Sample Category Title

EUR/GBP - 0.8781

Original strategy  :

Sell at 0.8890, Target: 0.8740, Stop: 0.8930

O.C.O.

Buy at 0.8670, Target: 0.8820, Stop: 0.8610

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.8890, Target: 0.8740, Stop: 0.8930

O.C.O.

Buy at 0.8670, Target: 0.8820, Stop: 0.8610

Position : -

Target :  -

Stop : -

 
Although the single currency continued trading defensively after breaking below support at 0.8774 and near term bearishness remains for the selloff from 0.9307 top to extend weakness to 0.8690-95 (61.8% Fibonacci retracement of 0.8312-0.9307), loss of downward momentum should prevent sharp fall below 0.8670-75 (50% projection of 0.9226-0.8774 measuring form 0.8899) and bring rebound later. Above 0.8815-20 would bring recovery to 0.8850, however, resistance at 0.8899 should cap upside and bring another decline later. 

In view of this, whilst we are looking to sell euro on recovery, we are inclined to turn long on subsequent decline as 0.8670-75 should limit downside. Below 0.8640-50 would risk weakness to 0.8600-10 but sharp fall below there should not be repeated and risk remains for another rebound to take place soon. 

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.

Oil prices gained notably on Monday, amid potential supply disruptions. Turkish President Erdogan said he is willing to "close the tap" and cut oil flows from Iraq's Kurdish region to the rest of the world, after the Iraqi Kurds held an independence referendum. The precious liquid edged even higher during the European morning Thursday, perhaps due to another comment from Turkey that it will deal only with the central Iraqi government for all crude that passes through a Turkish pipeline.

We see the case for oil prices to remain supported for a while more, given that Turkey could follow up its threats and restrict the Kurds from accessing that pipeline. Something like that could eliminate roughly 500,000 barrels/day from the market. In addition, there is also the risk of military conflict, something Erdogan said is on the table on Monday.

WTI edged north during the European morning Thursday, after it hit support at the 52.00 (S2) line. Then, the price emerged above 52.50 (S1) to stop fractionally below the 53.00 (R1) resistance zone. The price structure on the 4-hour chart continues to suggest a short-term uptrend and as such, we see the possibility for the bulls to remain in the driver's seat for a while. A break above the 53.00 (R1) hurdle may set the stage for more upside extensions, perhaps towards the 54.00 (R2) territory, marked by the peaks of the 7th of March and 12th of April.

Looking at our short-term momentum studies, we see that both of them support the case for further near-term advances. The RSI turned up and now looks ready to cross above its 70 line, while the MACD, already positive, re-crossed above its trigger line and is now pointing up.

As for the bigger picture, even if WTI continues to trade north for a while, we remain skeptical on whether a healthy long-term uptrend can be established. The price is now trading within the longer-term sideways range, between 51.50 (S3) and 55.30 (R3), where we believe US shale producers may be attracted to increase production. This could put a lid on any future gains.

USD/CAD - 1.2456

Trend:  Down

 
Original strategy       :

Bought at 1.2285, met target at 1.2450

Position: - Long at 1.2285

Target:  - 1.2450

Stop: -

 
New strategy             :

Buy at 1.2360, Target: 1.2560, Stop: 1.2300

Position: -

Target:  -

Stop:-

As the greenback surged again after finding renewed buying interest at 1.2329 and reached our indicated upside targets at 1.2450 (our long position entered at 1.2285 made 165 points profit), adding credence to our view that low has been formed at 1.2061 and mild upside bias remains for this move to bring retracement of early selloff to 1.2525-30, then towards 1.2590-00, however, near term overbought condition should limit upside and reckon resistance at 1.2663 would remain intact. 

As we have taken profit on our long position entered at 1.2285, would not chase this rise here and would be prudent to buy again on pullback as 1.2360-70 should limit downside. Below indicated support at 1.2313 would defer and risk weakness to 1.2254 support (Friday’s low) but only break of latter level would signal top is possibly formed, bring test of previous support at 1.2197, below this level would confirm and bring weakness to 1.2160-65, then towards support at 1.2121, break there would confirm the rebound from 1.2061 has ended and bring retest of this level later, 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.

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 marginally higher on the day. US equities also take an uneventful start, opening with marginal losses.
• UK and EU negotiators have hailed progress in the latest round of Brexit negotiations. Despite upbeat comments by both sides, the EU says it may be weeks or months before talks can begin on Mrs May's new goal of a transition deal that could maintain much of the status quo for a further two years after Britain leaves the bloc in 2019.
• Euro zone economic sentiment improved more than expected in September (from 111.9 to 113), reaching levels last seen in July 2007, with optimism rising in all sectors except financial services. German inflation disappointed, stabilizing at 1.8% Y/Y (0% M/M) while consensus expected an acceleration to 1.9% Y/Y.
• US eco data printed close to consensus. Weekly jobless claims increased slightly, from 260k to 272k, but remain distorted by the devastating hurricanes. The final figure of Q2 US GDP showed a marginal upward revision from 3% Q/Qa to 3.1% Q/Qa. The trade deficit unexpected narrowed from -$63.9B to -$62.9B.
• The ECB should fight high and low inflation with equal vigour, ECB Liikanen said, suggesting he had little tolerance for any eventual inflation overshoot. ECB Praet said "Things are going on the real (economy) side much, much better, but the job is not yet done. Now we are talking about recalibration. The end of the story is not yet written."
• The Bank of England holds significant sway in influencing inflation, but it can't solve broader challenges and is limited in its ability to soften any blow from Brexit, BoE governor Carney said.

Rates

Core bond selling slows, but curve steepening alive

Core bonds started to decline in early Asian trading, likely triggered by Trump's tax reform plan and its potential reflationary effects. Overnight hawkish comments of Boston Fed Rosengren were a reminder that the Fed continues its gradual tightening rate path despite low inflation. The bond selling slowed and profit taking kicked in (and EUR/USD turned north) when European equity trading started. However, we didn't see some causality as the equity rally never went far. Curve steepening continued, while the US-German yield spread stabilized. EMU eco data were mixed with German and Spanish inflation slightly below expectations, but economic sentiment indicators very strong and better than expected. US eco data were a bit better than expected with a lower trade deficit and higher inventories, both contributing positively to Q3 GDP. However, we don't think the eco data were influential for trading. At the time of writing, German and US yields increased by up to 2.5 bps at the 30-yr tenor. Summarizing, bond selling slowed, probably due to some fatigue, profit taking and the absence of new bond negatives.

ECB Villeroy called for being pragmatic in reducing QE intensity. He referred to what they did in December (lower monthly amount of purchases). He suggested that the ECB will keep policy loose, including by keeping rates negative until sustainable rise in inflation. It pushed the Bund modestly higher to intraday highs, but wasn't the trigger for the turn.

The Italian debt agency successfully tapped the on the run 5-yr BTP (€2.5B 0.9% Aug2022) and 10-yr BTP (€2B 2.05% Aug2027). The combined amount sold was the maximum of the €3.5-4.5B target range with a solid 1.65 bid cover. Addtionally, the debt agency sold €1.5B of a floating rate bond (7-yr CCTeu). The US Treasury ends its refinancing operation tonight with a $28B 7-yr Note auction. The WI currently trades around 2.17%.

Currencies

USD profits as reflation trade resumes

Yesterday, the dollar made nice gains supported by a flaring up of the global reflation trade. This pattern was at least partially interrupted today. Core yields maintained an upward bias, but the dollar didn't make any further progress. The US currency even corrected slightly lower. EUR/USD trades in the 1.1785 area. USD/JPY is changing hands around 112.60. For now, we consider it a breather on this week's solid USD performance.

Asian equities showed again a mixed picture. USD/JPY returned to the 113 area, spurted by a further rise in US yields. The impact of a rising dollar and higher US yields on other Asian/EM markets was mixed. EUR/USD (1.1735 area) held within reach of yesterday's correction low.

The rise in US yields in Asia suggested that yesterday's reflation trade, including the rebound of the dollar, had still further to go. However, this was not the case. USD/JPY and EUR/USD came with reach of yesterday's top (113.26) and yesterday's low (1.1717), but a real test or a break didn't occur. The dollar rebound needed a breather. The confidence data of the European commission were strong. Maybe they supported a rebound of the euro, but the move had already started before the publication of the report. ECB speakers (including Villeroy and Hansson) also suggested that the impact of the recent rise of the euro on growth might be rather modest. EUR/USD traded gradually higher throughout the morning session and changed hands in the 1.1775 area around noon. USD/JPY failed to sustain above 113 and returned to the 112.70/60 area. The latter suggests that USD profit taking prevailed. Interest rate differentials between the euro end the dollar were negligible as a factor for USD trading. As said, the dollar rebound simply needed a breather.

US Q3 GDP was confirmed little changed at 3.1% QoQa. The August US trade deficit was substantially smaller than expected and inventories grew rather strongly. The data are supportive for the US Q3 GDP. The intraday decline of the dollar slowed during the US hours, but for now there is no sign of an extension of the recent USD rebound. USD/JPY trades in the 112.60 area. EUR/USD trades near 1.1785. The dollar rally apparently needs more good news.

EUR/GBP holds near recent lows

Sterling had somewhat of a roller-coaster ride today. At the BoE independence conference, BoE's Carrey said there were limits to the amount of economic problems the Bank can solve. At the same time, he reiterated that the Bank will support the UK through the Brexit process. In this context, he didn't give much weight to the recent rise in inflation. Markets considered it a dovish assessment, triggered further euro selling. The headlines from the UK-EU Brexit negotiations also weren't too positive. EU's Barnier said the Florence speech created a new dynamic. Even so, it can still take weeks or even months to achieve sufficient Brexit progress. Sterling was sold both against the euro and the dollar. EUR/GBP rebounded temporary north of 0.88. However, sterling still showed good resilience. The sterling decline was almost fully reversed in the afternoon session. We didn't see any 'hard, high profile news' to explain the move. Whatever. EUR/GBP trades again in the 0.8775 area. Cable hovers at around 1.3435. Over the previous days, the sterling rally (against the euro) lost some momentum, but there is no clear sign of a real countermove.

Good day traders! Let's start the US session with crude oil.

Crude oil made a new leg higher, into sub-wave v) of five. We so see a completed triangle correction within the previous wave iv) and now final wave v) in progress. Current rise may later search for a top near the Fibonacci ratio of 61.8 and near the triangle thrust measurement near the 53.10 region and from there a new drop lower may follow.

Crude oil, 1H

Daily Pivots: (S1) 1.1708; (P) 1.1752 (R1) 1.1787; More...

A temporary low is in place at 1.1716 and intraday bias is turned neutral first. Deeper fall is expected as long as 1.2029 resistance holds. Decline from 1.2091 is seen as correcting whole rise from 1.0569. Below 1.1716 will target 1.1661 support and then 38.2% retracement of 1.0569 to 1.2091 at 1.1510, where we're expecting support to bring rebound.

In the bigger picture, rise from medium term bottom at 1.0339 is still in progress for 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall from 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside. But after all, break of 1.1661 is needed to indicate medium term topping. Otherwise, outlook will remain bullish in case of pull back.

Daily Pivots: (S1) 0.9680; (P) 0.9724; (R1) 0.9767; More....

No change in USD/CHF's outlook and focus remains on 0.9772 key resistance. Decisive break there will suggest that whole down trend form 1.0342 has completed. In that case, near term outlook will be turned bullish for 0.9860/1.0099 resistance zone. Nonetheless, with 0.9772 resistance intact, outlook remains bearish. Below 0.9587 minor support will turn bias back to the downside for retesting 0.9420 low.

In the bigger picture, focus remains on whether 0.9443 key support (2016 low) could be taken out firmly as down trend from 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.

Daily Pivots: (S1) 112.25; (P) 112.75; (R1) 113.30; More...

No change in USD/JPY's outlook. With 111.46 minor support intact, further rise is expected. Sustained break of medium term channel resistance will argue that correction from 118.65 is already completed with three waves down to 107.31. Break of 114.49 will confirm this bullish case and target a test on 118.65 next. On the downside, however, break of 111.46 will suggest rejection from the channel resistance and turn bias back to the downside.

In the bigger picture, rise from 98.97 (2016 low) is seen as the second leg of the corrective pattern from 125.85 (2015 high). It's unclear whether this this second leg has completed at 118.65 or not. But medium term outlook will be mildly bearish as long as 114.49 resistance holds. And, there is prospect of breaking 98.97 ahead. Meanwhile, break of 114.49 will bring retest of 125.85 high. But even in that case, we don't expect a break there on first attempt.

Daily Pivots: (S1) 1.3347; (P) 1.3403; (R1) 1.3444; More....

GBP/USD recovers mildly today but it's staying in corrective pattern from 1.3651. Intraday bias remains neutral first. We'd continue to expect strong support from 38.2% retracement of 1.2773 to 1.3651 at 1.3316 to contain downside and bring rally resumption. Break of 1.3651 will turn bias back to the upside for 1.3835 support turned resistance next. Break there will target 55 month EMA (now at 1.4405).

In the bigger picture, current development argues that the long term trend in GBP/USD has reversed. That is, a key bottom was formed back in 1.1946 on bullish convergence condition in monthly MACD. Current rise from 1.1946 will target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 next. In any case, medium term outlook will now stay bull

Dollar is paring some gains today but it remains the strongest major currency for the week so far. While bond yields remains firm today, the greenback is losing some momentum. Euro and Sterling are trading firmer while commodity currencies remain weak. Released from US, initial jobless claims rose 12k to 272k in the week ended September 23, above expectation of 269k. Continuing claims dropped -45k to 1.93m in the week ended September 16. Trade deficit narrowed to USD -62.9b in August. Wholesale inventories rose 1.0% in August. Q2 GDP was revised up to 3.1% with price index unchanged at 1.0%.

US President Donald Trump's plan of cut in corporate tax rate from 35% to 20% and top individual tax rate from 39.5% to 35% are generally welcomed. But the plan itself is already drawing criticisms from top Democrats, as Bernie Sanders called it "morally repugnant" for benefiting the "wealthiest people and most profitable corporations in this country." Politics aside, there are questions on how the government could recoup the loss revenue. Without a plan, the tax cut could indeed be translated into small infrastructure spending. But overall, for now, more upside is still in favor for the Dollar.

ECB Praet: It's readjusting, not ending of stimulus

ECB Chief Economist Peter Praet emphasized today that the central bank will discuss adjusting monetary stimulus, not ending. He also repeated President Mario Draghi's wording of "re-calibration". Praet noted that "things are going on the real (economy) side much, much better", but the "job is not yet done". There are talks that ECB could announce to lower the current EUR 60b a month asset purchase target to EUR 40b a month starting next year.

Separately, ECB Governing Council member Francois Villeroy de Galhau is confident that the current recovery in economy and job market would push up inflation. But the question is how long that would take. And while policy makers "must reduce the intensity of our net asset purchases", they should also "keep overall our monetary policy significantly accommodative".

Another Governing Council member Erkki Liikanen said that for now "a very substantial degree of monetary accommodation is still needed in the euro area for underlying inflation pressures to gradually build up". He pointed to the fact that "global weight of the advanced economists has decreased". However, he also singled out that "a stronger than forecast deceleration in China's debt driven growth would weaken confidence globally and significantly dampen growth".

Release from Eurozone, German CPI CPI rose 0.1% mom 1.8% yoy in September, in line with expectation. Looking at the details, inflation in some German region has risen above ECB's target. In the state of Hesse, headline CPI surged to 2.1% yoy. CPI in Saxony rose to 2.0% yoy. Meanwhile, CPI in the most populous state of North Rhine-Westphalia was unchanged at 1.9% yoy. Also from Germany, Gfk consumer confidence dropped to 10.8 in October, down from 0.9, below expectation of 11.0.

Eurozone confidence indicators generally improved in September. Business climate rose to 1.34, up from 1.08 and beat expectation of 1.12. Economic confidence rose to 113.0, up from 111.9, beat expectation of 112.0. Industrial confidence rose to 6.6 up from 5.0 and beat expectation of 5.1. Services confidence rose to 15.3, up from 15.1 and beat expectation of 15.0. Consumer confidence was finalized at -1.2.

Carney said BoE can't nullify Brexit impacts

BoE Governor Mark Carney said today that the central is unable to nullify the economic impact of Brexit. Carney pointed out that "the biggest determinants of the UK's medium-term prosperity will be the country's new relationship with the EU and the reforms it catalyses." And, "monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU." And Carney added that "carefully circumscribed independence is highly effective in delivering price and financial stability." However, BoE "cannot deliver lasting prosperity and it cannot solve broader societal challenges." 

BoE Chief Economist Andy Haldane said today that majority of the MPC members are "nearing the point" to hike interest rate. And he emphasized the positive side of it. He noted that "this would be a sign of the economy healing, and therefore adjusting to that healing process." Therefore, "rather than being a source of fear or trepidation, this ought to be a good news story about the economy proving resilient." Haldane's comments affirm the expectation of a rate hike by BoE in near term, possibly in November.

Brexit talks need months to move to next stage

Staying in UK, Brexit Secretary David Davis said that "decisive steps forward" were made in the latest round of negotiations with EU. He hailed that "this round was a vital one". And Davis urged EU officials to be pragmatic with the talks. EU negotiator Michel Barnier said "we have had a constructive week". However, Barnier emphasized that "further work is needed in coming weeks and coming months" on the resolving the standout issues.

Barnier acknowledged the "new dynamic" created by UK Prime Minister Theresa May's speech in Florence last week. And there were progress made on citizen rights. However, Barnier said UK is not in a position to identify its financial commitments to EU yet. And Barnier emphasized that "for the EU, the only way to reach sufficient progress is that all commitments taken at 28 are honoured at 28."

Kiwi stays weak after RBNZ stands pat

New Zealand Dollar remains the weakest one for the week after RBNZ rate decision. As widely anticipated, RBNZ left the OCR unchanged at 1.75% in September Policymakers downgraded the domestic growth outlook and suggested that the accommodative monetary policy would stay for a 'considerable period'. Thanks to the recent decline in New Zealand, driven by heightened political uncertainty, RBNZ tweaked its warning over currency strength. It noted that a lower exchange rate would "would help" raise tradables inflation. We expect RBNZ to keep the policy rate unchanged for the rest of the year, and likely through 2018. More in RBNZ Downgrades Growth Outlook While Keeping OCR At 1.75%

BoJ Kuroda cautiously upbeat on economy

BoJ Governor Haruhiko Kuroda reiterated his cautiously upbeat view on the economy. He expects expansions to be well balanced and are broadening He expressed confidence that recovery is likely to be highly sustainable. However, the question remains on the fact that "despite an expanding economy, prices continue to hover on a weak note." And therefore, BoJ is still committed to the massive stimulus program in form of yield curve control framework. It will still take much time for Japan to hit 2% inflation target.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3347; (P) 1.3403; (R1) 1.3444; More....

GBP/USD recovers mildly today but it's staying in corrective pattern from 1.3651. Intraday bias remains neutral first. We'd continue to expect strong support from 38.2% retracement of 1.2773 to 1.3651 at 1.3316 to contain downside and bring rally resumption. Break of 1.3651 will turn bias back to the upside for 1.3835 support turned resistance next. Break there will target 55 month EMA (now at 1.4405).

In the bigger picture, current development argues that the long term trend in GBP/USD has reversed. That is, a key bottom was formed back in 1.1946 on bullish convergence condition in monthly MACD. Current rise from 1.1946 will target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 next. In any case, medium term outlook will now stay bull

Economic Indicators Update