it was boosted on hopes of progress in the Brexit talks following last week's EU summit. But concerns about the negative impact of the Brexit uncertainty came back to haunt the markets today following worrying business surveys. A report by Ernst and Young said profit warnings by British companies jumped in the third quarter, while the CBI's latest survey showed factory orders in the UK grew at the slowest pace in 11 months in October. The pound was last trading at $1.3195.

The New Zealand dollar extended last week's steep losses following the formation of a new Labour-led coalition government in New Zealand after September's inconclusive general election. Fears that the new Labour government would pursue less market-friendly policies pushed the kiwi to a five-month low of $0.6929 in Asian trading today, but it stabilized in the European Session to steady around $0.6965.

Another commodity-linked currency struggling today was the Canadian dollar. The loonie hit a 7½-week low of C$1.2648 per US dollar as investors pared back expectations of another rate hike by the Bank of Canada this year after last week's weaker-than-forecast retail sales data for August. Dollar/loonie was last trading around C$1.2635.

In commodities, crude oil prices stayed in positive territory, supported by signs that the oil market is tightening. WTI crude rose 0.6% to $52.14 a barrel in late session, while Brent crude was slightly up at $57.80 a barrel. Gold came under pressure however, weighed by a stronger greenback. The precious metal hit a more than two-week low of $1271.86 an ounce on the back of rising US yields.

USD/JPY has started the week with gains in the Monday session. In North American trade, USD/JPY is trading at 113.71, up 0.18% on the day. On the release front, there are no US events on the schedule. In Japan, Flash Manufacturing PMI improved to 53.1 points.

On the weekend, Prime Minister Shinzo Abe cruised to an easy victory, as Japanese voters elected representatives to the upper house of parliament. Abe's Liberal Democratic Party and a small junior coalition party won a convincing victory, winning at least 312 seats out of 465 seats in the lower house of parliament. The result gives Abe a two-third majority in both seats of parliament, and will allow him to continue his policies. We can expect to see the ultra-loose monetary policy continue until inflation moves closer to the Bank of Japan's target of around 2 percent. Although Abe won a decisive victory, his popularity remains low. The LDP took full advantage of a divided opposition which failed to provide the Japanese voter with a credible alternative. The Tokyo stock markets posted gains after the election, but the Japanese yen responded with slight losses.

Investors are keeping close tabs on the next choice for Federal Reserve chair, with Janet Yellen's term due to expire in February. President Trump has said he will nominate a new Fed head shortly. The front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen's monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump's choice for the new Fed chair could have a significant effect on monetary policy and the strength of the US dollar.

EUR/GBP - 0.8902

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

 
Despite rising to 0.9023 late last week, the subsequent retreat has retained our view that further consolidation below previous resistance at 0.9033 would be seen and weakness to 0.8875-80 cannot be ruled out, however, reckon support at 0.8856 would hold from here and near term choppy trading would continue. Only a drop below this level would signal top has been formed at 0.9033 and bring further fall to 0.8820-25, then towards 0.8800.

On the upside, expect recovery to be limited to 0.8945-50 and reckon 0.8980-85 would hold from here, bring retreat later. Above 0.9000 would bring another test of resistance at 0.9033 but break there is needed to revive bullishness and extend the rebound from 0.8856 for further gain to 0.9060 and later towards 0.9090-00.

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.

USD/CAD - 1.2637

Trend:  Down

 
New strategy             :

Stand aside

Position: -

Target:  -

Stop:-

As the greenback has surged again and finally broke above resistance at 1.2599, confirming the rise from 1.2061 low has resumed and reviving our bullishness for this move from there (wave iii trough) to extend further gain towards previous resistance at 1.2663, then 1.2700 but price should falter well below another previous resistance at 1.2778. 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 as 1.2570-75 should limit downside and bring another rise. Below 1.2520 (previous minor resistance) would abort and suggest top is possibly formed, risk test of 1.2475-80, break there would confirm and then further fall to 1.2450 would follow. Only a break of support at 1.2433 would turn outlook bearish, bring retracement of recent rise to 1.2400, then towards 1.2350-55 but support at 1.2313 should remain intact.

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.

• European equities trade positive in this week's opening session with the French CAC outperforming (+0.5%). US stock markets opened near Friday's closing levels and fail to gain momentum.
• British manufacturers' sentiment on business conditions soured in the three months to October a CBI survey found, in the latest sign of worries sparked by Brexit talks.
• Trump's tax plan picked up momentum as White House budget director Mick Mulvaney said approving a bill by December is realistic. The GOP hasn't abandoned its goal of making the measure revenue neutral and can do so by boosting economic growth, Mitch McConnell said.
• Turkish stocks, bonds and the lira fell after a weekend report in a local newspaper said six Turkish banks may face penalties resulting from a US investigation into their dealings with Iran, even after regulators denied the news and the publisher pulled the story.
• Growth in Germany, Europe's biggest economy, likely held up at a high level in the third quarter, driven by superb industrial orders even as construction activity levelled off and private consumption dipped, the Bundesbank said in a monthly report.

Rates

Core bonds move sideways with upside bias.

In the opening session of the week, core bonds couldn't recoup much of Friday's steep losses. They moved sideways in a narrow range above (German bonds) to around (US Treasuries) Friday's closing levels. At the time of writing, US yields decline marginally between 1 (2-yr) and 0.5 bp (30yr). The German yield curve shifted lower 1.1 (2-yr) to 1.8 (5-yr) bps. Peripheral 10-yr yield spreads versus Germany were fractionally narrower (1 to 2 bps). This occurred after tensions between Spain and Catalunya increased in the weekend, a Czech election in which the "traditional" parties were decimated by the populist/ultra-right wing parties and referendum in Northern Italy in which the parties in favour of more autonomy gained. So, political issues are largely ignored. The only noteworthy eco report, the EMU consumer sentiment, will be released when the redaction of our report closes. The wait-and-see attitude of bond markets is no surprise. Not only the eco calendar was unattractive, but investors stayed side-lined as Thursday's ECB meeting looms..

The Belgian debt agency kicked off this week's scheduled EMU bond supply. It sold €1.012B of its Oct. 2023 and €0.915B of its June 2047 on-the run OLO's. It also sold €0.875B of its March 2026 off-the-run OLO. The Agency sold a total of €2.8B, the upper limited of the targeted range. Especially the longest bond was in strong demand, but also the other bonds were well bid. The bid/covers were higher than at the previous auction. Belgium is now fully funded for the year. The remaining auction in November could be used to start 2018 pre-funding.

Currencies

Dollar gains marginally ground in dull trading session

Trading in global FX markets showed no clear dynamics at the start of the new week. The dollar gained a few tics against the euro. Investors turned reluctant to add euro long exposure ahead of the ECB meeting and given the uncertainty on Spain. The initial weakening of the yen after the election victory of PM Abe had no strong legs. USD/JPY returned below 114 despite the cautious overall dollar bid.

Overnight, the trade weighted dollar gained cautiously ground. USD/JPY initially took the lead. The yen declined as the coalition of Japanese PM Abe secured a two-thirds majority in the lower house of Parliament. USD/JPY jumped temporary north of 114, but the rebound did run into resistance very soon. EUR/USD hovered in the 1.1750/75 area. The single currency remained resilient giving ongoing political uncertainty in Spain.

There were several stories with market moving potential playing in the background (Catalonia, replacement of Yellen, US tax plans/hopes). However, there was no concrete news on these items to move the (FX) market. Sentiment on risk remained fairly constructive and interest rate differentials moved slightly in favour of the dollar. The dollar maintained the benefit of the doubt. EUR/USD drifted south to the mid 1.17 area. USD/JPY held a tight sideways range in the 113.60/90 area.

No real change in the intraday scenario as US traders joined. EUR/USD maintained a slightly negative bias. Euro investors are not inclined to raise euro long exposure going into the ECB meeting and as uncertainty on Spain continues to weigh (euro long exposure declined slightly according to Friday's CFTC data). EUR/USD trades in the 1.1735/40 area, nearing last week's correction low at 1.1730. A break could open the way to the 1.1670/62 area. USD/JPY (currently 113.80 area) is holding a sideways intraday trading pattern. So, for now there are no follow-through losses of the yen in the wake of the election victory of PM Abe this weekend.

Sterling rebound stalls. CBI data were soft

EUR/GBP was locked in an extremely tight sideways range. The CBI business optimism and the October orders were weaker than expected. However, contrary to what was the case last week, the report triggered no additional sterling selling. At the same time, there was also no 'new news' on Brexit. EUR/GBP hovered in a tight range marginally north of 0.89. Cable lost a few tics mirroring the 'by default' overall USD strength. The pair trades in the 1.3175 area. We maintain the view that markets are growing evermore convinced that there is very little reason to position for additional BoE rate hikes beyond the one step that is expected at the early November meeting.

USD/CHF - 0.9856

Original strategy :

Buy at 0.9795, Target: 0.9895, Stop: 0.9760

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9795, Target: 0.9895, Stop: 0.9760

Position : -

Target :  -

Stop : -

As the greenback rallied after finding renewed buying interest at 0.9737 late last week, adding credence to our view that recent upmove has resumed and bullishness remains for the rise from 0.9421 low to extend headway to 0.9870 and possibly towards 0.9900, however, near term overbought condition should limit upside and price should falter below 0.9940-50, bring retreat later.

In view of this, we are looking to buy dollar again on pullback as support at 0.9796 should limit downside and bring another rise. Below 0.9765-70 would defer and suggest top is possibly formed, risk test of indicated support at 0.9730-37, however, break there is needed to provide confirmation, then further fall to previous support at 0.9705 would follow.

GBP/USD - 1.3200

Original strategy :

Sell at 1.3285, Target: 1.3155, Stop: 1.3320

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.3285, Target: 1.3155, Stop: 1.3320

Position : -

Target :  -

Stop : -

As cable found good support at 1.3088 late last week and has staged a strong rebound, suggesting consolidation with initial upside bias would be seen for recovery to 1.3240-45 (61.8% Fibonacci retracement of 1.3338-1.3088), however, price should falter below indicated resistance at 1.3287 and bring retreat later, below 1.3130-35 would bring test of said support at 1.3088 but break there is needed to extend the fall from 1.3338 to 1.3050, then towards recent low at 1.3027.

In view of this, wee are looking to sell cable on further subsequent recovery as resistance at 1.3287 should limit upside and bring another decline later. Only above 1.3312 resistance would abort and extend further gain to said recent high at 1.3338 which is likely to hold from here.