Sample Category Title

USD/CHF resumes the upside momentum and seems poised to reach fresh new highs in the upcoming period. Has finally managed to make an aggressive breakout, which will lead the rate at least till the upper median line (uml) of the ascending pitchfork.

Has climbed also above the second warning line (WL2) of the former ascending pitchfork. I want to remind you that the rate continues to move in range on the short term, so only a valid breakout above the 0.9787 static resistance and above the upper median line (wl1) will confirm a major increase.

Price is trading in the green after the yesterday's minor decrease. A valid breakout above the 150% Fibonacci line (ascending dotted line) will confirm a further increase. The next upside target will be at the sliding line (sl) of the black ascending pitchfork, while the major resistance level will be at the first warning line (WL1) of the major ascending pitchfork.

Price-action has reclaimed the 1.1900 handle on the EURUSD pair, ahead of today's key note speech by European Central Bank President Mario Draghi, at the second ESRB annual conference in Frankfurt, Germany.

Earlier, sellers failed to close price beneath the pairs monthly pivot point, provoking a strong intraday bounce towards the 1.1919 level, which is four pips above Monday's swing-low and ten pips away from the daily pivot point.

Going forward, if the euro fails to close price back above the 1.1915 level on a higher time-frame basis, sellers may push price-action back towards the monthly pivot point, located at 1.1884.

Key intraday technical resistance above the 1.1919 level, is found at 1.1928, 1.1938 and 1.1957.

Below the 1.1900 handle, intraday EURUSD support is found at 1.1884, 1.1870 and the pairs key 50-day moving average, located at 1.1855.

Below 1.1855, traders will look to the former weekly low, at 1.1838 and the pairs crucial 200-week moving average, at 1.1725.

Sterling is turning lower, after failing to move above the pairs key 50-hour moving average, at 1.3515. The British pound is also coming in-line with the broader intraday theme of overall U.S dollar index strength.

Yesterday, the pair printed an explosive 1-hour price-candle immediately after the Federal Reserve interest decision, with price-action spiking to a new yearly high, at 1.3657, and then falling to a new weekly low, at 1.3552.

A higher time frame price-close below the 1.3473 level should accelerate technical selling, whilst a higher time-frame price close above 1.3515 should encourage buying interest.

Key intraday GBPUSD support is found at 1.3452 and 1.3420, with key intraday support from the pairs key 100-week moving average, at 1.3382.

To the upside, key intraday GBPUSD resistance is found 1.3496 and 1.3515. Once closing above 1.3515, further resistance is seen at the daily pivot, at 1.3538, and the 50 percent Fibonacci retracement of yesterday's daily range, at 1.3557.

GBPUSD - The pair saw price rejection on Wednesday leaving risk of more weakness on the cards in the days ahead. Support lies at the 1.3450 level where a break will turn attention to the 1.3400 level. Further down, support lies at the 1.3350 level. Below here will set the stage for more weakness towards the 1.3300 level. Conversely, resistance stands at the 1.3550 levels with a turn above here allowing more strength to build up towards the 1.3600 level. Further out, resistance resides at the 1.3650 level followed by the 1.3700 level. On the whole, GBPUSD continues to face further downside threats on higher price rejection.

September 21: Five things the markets are talking about

The Fed's decision to leave the benchmark interest rate unchanged was entirely anticipated yesterday, but their ‘hawkish' forecast for where rates will be at the end of the year caught some of the market by surprise.

As expected, the Fed announced its balance sheet runoff plan would start next month, while keeping its options open on a potential December rate hike. After the announcement the U.S Treasury curve flattened as short-end backed up faster than long rates.

Note: With the Fed biting the bullet over quantitative easing (QE), investors are now expected to turn their attention to several appearances by ECB officials for clues on the future of Europe's stimulus.

Elsewhere, the Bank of Japan (BoJ) also left policy unchanged, as expected. The one dissenter, by new BOJ policy board member Goushi Kataoka, said that the 'yield curve control is not enough to meet inflation target,' and 'sees low chance of consumer prices increasing from 2018 on.'

In the U.K, Brexit strategy continues to top the agenda as PM Theresa May prepares to outline her revised approach tomorrow, while in Germany campaigning continues before Sunday's (Sept. 24) general election. Down-under, New Zealand prepares to go to the polls Saturday.

1. Stocks mixed results

In Japan, the Nikkei share average edged up overnight (+0.2%), helped by gains on Wall Street and a weaker yen (¥112.40) after the Fed signalled it still expects to raise interest rates one more time this year. The BoJ kept monetary policy steady, while maintaining its upbeat view of the economy. The broader Topix index rallied less than +0.05% to its highest print in two-years, before giving up some of its gains after the BoJ's decision.

Note: Investors remain weary of headlines related to a snap Japanese election that are rumoured to be called by PM Abe as early as next Monday.

In Hong Kong, shares ended little changed, as strength in financial and consumer stocks offset a slump in the resources sector triggered by a stronger dollar. The Hang Seng index fell -0.1%, while the China Enterprises Index rose +0.2%.

In China, the major indexes slipped, as developers and the materials sector weakened, offsetting gains in financial firms buoyed by the potential of another Fed rate increase. The blue-chip CSI300 index fell -0.1%, while the Shanghai Composite Index lost -0.2%.

In Europe, regional indices trade mostly higher across the board with the weaker EUR (€1.1916) helping push indices higher following the Fed and BoJ rate decision.

U.S stocks are set to open in the ‘red' (-0.1%).

Indices: Stoxx600 +0.2% at 382.7, FTSE flat 7271.5, DAX +0.2% at 12598, CAC-40 +0.5% at 5267, IBEX-35 +0.2% at 10311, FTSE MIB +0.5% at 22470, SMI +0.4% at 9133, S&P 500 Futures -0.1%

2. Oil prices steady ahead of key OPEC meeting, gold lower

Oil prices were steady overnight, holding most of this week's gains ahead of today's OPEC meeting in Vienna that could extend production limits aimed at clearing a glut that has depressed the market for more than three years.

In January, OPEC and its allies agreed to reduce output by about -1.8m bpd until March 2018 in an attempt to empty inventories. The market is now anticipating an extension to that deal, possibly to the end of next year.

Brent crude oil is down -5c at +$56.24 a barrel, while U.S light crude is -15c lower at +$50.54.

Note: Both contracts have risen more than +15% over the last three-months as global oil supply has tightened.

Ahead of the U.S open, gold prices have slipped to its lowest print in over three-weeks overnight. A stronger U.S dollar and increasing prospects of a December Fed rate hike is curbing appetite for the ‘yellow' metal. Spot gold is down -0.2% at +$1,298.06 an ounce.

3. Sovereign yields on the rise

With the Fed considered a tad more ‘hawkish' after yesterday's Federal Open Market Committee (FOMC) meeting – suggesting it is open to one more rate hike in 2017, data depended and three hikes next year – took the market by surprise.

FI dealers scrambled to price in a Dec. hike, pushing front-end U.S yields much higher (U.S 2's backed up to +1.43% for the first time since 2008) and flattening the curve.

According to the CME, Fed fund future odds moved from pre-meet +50% to +73% possibility for a Dec. Fed rate hike.

Market fears that the Fed will continue to raise rates despite lackluster inflation could keep pressure on the bond market in the near term. Also, the Fed indicated yesterday that it reduced its longer-term projection for its federal-funds rate. Officials now see a rate target of +2.8%, rather than +3%.

The yield on U.S 10-year rallied less than +1 bps to +2.27%, reaching its highest yield print in more than seven-weeks on its fifth consecutive advance. In Germany, the 10-year Bund yield climbed +3 bps to +0.47%, the highest in more than six-weeks.

4. Dollar still holding tough for now

The U.S dollar has posted a powerful rebound in the past 24-hours as the market was caught off guard by the Fed's projection of one more rate hike within the year.

In yesterday's session, the EUR slumped -0.8% to €1.1860 intraday, giving back most of its gains made in the prior four-sessions. USD/JPY has managed to surge up to ¥112.52, its highest intraday level in nearly two-months, extending its winning streak to a fourth-session.

USD/CHF is up for a fourth day as it gains +0.2% to $0.9724, and USD/CAD has regained the psychological C$1.2300 level by rising +0.3% to C$1.2324. The pound swung up to £1.3656 Wednesday, its highest intraday level since the Brexit vote, before retreating to trade atop of £1.3492.

Elsewhere, NOK ($7.8066) has rallied against the U.S dollar after Norges Bank suggested rates might rise sooner than anticipated, even as it left its key policy rate at a record low of +0.5% earlier this morning. EUR/NOK has dropped to its lowest level in a week and a half at around €9.3057.

5. S&P cuts China's credit rating

S&P Global Ratings cut China's sovereign credit rating for the first time in 18-years earlier this morning, citing the risks from soaring debt, and revised its outlook to stable from negative.

The sovereign rating was cut by one step, to A+ from AA-.

'China's prolonged period of strong credit growth has increased its economic and financial risks,' S&P said. 'Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.'

Note: Moody's Investors Service cut China's rating last May to A1 from Aa3, citing similar concerns over economy-wide debt and effects on state finances.

The EUR/USD has formed the main channel (light green) that could break soon if the price gets below 1.1890. The price will be trapped in the downtrend channel (violet) and might drop to 1.1800. the POC zone (D H3,EMA89, 50.0,order block, ATR high) 1.1930-50 could reject the price on a retracement. If we don’t see any retracement, pay attention to break of 1.1890. Targets are 1.1850, 1.1835 and 1.1800.

Notes/Observations

European Indices higher following FOMC rate decision, unwind lifts dollar

Norway keeps rates on hold, reiterates will likely remain on hold til 2019

Overnight

Asia:

BoJ left rates on hold as expected with a vote of 8-1 with newcomer Kataoka dissenting

China PBOC sets yuan reference rate-0.3% at 6.5867, the weakest level since Sept 1st.

New Zealand Q2 GDP comes in line with expectations

Taiwan and Philippines leave rates on hold as expected

HTC Confirms $1.1B cooperation agreement with Google, where Google will acquire part of HTC engineering team related to Pixel phone

Australia's CBA to sell Life Insurance unit to AIA Group for $3B

Europe:

Norway keeps deposit rates on hold as expected; Notes Capacity Utilization is on the rise, higher than previously assumed, labor mkt improvement has occurred somewhat faster pace than assumed in June

Sweden Central bank (Riksbank) Sept Minutes showed there are some temporary factors behind the most recent upturn in inflation and the krona has strengthened more rapidly than in the forecast in July

ECB SEPT ECONOMIC BULLETIN: Short term indicators confirm the outlook for robust growth momentum in the near term

Americas:

FOMC kept rates on hold as expected, confirms start of balance sheet reduction in Oct; hurricanes could temporarily boost inflation

Economic data

(UK) AUG PUBLIC FINANCES (PSNCR): £0.0B V -£3.9B PRIOR; PUBLIC SECTOR NET BORROWING: +£5.1B V +£6.4BE

(CH) SWISS AUG TRADE BALANCE (CHF): 2.17B V 3.5B PRIOR

(CH) SWISS AUG M3 MONEY SUPPLY Y/Y: 4.0% V 4.0% PRIOR

(NL) Netherlands Aug Unemployment Rate: 4.7% v 4.8%e

(NL) Netherlands Sept Consumer Confidence Index: 23 v 26 prior

Fixed Income Issuance:

(ES) SPAIN DEBT AGENCY (TESORO) SELLS TOTAL €4.68B VS. €4.0-5.0B INDICATED RANGE IN 2021, 2026, 2028 AND 2044 BONDS

(FR) FRANCE DEBT AGENCY (AFT) SELLS TOTAL €6.99B VS. €6.0-7.0B INDICATED RANGE IN 2020, 2023 AND 2024 OATS

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.2% at 382.7, FTSE flat 7271.5, DAX +0.2% at 12598, CAC-40 +0.5% at 5267, IBEX-35 +0.2% at 10311, FTSE MIB +0.5% at 22470, SMI +0.4% at 9133, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes:

European Indices trade mostly higher across the board with the weaker Euro helping push Indices higher following the FOMC rate decision yesterday.

Corporate activity was light this morning, with notable movers including Capita trading sharply lower after missing estimates while Kier Group trades higher after Full year results. Else where Ryanair remains on focus after press reports that the Pilots have rejected a cash bonus offer to work overtime, while CRH trades higher after acquiring Ash Grove.

On the US front Calgon Carbon called sharply higher after being acquired.

Equities

Consumer discretionary [ Capita [CPI.UK)] -10% (Earnings), Mitchells & Butlers [MAB.UK] -5.1% (Trading update), Ryanair [RYA.UK] -2.2% (Reprtedly pilots turn down £12K cash bonus offer to work overtime]

Industrials: [Kier [KIE.UK] +8.6% (Earnings)]

Material: [CRH [CRH.UK] +2.8% (To acquire Ash Grove for enterprise value of $3.5B)]

Healthcare:[Nicox [COX.FR] +2.6% (Announces licensing agreement with Eyevance for commercialization of ZERVIATETM in the United States; To receive upfront payment of $6M)]

Speakers

BOJ Gov Kuroda: To adjust policy as appropriate and to maintain momentum towards 2% price target- post rate decision press conference

Currencies

The dollar continues hold ground after gaining sharply yesterday, while the Yen weakens following the BoJ rate decision. Then USD/JPY rallied over 100 pips following the rate decision.

Fixed Income

Thursday's liquidity report showed Wednesday's excess liquidity fell to €1.729T from €1.747T and use of the marginal lending facility rose to €137M from €86M.

Corporate issuance saw $0.6B come to market in quieter session, bringing Week to date issuance to just above $13B and Monthly issuance at ~ $102B

Looking Ahead

07:30 (BR) Brazil Central Bank (BCB) Quarterly Inflation Report (QIR)

08:00 (PL) Poland Central Bank (NBP) Sept Minutes

08:00 BR) Brazil Mid-Sept IBGE Inflation M/M: 0.1%e v 0.4% prior; Y/Y: 2.6%e v 2.7% prior

08:05 (UK) Baltic Dry Bulk Index

08:30 (US) Sept Philadelphia Fed Business Outlook: 17.2e v 18.9 prior

08:30 (US) Initial Jobless Claims: 300Ke v 284K prior; Continuing Claims: 1.98Me v 1.944M prior

08:30 (CA) Canada July Wholesale Trade Sales M/M: -0.7%e v -0.5% prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (US) July FHFA House Price Index M/M: 0.4%e v 0.1% prior

09:00 (MX) Mexico July Retail Sales M/M: +0.1%e v -1.1% prior; Y/Y: 1.0%e v 0.4% prior

09:00 (RU) Russia Gold and Forex Reserve w/e Sept 15th: No est v $427.3B prior

09:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to cut Interest Rate by 25bps to 6.75%

10:00 (US) Aug Leading Index: No est v 0.3% prior

10:00 (EU) Euro Zone Sept Advance Consumer Confidence: -1.5e v -1.5 prior

10:30 (US) Weekly EIA Natural Gas Inventories

12:00 (US) Fed reports Q2 Financial Accounts: Household Change in Net Worth: No est v $2.347T prior

EUR/USD

Having surged to a daily high of 1.2023, the EUR/USD pair fell following Fed's announcement, seen generally hawkish. Clear indications on how and when they will unwind their balance sheet and three rate hikes still seen for this year, were clearly dollar positive, at least short term. The Central Bank left rates unchanged, as largely expected, but indicated that it will start reducing its $4.5 trillion balance sheet by $10 billion per month, from next October. Also, the dot-plot showed that a third rake hike for this year is still on the table, as 11 of 16 Fed members consider it's appropriate, with the Fed funds futures now suggesting a 72% chance of at least one more rate increase before year-end, up from previous 51%.

The pair fell down to 1.1861, recovering modestly within the Q&A, as Yellen said that falling inflation is somewhat a "mystery." Policymakers downgraded their short-term inflation forecast, lowered to 1.5% from previous 1.7%, for this year, whist growth was revised up, from 2.2% to 2.4%. Yellen has just made the ECB a big favor, as the European Central Bank was unable to fight a rising EUR, but seems possible that the decline extends now on profit taking, particularly considering USD shorts were overcrowded.

Anyway, the pair resumed its decline afterwards, heading into the Asian session at its lowest for the week, and poised to extend its decline towards the critical 1.1820/30 region, in where the pair has bottomed the previous two weeks, also having there a long term ascendant trend line coming from early April low of 1.0603. A break below the level should lead to a steeper decline that can extend during the upcoming sessions down to 1.1661, August 17th low. Technical readings in the 4 hours chart support a downward extension, albeit the price is now unable to break below its 200 SMA, whilst technical indicators partially lost downward momentum, remaining anyway near oversold readings.

Support levels: 1.1860 1.1820 1.1775

Resistance levels: 1.1910 1.1950 1.1995

USD/JPY

The USD/JPY pair heads into the Asian session above 112.00, but off the daily high of 112.52 achieved post-Fed, also the highest since mid July. The Japanese yen is down for third consecutive day, underpinned by advancing US Treasury yields, up to their highest in six weeks, on news the US Central Bank will start unwinding its balance sheet, while keeping doors opened for a third rate hike for the year. The 10-year note benchmark settled at 2.28%, up from 2.24%, while the 30-year note yield posted a modest advance, to 2.82% from 2.81%. The Bank of Japan will have its monetary policy meeting during the upcoming Asian session, but is largely anticipated to be a non-event. Japan will also release July's industrial activity index, expected at -0.1% from previous 0.4%. From a technical point of view, the 4 hours chart maintains the risk towards the upside, despite the late US session pullback, as indicators just retreated from overbought readings, but are far above their mid-lines, whilst the 100 SMA keeps advancing modestly above the 200 SMA, both well below the current level. Tuesday's high at 111.87 is key, as a break below it will likely anticipate some further slides ahead.

Support levels: 111.90 111.50 111.20

Resistance levels: 112.50 112.85 113.30

GBP/USD

The GBP/USD pair peaked at 1.3653, its highest since the Brexit referendum following Fed's initial release, in which it left rates unchanged, but the dollar gained traction on news the US Central Bank will begin unwinding its balance sheet starting next October. The Pound ended the day just 30 pips lower against its American rival, boosted at the beginning of the day by upbeat UK Retail Sales figures for August. Sales increased by 1.0% compared with July, and by 2.4% when compared to a year earlier, more than doubling market's expectations. The core readings, excluding fuel prices, were also sharply higher, while all July readings were revised modestly higher. The news sent the pair briefly above the 1.3600 level but pulled back ahead of Fed, holding anyway above 1.3500. Anyway, the pair is heading into the Asian opening around 1.3480, having set a low of 1.3451 on dollar's strength. From a technical point of view, the 4 hours chart shows that the risk has turned towards the downside, as the price is currently below a modestly bearish 20 SMA, whilst the RSI indicator hovers within neutral territory, and the Momentum entered bearish territory, with not enough directional strength at the time being. An extension below 1.3440 is now required to confirm a bearish continuation for this Thursday, with scope then to test the 1.3350/70 region.

Support levels: 1.3440 1.3410 1.3370

Resistance levels: 1.3530 1.3560 1.3595

GOLD

Gold prices fell to fresh September lows, with spot down to $1,295.99 a troy ounce, to settle a few cents below the 1,300.00 mark. News that the US Federal Reserve is still open to raise rates next December, while it will also begin unwinding its balance sheet, dented further demand gold, usually sensitive to higher rates. Moreover, market has shown no signs of worry on the latest verbal menaces between the US and North Korea, limiting the demand for the safe-haven metal. Struggling to regain the 1,300 level, the daily chart for the commodity indicates that the bearish momentum has just accelerated, as the price is well below its 20 SMA, now turning south, whilst technical indicators extended their bearish slopes, now nearing oversold territory. In the 4 hours chart, gold has broken below all of its moving averages, settling below the 200 SMA for the first time since mid July, whilst technical indicators pared losses, but so far posted shallow bounces within negative territory, not enough to confirm an upcoming recovery.

Support levels: 1,296.00 1,288.10 1,280.45

Resistance levels: 1,304.60 1,311.60 1,319.80

WTI CRUDE OIL

Crude oil prices surged to their highest since last May, as a disappointing EIA report was offset by hopes the OPEC will extend its production-cut deal. West Texas Intermediate crude futures traded as high as $51.10 a barrel, level reached on a volatile dollar after Fed's decision, to finally settle at 50.70. The EIA weekly report released early Wednesday showed that domestic crude supplies climbed by 4.59 million barrels for the week ended September 15h, surpassing market's expectations of 3.49 million but below previous 5.88M. The API report released late Tuesday also showed a 1.443M build, below previous 6.181M. US crude futures are at the higher end of the their yearly range, having topped back in January at 55.22, which means that the pace of the advance may begin moderating. Anyway, the bullish stance persists, as in the daily chart, WTI posted a higher high and a higher low daily basis, extending further beyond its 100 and 200 SMAs, whilst technical indicators picked up near overbought readings after being consolidating for most of the week. Shorter term, and according to the 4 hours chart, the commodity is also bullish, far above bullish moving averages, and with a strong upward momentum. Beyond the mentioned daily high, the 51.52, May high is the next probable target, en route to the 52.00 price zone.

Support levels: 50.20 49.60 49.10

Resistance levels: 51.10 51.55 52.00

DJIA

Wall Street closed mixed, but with the DJIA up for ninth day in-a-row, up 41 points to 22,412.59. The S&P added 0.06%, to end at 2,508.24, although the Nasdaq Composite ending the day down 5 points, at 6,456.04. The Federal Reserve decided to leave rates unchanged, but also indicated that a hike remains likely before the end of the year, and that three additional hikes are possible for the next one, while announcing also they will unwind their balance sheet. Bank-related equities were among the best performers, as they benefit from higher bond yields because it means they can charge higher interest rates on loans. Apple was the worst performer, down 1.68%, followed by Johnson & Johnson that shed 1.48%. McDonald's on the other hand, was the best performer, up 1.56%. The daily chart supports additional gains ahead, although the risk of a downward correction keeps increasing. Indicators in the mentioned time frame, however, keep heading north above their mid-lines, whilst moving averages accelerated further north well below the current level. Being at unexplored territory, round numbers are clear market targets for speculators, now looking to test 22,500. Shorter term, and according to the 4 hours chart, the risk is also towards the upside, as the index bounced sharply after attempting to break below a bullish 20 SMA, whilst technical indicators also turned higher, and particularly the RSI now stands at 79.

Support levels: 22,370 22,334 22,288

Resistance levels: 22,424 22,475 22,500

FTSE100

The London benchmark, the FTSE 100, ended Wednesday at 7,271.95, down 3 points, as the Pound surged on upbeat UK Retail Sales figures for August. Nevertheless, the decline was limited amid the prevalent cautious mode ahead of the US Federal Reserve's September policy decision. Babcock International Group led advancers, adding 5.81%, followed by Kingfisher that gained 5.60% after saying it's on track to meet targets in the second year of its five-year restructuring plan, also raising its dividend. Diageo, a drinks company, was the worst performer, shedding 2.78%. The index added some 20 points after the close, now struggling around 7,290, but still looking bearish in the daily chart, as the index has multiple relevant lows in the region from these last few months as the index develops below all of its moving averages, whilst technical indicators remain within bearish territory gaining downward strength. In the 4 hours chart, the RSI indicator remains below its mid-line, whilst the Momentum lost upward strength within positive territory. In this last time frame, the index stands a few points above a strongly bearish 20 SMA, also limiting chances of a steeper recovery for this Thursday, particularly if the Pound maintains its strength.

Support levels: 7,268 7,236 7,195

Resistance levels: 7,317 7,344 7,380

DAX

European equities ended the session little changed, with the German DAX managing to add 7 points, to 12,569.17, amid wait-and-see stance ahead of Fed's announcement. Higher oil prices kept equities afloat, whilst German equities found additional support in rising producer price inflation up by 0.2% in August from the previous month, and by 2.6% from a year earlier. RWE AG led advancers, closing the day 3.50%, followed by Commerzbank that added 2.51%, while Deutsche Bank led decliners, down 1.68%. The index surge in after-hours trading, amid Wall Street's reaction to the Fed's announcement, now heading into the Asian opening at 12,638, its highest in over two months, helped by a weaker EUR. Technically, the daily chart for the index favors further gains ahead, given that technical indicators have resumed their advance near overbought levels, whilst it extended further above its moving averages. Shorter term, and according to the 4 hours chart, the index is also biased higher, as an early decline was contained by buying interest around its 20 SMA, whilst technical indicators turned strongly up with the Momentum above its 100 level and the RSI entering overbought territory.

Support levels: 12,584 12,537 12,489

Resistance levels: 12,677 12,720 12,769

EUR/GBP         –  0.8829

Last week’s late selloff suggests the reversal from 0.9307 top is still in progress, hence downside bias is seen for this move to extend weakness towards previous support at 0.8743, a daily close below there would add credence to our view that recent upmove has indeed ended at 0.9307, bring further decline to 0.8700, then towards 0.8700-10, however, loss of near term downward momentum should prevent sharp fall below another previous support at 0.8652 and price should stay above 0.8600, bring rebound later.

Our latest preferred count is that the wave V of a 5-wave series from 0.5682 ended at 0.9805 earlier and major from there has possibly ended at 0.8067 as A-B-C-X-A-B-C. We are keeping our view that the entire correction from 0.9805 has possibly ended at 0.7756 and as labeled as the attached daily chart and impulsive move from 0.9084 has ended at 0.6938 as a 5-waver which marked as the (C) wave, recent impulsive rise is labeled as (I) (II), (i) (ii) series, indicated upside target at 0.9084 had been met, the retreat from 0.9576 suggest wave iii ended there and next upside target for wave v of (III) should head towards 0.9700 but price should falter well below parity .

On the upside, whilst initial recovery to 0.8890-00 cannot be ruled out, reckon upside would be limited to 0.8950 and price should falter well below 0.9000, bring another decline later to aforesaid downside targets. Only above resistance at 0.9048 would abort and signal the fall from 0.9307 has formed a temporary low, bring a stronger recovery to 0.9100 and then 0.9145-50, having said that, price should falter well below resistance at 0.9203, then the single currency shall head south again from there.  

Recommendation: Sell at 0.8950 for 0.8750 with stop above 0.9050

Euro's long term uptrend started in Feb 1981 at 0.5039 and is unfolding as a (A)-(B)-(C) move with (A): 0.8433 (Feb 1993), (B): 0.5682 (May 2000) and impulsive wave (C) should have ended at 0.9805 with wave III ended at 0.7254 (May 2003), triangle wave IV at 0.6536 (23 Jan 2007) and wave V as well as wave (C) has ended at 0.9805.

We are keeping an alternate count that only wave III ended at 0.9805 and the correction from there is the wave IV and has possibly ended at 0.6936, however, it is necessary to see a daily close above resistance at 0.9576 in order to change this to be the preferred count.