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The Euro opened with gap lower on Monday as political uncertainty rises after German far-right AfD party won a surprise gain in votes and enters parliament for the first time. This put Angela Merkel, who won the election in difficult position as she now faces though work to form the coalition after the Social democrats said they are moving into opposition after gaining around 20% votes in Sunday's election. The EURUSD pair dipped to 1.1890 low (30SMA) after Monday's opening and recovered most of overnight's losses on recovery rally in Asian trading, but gap stayed unfilled after daily Tenkan-sen/10/20SMA bear-cross formation capped recovery action at 1.1935. Fresh weakness in early hours of the European session keeps near-term risk shifted lower. The notion is supported by Shooting star pattern which formed on daily chart after Friday's strong upside rejection and subsequent weakness on Monday, as well as bearish near-term techs. Violation of today's low would expose key near-term supports at 1.1861/50 (last week's lows/the neckline of H&S pattern on daily chart) and 1.1837/22 (lows of 14 Sep/31 Aug), break of which would trigger deeper fall. Selling upticks is seen as favored near-term scenario while the price stays under 4-hr cloud (1.1933/1.1965). Alternative scenario requires sustained break above 1.1965 (top of 4-hr cloud) to sideline near-term bears.

Res: 1.1935, 1.1950, 1.1967, 1.1994
Sup: 1.1890, 1.1861, 1.1850, 1.1822

USD/JPY - 112.07

USD/JPY – Wave V of larger degree circle V has possibly ended at 75.31 and major correction has commenced and already met indicated target at 125.00.

The greenback surged again after brief pullback to 111.11, adding credence to our view that low has indeed been formed at 107.32 earlier this month and consolidation with upside bias remains for this move from 107.32 to bring at least a retracement of recent entire fall from 118.66 (indicated upside target at 111.65 - 38.2% Fibonacci retracement of 118.66-107.32 and 112.20-25 had been met last week) and bullishness remains for further subsequent rise to 112.95-00 (50% Fibonacci retracement) and later towards 113.50-60, however, near term overbought condition should limit upside to 114.30-35 (61.8% Fibonacci retracement) and price should fatter below resistance at 114.50, bring retreat later.

Our preferred count is that, triangle wave IV (with circle) ended at 101.45 and the circle wave V brought dollar down to the record low of 75.31 in 2011 and the subsequent rebound signal major correction has commenced with A leg ended at 84.19, followed by wave B at 77.14 and impulsive wave C is now unfolding (indicated upside target at 125.00 had been met) for gain towards 127.00 level. In the event dollar drops below support at 99.01, this would confirm medium term decline from 125.86 top (2015 high) has resumed for subsequent weakness to 98.00 and possibly 97.00.

Under this count, this wave C is unfolding as impulsive waves with (1) (2), 1 2 ended at 80.67, 79.07, 82.84 and 81.69 respectively, hence the extended wave 3 has ended at 103.74 and wave 4 correction of recent upmove should bring weakness to 92.57, then towards 90.88 but psychological support at 90.00 should limit downside and bring another rally later in wave 5, indicated target at 125.00 had been met and gain to 127.00 cannot be ruled out but reckon price would falter below 130.00.

On the downside, whilst pullback to 111.60-65 is likely, reckon said support at 111.11 would limit downside and bring another rise to aforesaid upside targets later. A daily close below 111.11 would defer and risk weakness to 110.50-60, then towards 110.00 but support at 109.55 should remain intact. Only a drop below strong support at 109.55 would abort and suggest the rebound from 107.32 has ended instead, risk weakness to 109.00 and possibly 108.50-60 but price should stay well above said support at 107.32 and bring another rebound later. 

Recommendation: Buy at 111.15 for 113.15 with stop below 110.15.

On the monthly chart, we have changed our preferred count that an impulsive wave is unfolding with major wave III with circle ended at 79.75, then followed by wave IV with circle and is labeled as a triangle with A: 147.64 (11 August, 1998), B: 101.25, C: 135.20, D: 101.67 and E leg ended at 124.14 to end the wave IV with circle. Hence, wave V with circle commenced from there and hit a record low of 75.31, however, the subsequent strong rebound signals this circle wave V has possibly ended there, hence gain to (indicated upside target at 122.00 and 125.00 had been met), the retreat from 125.86 suggests wave A of major correction has ended there and wave B correction back to 99.00, then 95.00 would be seen, however, reckon downside would be limited to 90.00, bring another rebound in wave C next year.

Gold has been in a downtrend after reversing from the 1357.47 high on September 8. The market became overbought at this more than 1-year high, both on the 4-hour and daily charts. RSI rose above 70 in both time frames.

Focusing on the 4-hour chart, gold is entering a consolidation phase with prices capped at a key resistance of 1300. The technicals are painting a bearish picture, suggesting that risk is to the downside. The 20 and 50-period moving averages are negatively aligned and pointing down, while momentum indicators such as RSI and MACD are in bearish territory. But both are flat now and showing the likelihood of more range trading in the near term.

A move to the downside would target 1280 where support is expected at this 50% Fibonacci retracement of the uptrend from 1204.79 to 1357.47 (July 10 – September 8). An extension lower would shift the current neutral bias and the pause in the recent downtrend would resume to a stronger bearish bias. Further weakness below the 61.8% Fibonacci (1263.02) would target the August 8 low of 1251.49.

A sustained break above the key 1300 resistance level would help ease immediate downside pressure. A push higher from 1300 would open the way to 1321.27 and 1342.68 before seeing a re-test of 1357.47.

For now, the near-term risk is to the downside based on the technical indicators. Only a move back into the 1340 area would indicate the bearish phase has ended.

GBP/USD – 1.3529





Original strategy :

Sell at 1.3620, Target:1.3420, Stop: 1.3680

Position: -

Target:  -

Stop: - 




New strategy :

Sell at 1.3620, Target:1.3420, Stop: 1.3680

Position: -

Target:  -

Stop:- 



Although cable fell briefly below support at 1.3452, lack of follow through selling and current rebound suggest consolidation would be seen and recovery to 1.3595-00 cannot be ruled out, however,  price should falter well below last week’s high at 1.3659 and bring another retreat later, below said support at 1.3450 would signal a temporary top is formed, 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 further recovery as 1.3615-20 should limit upside. Above said resistance at 1.3658 (this week’s post-Fed high) would signal recent upmove is still in progress and may extend headway to 1.3700. 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. 


GBP/JPY - 151.70

New strategy :

Sell at 152.00, Target: 150.00, Stop: 152.50

Position: -
Target:  -
Stop:-

Although sterling rebounded after finding support at 150.70, reckon upside would be limited to 152.25-30 and bring further consolidation below last week’s high at 152.85, hence mild downside bias is seen for another corrective fall, below said support at 150.70 would bring weakness towards support at 150.15, however, a firm break below there is needed to suggest a temporary top is possibly formed, bring further fall to 149.70-80, then towards 148.90-00, only a drop below there would add credence to this view, 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 152.00 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.


EUR/JPY - 134.29

Original strategy:

Buy at 132.40, Target: 134.40, Stop: 131.80

Position: -
Target: -
Stop: -

New strategy :

Sell at 133.90, Target: 132.30, Stop: 134.50

Position: -
Target:  -
Stop:-

As the single currency met resistance at 134.24 earlier today and has slipped again since, suggesting 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 132.95-00, break there would add credence to this view, bring retracement of recent upmove to 132.50, then 132.25-30 but reckon previous resistance at 132.01 would turn into support and contain euro’s downside.

In view of this, we are looking to sell euro on recovery as 133.90-00 should limit upside. Only break of said intra-day resistance at 134.24 would abort and signal the retreat from 134.41 has ended, bring retest of this level, break there would extend recent upmove to 135.00-10, however, overbought condition should limit upside and reckon 135.55-60 would hold from here, price should falter below 136.00-10, risk from there is seen for a retreat to take place later. 

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).

AUD/USD – 0.7965

Original strategy:

Sell at 0.8040, Target: 0.7840, Stop: 0.8100

Position: -
Target:  -
Stop:-

New strategy :

Sell at 0.8040, Target: 0.7840, Stop: 0.8100

Position: -
Target:  -
Stop:-

As aussie found support at 0.7908 late last week and has rebounded since, retaining our view that consolidation above this level would be seen and corrective bounce to 0.8000 cannot be ruled out, however, reckon upside would be limited to 0.8040-50 and bring another decline later, below said support at 0.7908 would extend weakness to support at 0.8967-71, having said that, break there is needed to confirm temporary top has been formed at 0.8125 earlier this month, bring retracement of recent rise to 0.7800 first.

In view of this, we are looking to sell aussie again on recovery as 0.8040-50 should limit upside. Above said resistance at 0.8103 would abort and risk retest of 0.8125 but break of latter level is needed to confirm upmove has resumed and extend gain to 0.8150-60, then towards 0.8200 later. 

On the 4-hour chart, recent upmove from 0.7329 is unfolding as an impulsive rise with wave 3 as well as smaller degree wave (iii) extending, only minor wave v of (iii) has ended at 0.8125, hence bullishness remains for this move to extend headway to 0.8200, then towards 0.8300, however, reckon upside would be limited to 0.8400 and the final wave 5 should falter below 0.8500, bring correction later.

USDCAD is trading bearish overall, but on 4h chart we see price rising. This rising price action may only be temporary, as we see price trading within a complex correction of wave 4. Ideally a double zig-zag pattern is in the making within wave 4, which may search for resistance near the Fibonacci ratios of 23.6 or higher near the 38.2. resistance zone. Previous swing high at 1.2414 and 1.2668 level can also offer resistance and turning points.

USDCAD, 4H

Chancellor Merkel managed to win a fourth term in Germany's election on Sunday, but her victory was a bit over-shadowed by the hard-right AfD party which has won 13.3 % according to the source. The EUR/USD reacted with a common gap (head and shoulders, tradable) and I have predicted a possible gap close on Twitter, straight after the market opened. The has gap almost closed getting only 6 pips away from the Friday market close. At this point the market is still undecided as we have few possible scenarios. The main trend is still up but we might see a dip before the rally. 1.1890-1.1900 is the POC zone (W L3, D L4, channel low, ATR low) and we could see a spike towards 1.1965 and 1.1984, the projected high/ D H4. If 1.1890 is taken out, the price could drop to 1.1880 and 1.1850 W L4/ ATR projected low. Volatility is not high at all at this point so the price is a bit calm. More on the EUR/USD movement will be shown in today's webinar so don't forget to sign up.

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

The British pound has recovered well-above the 1.3500 handle against the U.S dollar, after international credit rating agency Moody's downgraded the United Kingdom's late on Friday, whilst confirming the UK's current outlook.

Following the credit downgrade, the GBPUSD pair fell to 1.3450, but has now recovered nearly 100-pips towards the 1.3550 handle, with the pair now trading above its weekly pivot point, located at 1.3535.

The GBPUSD pair remains bullish in the medium and long-term, but range-bound conditions persist on an intraday basis.

A higher time-frame close below the channel-top at 1.3481 should accelerate GBPUSD selling, whilst a higher time frame price close above the weekly time-frame down-slopping trendline, found at 1.3618, should further encourage GBPUSD buying.

Key intraday technical resistance is found at 1.3553, 1.3568 and 1.3585. Above 1.3585, further intraday resistance is found at 1.3595 and 1.3618.

To the downside, key intraday support is found between the daily and weekly GBPUSD pivot points, at 1.3535-38. Further intraday support comes from the M5 time-frame 200 period moving average, at 1.3517 and the recent swing low, at 1.3497.