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USD/JPY Monitoring Long-Term Downtrend Channel
USD/JPY is bouncing lower below 113.00. Strong support is located at 111.12 (20/09/2017 low). Expected to show further bearish pressures. Yet, downside risks are rising as markets may soon take some short-term profit.
We favor a long-term bearish bias. Support is now given at 99.02 (10/08/2013 low). A gradual rise towards the major resistance at 125.86 (05/06/2015 high) seems unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
GBP/USD Ready For A New Leg Lower
GBP/USD is pushing lower after recent surge. Hourly resistance is given at 1.3657 (20/09/2017 high). Strong support is given at 1.3431 (25/09/2017 low). Expected to show continued bearish pressures.
The long-term technical pattern is reversing. The Brexit vote had paved the way for further decline. Long-term support can be found at 1.1841 (07/10/2017 low). Long-term resistance given around 1.35 is at stake and indicates a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.
EUR/USD Short-Term Downtrend
EUR/USD is consolidating lower in a downtrend channel. Hourly resistance can be found at 1.2092 (08/09/2017 high) while hourly support lies at 1.1823 (31/08/2017 low). Stronger support is given at a distance at 1.1662 (17/08/2017 low). Expected to show continued short-term bearish pressures.
In the longer term, the momentum is now turning largely positive. We favour a continued bullish bias. Key resistance is holding at 1.2252 (25/12/2014 high) while strong support lies at 1.0341 (03/01/2017 low).
GBP/JPY Elliott Wave Analysis
GBP/JPY – 150.25
The British pound rallied and finally broke above previous chart resistance at 148.45, confirming our bullish view that the erratic rise from 120.50 low (wave v trough) has resumed and may extend further subsequent gain to 153.50-60, then 154.00-10, however, loss of near term upward momentum should prevent sharp move beyond 155.00, risk from there has increased for a correction to take place 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.
On the downside, whilst initial pullback to 149.50, then 148.90-00 cannot be ruled out, reckon 148.10-20 would limit downside and bring another rise later. Below minor support at 147.25 would defer and suggest a temporary top is possibly formed, bring retracement of recent rise to 146.50-60, then towards 146.00 but still reckon support at 145.25 would remain intact, sterling shall head north again from there in Q4.
Recommendation: Buy at 148.20 for 151.20 with stop below 147.20.
The long-term downtrend from 570.99 (29 Feb 1980) is labeled as an impulsive wave with III with circle ended at 129.77 (20 Apr 1995) and the corrective rebound to 251.12 (20 Jul 2007) is treated as wave IV with circle and the wave V with circle selloff from 251.12 has possibly ended at 116.80 (almost reached our indicated target at 116.00) and major correction has commenced from there and indicated upside target at 183.90-00 (50% Fibonacci retracement of 251.10-116.85) had been met, reckon upside would be limited to 199.80-90 (61.8% Fibonacci retracement) and bring wave (V) decline in later part of 2017.
EUR/USD – Euro Slips To 4-Week Low, US Consumer Confidence, Housing Reports Next
The euro has posted losses on Tuesday, continuing the downward trend which marked the Monday session. Currently, EUR/USD is trading at 1.1803, down 0.33% on the day. On the release front, the sole eurozone event, German Import Prices, came in at 0.0%, shy of the forecast of 0.1%. Still, the reading ended a streak of five straight declines. In the US, today's key indicators are CB Consumer Confidence and New Home Sales. Later in the day, Fed Chair Janet Yellen will speak at an event in Cleveland. On Wednesday, the US will release Core Durable Goods Orders and Pending Home Sales.
Angela Merkel easily won the German election on Sunday, but her win has been described as a “nightmare victory”. This sentiment has pushed the euro downwards, as EUR/USD is currently trading at its lowest level since August 25. Merkel's CDU won 33 percent of the vote and will be the largest party in parliament, but arduous negotiations await as Merkel will have to cobble together a coalition in order to form a government. The center-left SFD, which won 20 percent of the vote, announced that it will not join the CDU, so Merkel will have to negotiate with smaller parties. The far-right AFD ran on a far-right, anti-immigrant platform, and the party's surge in support has sent shock waves in Germany and across Europe. The AFD can be ruled out as a coalition partner, which leaves the Greens and the pro-business FDP party as the most likely configuration. However, the FDP has insisted on the powerful finance portfolio and will likely try to reduce German transfer payments to the European Union. These views run counter to Merkel's vision of taking steps to more closely integrate the European Union, particularly as Britain is on its way out of the club.
Federal Reserve policymakers have been divided over a rate hike in December, which would mark a third rate increase in 2017. With no clear message from the Fed, the markets really don't know what to expect, and fed futures have priced in a December hike at 55%. On Monday, New York Fed President William Dudley made a strong case to raise rates. Dudley cited a soft US dollar and strong global growth as reasons why inflation would increase and also translate into stronger wage growth. Dudley said he expects inflation to reach the Fed's target of 2 percent in the “medium term”, and predicted that the Fed would continue to gradually remove monetary accommodation. In last week's rate statement, the Fed announced that it would reduce its $4.2 trillion balance sheet by $50 billion/mth, starting in October.
Technical Outlook: WTI Oil Hit 5-Month High On Turkey’s Threats To Cut Kurdish Exports
WTI Oil is consolidating under fresh five-month high at $52.41, after the price was boosted by threats from Turkey to cut oil exports from Iraq's Kurdistan region.
Threats come as intensified pressure on the Kurdish autonomous region over its independence referendum which is expected to show a comfortable majority in favor of independence.
This provide strong support to oil prices, as reduced supply, combined with production cut from top oil producers, could raise concerns about tighter crude supply and further boost oil price.
WTI oil price rose strongly on Monday, marking the biggest one-day gains since 18 Aug.
The price is riding on the third wave of five-wave sequence from $45.57, which met its FE 138.2% at $52.30 and could extend to $53.21 (FE 161.8%).
Meanwhile, bulls may take a breather on overbought daily conditions. Rising 10SMA underpins the action (currently at $50.51) should ideally contain dips.
Res: 52.41, 53.00, 53.21, 53.77
Sup: 51.63, 51.09, 50.77, 50.51
Technical Outlook: AUDUSD – Bears Pressure Daily Cloud Top
The Aussie dollar extends weakness from the previous day and approaches key support at 0.7905 (daily cloud top) pressured by fresh concerns over North Korea. Fresh bears are on track to fully retrace last Friday's recovery which was capped at 0.7986, as the price returned below cracked Fibo support at 0.7929 (Fibo 61.8% of 0.7807/0.8124 upleg) Pressure on cloud top which underpinned the action in past few weeks is rising and eventual penetration into daily cloud (spanned between 0.7905 and 0.7794) would signal further easing. Bearish setup of daily MA's and Momentum studies in the negative territory are supportive, however, bears may show hesitation at cloud top as slow stochastic is oversold on daily chart. Corrective upticks are expected to be limited and offer selling opportunities while key barriers at 0.8000 zone (converged daily Kijun-sen/Tenkan-sen) stay intact. Only sustained break here would neutralize and provide fresh bullish signal.
Res: 0.7948; 0.7973; 0.7986; 0.8005
Sup: 0.7905; 0.7882; 0.7865; 0.7807
Trade Idea: GBP/USD – Sell at 1.3535
GBP/USD – 1.3472
Original strategy :
Sell at 1.3620, Target:1.3420, Stop: 1.3680
Position: -
Target: -
Stop: -
New strategy :
Sell at 1.3535, Target:1.3335, Stop: 1.3595
Position: -
Target: -
Stop:-
As cable met renewed selling interest at 1.3571 yesterday and slipped again, retaining our view that further consolidation below last week’s high at 1.3658 would be seen and mild downside bias remains for the fall from 1.3658 to bring retracement of recent rally to 1.3380-85, then 1.3350 but reckon 1.3300-10 would hold from here.
In view of this, we are looking to turn short on recovery as 1.3540-50 should limit upside. Above said resistance at 1.3571 would risk test of 1.3600 but break of latter level is needed to signal pullback from 13658 (last week’s post-Fed high) has ended, bring retest of this level later. break there would signal recent upmove has resumed for headway to 1.3700-10 first. Our preferred count is that (pls see the attached chart) the wave IV is unfolding as a complex double three (ABC-X-ABC) correction with 2nd wave B ended at 1.2774, hence 2nd wave C is unfolding and may extend further gain to 1.3650, then 1.3700, however, overbought condition should limit upside to 1.3770-75 and reckon 1.3800-10 would hold from here, bring retreat later.
Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has ended at 1.7192, the subsequent selloff is the larger degree wave (C) which is still unfolding with minor wave (III) of larger degree wave 3 ended at 1.1986, hence wave (IV) correction is in progress which could either be a triangle wave (IV) of a complex formation but upside should be limited to 1.3500 and price should falter well below 1.4000, bring another decline in wave (V) of 3 for weakness to 1.1500, then 1.1200.
Trade Idea: GBP/JPY – Sell at 151.80
GBP/JPY - 150.55
Original strategy:
Sell at 152.00, Target: 150.00, Stop: 152.50
Position: -
Target: -
Stop: -
New strategy :
Sell at 151.80, Target: 149.80, Stop: 152.40
Position: -
Target: -
Stop:-
Although sterling recovered after finding support at 149.75, if our view that a temporary top form at 152.85 is correct, upside should be limited to 151.80-90 and bring another decline, below said support at 149.75 would add credence to this view, bring retracement of recent rise to 148.90-00, however, only a drop below there would retain bearishness and bring retracement of recent rise to 148.50 and then 148.00 later.
In view of this, we are looking to sell sterling on recovery as 151.80-90 should limit upside. Above 152.25-30 would risk retest of said last week’s high at 152.85 but break there is needed to signal recent upmove has once again resumed and extend headway to 153.00-10 and possibly towards 153.50-60, however, 154.00 should hold, risk from there has increased for a retreat to take place 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.
Trade Idea: EUR/JPY – Sell at 132.90
EUR/JPY - 132.08
Original strategy:
Sell at 133.90, Target: 132.30, Stop: 134.50
Position: -
Target: -
Stop: -
New strategy :
Sell at 132.90, Target: 131.30, Stop: 133.50
Position: -
Target: -
Stop:-
As the single currency has dropped quite sharply yesterday and has remained under pressure, adding credence to our view that a temporary top has been formed at 134.41 last week, hence consolidation below this level would be seen with mild downside bias for weakness to 131.50, then 131.00-05 break there would bring retracement of recent upmove towards support at 130.62 which is likely to hold from here due to near term oversold condition.
In view of this, we are looking to sell euro on recovery but at a lower level as 132.90-00 should limit upside. Above previous support at 133.43 would abort and suggest at least first leg of decline from 134.41 has ended, bring a stronger rebound to 133.90-00 but still reckon said resistance at 134.41 would remain intact, bring further consolidation.
Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.
Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).
