Sample Category Title

GBP/CHF – 1.2885

  



As sterling found support at 1.2746 and has rebounded, retaining our bullishness and as long as said support holds, mild upside bias remains for test of resistance at 1.2980-85, break there would suggest the retreat from 1.3195 (last month’s high) has ended, bring further gain to 1.3050-60 but reckon upside would be limited to 1.3105-10 and price should falter well below said resistance at 1.3197, bring retreat later. In the event sterling is able to penetrate said resistance at 1.3195, this would indicate early erratic rise from 1.1475 has resumed for further gain to 1.3250, then towards 1.3300-10 but overbought condition should prevent sharp move beyond 1.3400 and reckon 1.3526 (previous support) would remain intact. 



To recap the larger degree count, the selloff from 2.4965 (July 2007) is the beginning of wave V with circle and is labeled as 1: 2.3760, 2: 2.4425, wave 3 extension ended at 1.1470, followed by wave 4 at 1.5547, the quick rebound from 0.9106 suggests wave 5 as well as entire circle wave V could have ended there, hence consolidation with mild upside bias is seen for major correction to take place, bring initial test of 1.5547 (previous 4th of a lesser degree).



On the downside, expect pullback to be limited to 1.2800-10 and as long as said support at 1.2746 holds, prospect of another rebound remains. Below 1.2746 would signal the fall from 1.3197 top is still in progress for retracement of recent rise to support at 1.2716, a daily close below this level would suggest a temporary top has been formed, bring correction to 1.2650-60 and later towards 1.2600.  


Recommendation: Hold long entered at 1.2800 for 1.3050 with stop below 1.2745.


On the Monthly chart, the longer-term count is that major downtrend is under way with circle wave I at 2.8645 (Sep 1.978), then wave II with circle at 4.6175 (Feb 1981), the wave III with circle ended at 1.7425 (Nov 1995) and followed by wave IV with circle at 2.4965 (July 2007 with a short wave C) and wave V with circle has possibly ended at 0.9106. A monthly close above 1.5547 would add credence to this view, bring major correction to 1.7000, then towards psychological level at 2.0000.

In result of the previous trading session, the Pound managed to break through a combined resistance level formed by the 55-hour SMA and the upper edge of a descending channel that was additionally backed up by the 38.2% Fibonacci retracement level. During the surge, the pair has formed a junior ascending channel that together with the bullish market sentiment is likely to elevate the pair to the 1.3200 or even 1.3250 levels. However, in order to reach these targets the Pound needs a release of better than expected data about the UK manufacturing activity. In larger perspective, there is a need to take into account that the pair is moving in a general downtrend that is continuously fuelled by ineffectual Brexit talks.

An assumption about further movement of the pair was partially confirmed yesterday. On the one hand, bulls made not less than five attempts to break to the top and restore lost positions. On the other hand, a combination of the 55-, 100- and 200-hour SMAs as well as the weekly PP at 112.81 blocked each one of them. As long as investors continue to fear further escalation of the North Korean crisis, the Yen is likely to continue to gain value against the Dollar. In support of this assumption, the average market sentiment continues to be 61% bearish. From technical perspective, there is a need to take into account that while the northern side is full of many technical indicators, the southern side contains only the weekly S1 that is located at the 112.19 level.

Because of the robust demand on gold from two largest Asian countries as well as continuous fears related to the North Korean crisis, the exchange rate continued to head to the top towards the 1,290.00 target. During the surge, the pair has even formed a minor rising wedge pattern whose breaking point is located exactly near the above mark. In addition to that, there is a need to take into account that an area near the 1,294.00 level represents a location of the 55-day SMA. Hence, one of those technical barriers is likely to turnaround the pair and gives it an impulse to continue to plunge towards the bottom edge of a senior ascending channel. However, if geopolitical situation continued to be as intense as it is now, investors will continue to seek safe heavens, such as gold.

The Australian Dollar inched up against the Greenback, as the report showed higher business confidence and the Conditions Index remaining at a strong level. The AUD/USD added 8 base points or 0.11% to start the Tuesday session with a solid upmove, touching the 0.7790 mark.

The NAB monthly survey revealed that Australia's Business Confidence Index climbed to 7 points in September, following a steep decline in the prior month when firms were concerned by geo-political tensions with North Korea. In addition, data showed that business conditions held steady at the 15 mark. Overall, the Australian companies' outlook remains upbeat, as the figures indicated that the business sector was doing well in the reported period.

The Euro fell modestly against the American peer, ignoring impressive gains in Germany's industrial production. The EUR/USD currency pair went down just 7 base points or 0.06% to finish the sessions slightly higher in the 1.1740 area.

Destatis revealed that industrial output in Germany rose at a faster-than-expected pace of 2.6% over the month of August, showing the largest monthly gain since July 2011. The strong figure suggested that the European biggest economy is likely to expand in the October quarter. In addition, an upbeat business sentiment and solid increase in industrial orders, which was driven by strong demand particularly from outside the Euro zone, pointed to further upswing in the industrial output.

Cable remains bid on Tuesday but still below Monday's high at 1.3183, posted on short-covering rally.

Cable may extend correction of 1.3655/1.3026 downleg if bulls clearly break above initial barrier at 1.3183, which would open way for further recovery towards pivots at 1.3241 (daily Tenkan-sen), 1.3255 (falling 10SMA) and 1.3266 (Fibo 38.2%), break of which would generate stronger bullish signal.

Series of data from the UK are in focus today. UK Manufacturing Production is expected to rise by 0.2% in Aug vs 0.5% in July, while UK trade balance gap is expected to narrow to 11.2 billion pounds from 11.58 billion pounds gap in the previous month.

Near-term action is supported by 55SMA (1.3133), loss of which would signal an end of correction and shift focus towards key near-term points at 1.3018 (100SMA) and psychological 1.3000 support.

Res: 1.3183, 1.3200, 1.3241, 1.3255
Sup: 1.3133, 1.3110, 1.3074, 1.3026

The Euro is standing at the front foot on Tuesday and extends recovery from last Friday's low at 1.1669.

Comments on Monday from ECB's hawk Lautenschlaeger who called to start winding down asset-buying program, inflated the single currency with fresh boost in early European trading on Tuesday, coming from upbeat German data. Germany's exports and imports rose significantly in August while trade surplus widened to 21.6 billion Euros in August vs 19.3 billion surplus in July and beating forecast for 20 billion Euros.

Markets are also focusing the situation in Spain as Catalonian leaders may declare independence from Spain today, as there were no signs of compromise between secessionist leaders and Spanish government.

Leading European countries, Germany and France put pressure on secessionists, expressing their support to Spain's unity.

The Euro may come under increased pressure if Catalonian leader decide to declare independence, as government in Madrid would respond and likely suspend Catalan autonomy which would further raise tensions and uncertainty. Such scenario could easily drive the single currency through strong supports at 1.1600 zone.

Alternatively, political solution would lower tensions and offer fresh support to the single currency for bullish acceleration through initial barriers at 1.1800/30.

From the technical point of view, EURUSD's near-term studies are bullishly aligned and supportive for further recovery.

On the daily chart, bullish signal was generated on lift above 10 SMA/daily Tenkan-sen at 1.1750 zone, after completion of falling wedge pattern signaled reversal.

This could signal limited upside action as daily techs are negative and plethora of MA barriers that lay above, weighs on near-term action.

Initial resistance lies at 1.1808 (Fibo 38.2% of 1.2033/1.1669 downleg) followed by 1.1832 (29 Sep lower top/converged 20/55SMA in attempt to form bear-cross).

Extended upticks would face strong headwinds and should be ideally capped here as underlying bear-trend from 1.2092 peak is still intact.

Res: 1.1787, 1.1808, 1.1832, 1.1866
Sup: 1.1755, 1.1720, 1.1662, 1.1605

GBPUSD has paused its bearish phase and is making a corrective move after rebounding ahead of the key 1.3000 psychological level. Risks are still tilted to the downside and further weakness is expected since momentum signals are bearish.

MACD is sloping down which highlights the potential for another leg lower in GBPUSD. RSI is in bearish territory below 50 although the decline has stalled, which suggests the market could enter a consolidation phase or bounce higher.

Immediate resistance is expected at 1.3216, which is the 50% Fibonacci retracement level of the upleg from 1.2773 to 1.3656. Above this, further resistance can be found at 1.3318 and 1.3448 before the September 20 peak at 1.3656, the highest since June 2016.

GBPUSD is currently finding support at the 50-day moving average at 1.3131. Breaking below this would turn the focus back to the downside to target the key 1.3000 area. An extension lower would bring the August 24 low at 1.2773 into view.

The short-term bearish bias is still in progress. Only a move back above 1.3200 would indicate that the short-term bearish phase from 1.3656 has ended.

With Japanese and South Korean markets returning from holidays, the dollar failed to gain ground against its rivals as investors continued pricing geopolitical tensions between the US and North Korea. On the other hand, the euro and the aussie were in an uptrend as economic conditions in the regions showed signs of improvement.

The greenback was trading 0.18% lower against its major rivals at 93.54 with markets being cautious whether North Korea will conduct another missile test over the next days, challenging the US and ignoring international warnings.

Dollar/yen hold flat at 112.62 although the BOJ Governor, Haruhiko Kuroda, reiterated to maintain the bank’s ultra-easy monetary policy until inflation breaks stably above the BOJ target of 2%. In terms of data out of Japan, the current account surplus increased unexpectedly to 2.380 trillion yen, while analysts anticipated the figure to decline to 2.262 trillion yen.

Gold was 0.30% up at $1,287.50 per ounce.

Political developments in Spain will be in focus today as the Catalan leader, Carles Puigdemont, is due to address the regional parliament. He is expected to declare unilateral independence despite demonstrations of thousands of people in Barcelona showing their opposition to leave Spain on Sunday. The euro, however, managed to recoup losses and rise to a one-week high of $1.1770 after the ECB’s executive member, Sabine Lautenschlaeger, made some hawkish comments yesterday in Germany, arguing that the central bank should start reducing its asset purchases gradually next year and explaining that factors keeping inflation under pressure are temporary. Upbeat readings on German industrial production and the eurozone’s Sentix investors confidence index released earlier on Monday also provided some support to the currency.

The pound was trading higher by 0.24% at $1.3171, a day after the UK Prime Minister, Theresa May, claimed in the British Parliament that Brexit negotiations made progress on the rights of expatriates and the border with the EU-member Ireland, while she expressed her willingness to achieve a special partnership with the block. However, she added that it is in the EU’s hands for negotiations to move to the next level. Moreover, in her meeting with business leaders yesterday, May said that a two-year transitional period, which will give time for businesses to adjust after Brexit, is not negotiable, according to sources familiar with the matter.

Next up, traders will look forward to evidence on the UK’s industrial production and trade balance, which might shake the currency during the European trading hours.

Australian business confidence gauged by the National Australia Bank (NAB) rose by 2 points to +7 in September, exceeding the forecast of +6. NAB business conditions remained strong, with the corresponding measure holding at +14, near the 9-year high levels. The data pushed the aussie higher to $0.7787, being 0.50% up on the day.

The kiwi fell back to $0.7069 after reaching a session high of $0. 7087 in response to comments made by the leader of New Zealand’s First Party, Winston Peters. Peters, whose party’s support is crucial for the next government to be formed, said that the currency’s weakness due to the inconclusive general elections would “please exporters” given the country’s dependence on overseas sales. September retail sales measured by electronic card transactions released previously grew by 0.1% m/m compared to the 0.7% that was expected. August’s mark was upwardly revised from -0.2% to 0.1%. On a yearly basis, growth in electronic sales decreased from 4.4% to 2.9%.