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EURUSD

The EURUSD had a moderate bullish momentum yesterday topped at 1.2006. The bias is bullish in nearest term testing 1.2090 key resistance which need to be clearly broken to the upside to continue the bullish scenario targeting 1.2175 area. Immediate support is seen around 1.1950. A clear break below that area could lead price to neutral zone in nearest term but key support remains around 1.1823 area, which remains a good place to buy with a tight stop loss as a clear break below that area would take the pair to a bearish correction zone.

GBPUSD

The GBPUSD was indecisive yesterday. The bias is neutral in nearest term. Overall I remain bullish but price is still in a bearish correction/consolidation phase after formed a double top formation as you can see on my H1 chart below. Immediate support is seen around 1.3465 followed by 1.3400 region. Immediate resistance is seen around 1.3550. A clear break above that area could trigger further bullish pressure retesting 1.3615 key resistance which need to be clearly broken to the upside to continue the bullish scenario targeting 1.3700 – 1.3750 area.

USDJPY

The USDJPY was indecisive yesterday. The bias is neutral in nearest term but overall price is still in a bullish phase since bounced-off 107.50 support area. Immediate support is seen around 111.00. A clear break below that area could trigger further bearish pressure testing 110.50 or lower. Immediate resistance is seen around 112.15. A clear break and daily close above that area could trigger further bullish pressure testing 113.10/50 area. Overall I remain neutral.

USDCHF

The USDCHF had another indecisive movement yesterday. There are no changes in my technical outlook. The bias remains neutral in nearest term probably with a little bearish bias testing 0.9565 – 0.9525 support area as a part of the bearish scenario after the appearance of the bearish pin bar on daily chart last week. Immediate resistance remains around 0.9650. A clear break and daily close above that area could trigger further bullish pressure testing 0.9700 region or higher. On the downside, a clear break and daily close below 0.9525 would expose 0.9450 key support which remains a good place to buy.

GBP/USD – 1.3519





Original strategy :

Buy at 1.3400, Target:1.3600, Stop: 1.3340

Position: -

Target:  -

Stop: - 




New strategy :

Buy at 1.3380, Target:1.3580, Stop: 1.3320

Position: -

Target:  -

Stop:- 



Cable’s retreat after meeting resistance at 1.3619 has retained our view that consolidation below this level would be seen and retracement to 1.3440-50 is likely, however, reckon 1.3380-85 would limit downside and bring another rise later, above resistance at 1.3552 would signal the retreat from 1.3619 has ended, bring retest of this level first. Looking ahead, a break of 1.3619 would extend recent upmove to 1.3650-60, then towards 1.3700. We have re-labeled our preferred count (pls see the attached chart) that 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, near term overbought condition should limit upside to 1.3770-75 and reckon 1.3800-10 would hold from here, bring retreat later.

In view of this, would not chase this rise here and would be prudent to buy sterling on subsequent pullback as 1.3380-85 should limit downside. Only below previous resistance at 1.3329 (now support) would abort and signal a temporary top is formed instead, bring deeper correction to 1.3290-00 and possibly towards 1.3250-60.

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 - 150.60

Original strategy:

Sold at 151.00, Target: 149.00, Stop: 151.60

Position: - Short at 151.00
Target: - 149.00
Stop: - 151.60

New strategy :

Hold short entered at 151.00, Target: 149.00, Stop: 151.05

Position: - Short at 151.00
Target:  - 149.00
Stop:- 151.60

Sterling has remained confined within near term established range and further consolidation would be seen, however, reckon upside would be limited to 151.00 and bring retreat later, below 150.00-10 would suggest a temporary top is possibly formed, bring retracement of recent rise to 149.50, then 149.00, however, reckon previous resistance at 148.35 (now support) would hold and bring rebound later.

In view of this, we are holding on to our short position entered at 151.00. A firm break above 151.00-05 would suggest the pullback from 151.55 has ended, bring retest of this resistance, break there would extend recent rise to 152.00, then 153.00, however, overbought condition should limit upside to 154.00-10 and price should falter below 155.00. Our latest preferred count is that triangle wave B correction ended at 139.35 (the final e leg of triangle), hence wave C has commenced and may extend further gain to 153.00 and later 154.00.

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.


Daily Pivots: (S1) 150.07; (P) 150.83; (R1) 151.53; More

With 150.12 minor support intact, intraday bias in GBP/JPY remains on the upside. Current medium term rise from 122.36 should target 61.8% projection of 122.36 to 148.42 from 139.29 at 155.39 next. On the downside, below 150.12 minor support will turn intraday bias neutral and bring consolidation before staging another rally.

In the bigger picture, the consolidation from 148.42 should have completed and medium term rebound from 122.36 is resuming. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. For now, the bullish scenario is preferred as long as 139.29 support holds.

Sunrise Market Commentary

• Rates: Flattening US yield curve on Fed verdict?
  We expect the FOMC to announce the start of its BS run-off, hang on the 2017/2018 rate projections (1-3) and potentially lower its neutral rate forecast. That would cause a flattening of the US yield curve. The front end of the US yield curve will in this scenario rise further as the market implied probability of a 2017 rate hike currently stands at 53%.
• Currencies: Will Fed help to put a floor under the dollar?
  Today's Fed policy assessment might be key for the dollar. The start of reducing the BS will probably give the dollar only limited additional interest rate support short-term. The new Fed dots will signal substantial additional rate rises to come. In theory this should be USD positive, but will the FX market believe the Fed more than it did until now?

The Sunrise Headlines

• US stock markets eked out small gains yesterday (+0.1%) in an uneventful session. Overnight, Asian risk sentiment is mixed but changes remain small.
• Trump warned that America would “totally destroy” North Korea if forced to defend itself or its allies, as the US president used his debut address to the UN general assembly to issue stark threats to a “wicked few” oppressive regimes.
• Theresa May will offer a €20B Brexit payment to the EU when she lays out her divorce strategy Friday, according to the FT. She hopes it will break a threemonth deadlock over negotiations and allow talks to include a future trade deal.
• Shipments of cars and electronics in August drove up Japan's exports at the fastest pace in nearly 4 years (18.1% Y/Y), evidence that overseas demand is strong enough to support healthy economic growth. Imports rose 15.2% Y/Y.
• Iraq's oil minister said OPEC and other crude producers were considering extending or even deepening a supply cut to curb a global glut, while a report showed a smaller-than-expected increase in U.S. inventories.
• Two key US senators said they had reached a pact on the parameters of a critical budget resolution, removing an obstacle on the complex path towards Republican-led tax cuts.
• Today's calendar contains UK retail sales, US existing home sales and a German 30-yr Bund auction. However, these will all be overshadowed by tonight's FOMC meeting and press conference by chair Yellen.

Currencies: Will Fed Help To Put A Floor Under The Dollar?

Will Fed put a floor under the dollar?

USD trading remained technical in nature yesterday as investors counted down to tomorrow's FOMC decision. Data were second tier and had little impact on trading. USD/JPY set a new ST top, but reversed gains later. EUR/USD traded close to mostly slightly below 1.20.

Overnight, Asian equities are narrowly mixed after WS closing at again new record levels. Japan August trade data were stronger-than-expected, but doesn't change to broader picture going into tomorrow's BOJ policy announcement. The BOJ is largely expected to keep course, lagging the normalisation process in other major economies. This prospect weighs on the yen, especially if rates in the US or Europe would rise further. The overall picture for the dollar stays unchanged. USD/JPY holds in the mid 111 area, within reach of the ST correction top. The dollar continues to trade weak against the euro. EUR/USD tries to regain the 1.20 barrier. EUR/JPY trades near the highest levels since December 2015.

Today, the eco data (German PPI, US existing home sales) will be largely ignored as investors will forward to the Fed policy decision. For an in depth preview of the Fed decision, see the fixed income part of this report. The start of the reduction of the balance sheet is a symbolic step in the normalisation process. The move was extensively pre-announced and the initial impact on market liquidity is limited. In this context, the new Fed rate dots might be more important for the dollar. We don't see changes in the median dot for 2017 (one additional hike) and for 2018 (3 extra hikes), but chances of a downward revision of the 2019 median dot (2.5 extra rate hikes) and the long run (3%) are high. The Fed's ongoing intention to normalize policy should be USD supportive given that hardly any further tightening is discounted. However, are there reasons for the market to believe the Fed more after today's meeting than it did till now? For that to happen, the Fed dots probably need ‘confirmation' from good eco data and higher inflation. We won't get that today. In this context, the defuse/fragile picture for the dollar might persist for some time. We assume more USD consolidation near the recent lows, maybe with room for some modest USD gains, but we dare not anticipate on it.

From a technical point of view EUR/USD hovers in a ST consolidation pattern between 1.1823 and 1.2070. It was disappointing for EUR/USD bears that last week's correction didn't reach the range bottom. More confirmation is needed that the recent bottoming out process in US yields and in the dollar might be the start of more sustained USD gains (against the euro).

The day-to-day momentum in USD/JPY is more constructive. The yen trades weak across the board. USD/JPY regained the 110.67/95 previous resistance. This a short-term positive. EUR/JPY shows a similar positive picture. So, the yen might stay under pressure at least until the next event risk pops up.

EUR/USD: nearing correction top ahead of the FOMC decision

EUR/GBP

UK retail sales in focus

Sterling traded with a slightly negative intraday yesterday following a sharp rally last week, when the BoE warned that it was likely to raise its policy rate in the coming months. BoE governor Carney confirmed that view on Monday, but sterling started to lose ground. The political bickering between UK PM May and UK Foreign Secretary Johnson was also a slight sterling negative. EUR/GBP closed the session at 0.8881 (from 0.885). Cable hovered around the 1.35 pivot.

Today, the UK August retail sales take centre stage. A very modest rise of 0.2% M/M and 1.2% is expected A soft figure questions the viability of the recent hawkish BoE speak. However, the BoE is temporary giving more weight on prices than on activity data. Even so, the sterling rally might lose further momentum in case of a poor report. Markets will also look forward to PM's Brexit speech. A more conciliatory PM May would be a ST sterling positive. The recent GBP rebound is losing momentum. Even so, we look out whether sterling can return to the recent correction top (EUR/GBP low). If that move fails, the easiest part of the sterling rebound might be behind us.

EUR/GBP made an impressive uptrend since April and set a new MT top at 0.9307 late August on the back of euro strength. Simultaneously, UK price data were soft enough to keep the BoE side-lined. Recent price data amended this story and the ST-trend reversal of sterling was reinforced by recent BoE hawkish comments. Medium term, we maintain a EUR/GBP buy-on-dips approach as we expect the mix of relative euro strength and sterling softness to persist. However, the prospect of (limited) withdrawal of BOE stimulus put a solid floor for sterling ST term. We look out how far the current correction has to go. EUR/GBP is nearing support at 0.8743 and 0.8652, which we consider difficult to break. We start looking to buy EUR/GBP on dips.

EUR/GBP: GBP-rebound rebound slows

Download entire Sunrise Market Commentary

Daily Pivots: (S1) 133.33; (P) 133.74; (R1) 134.27; More...

At this point, intraday bias remains on the upside for further rally. Firm break of 134.20 fibonacci level will pave the way to 141.04 resistance next. On the downside, below 132.94 minor support will turn intraday bias neutral and bring consolidations. But firm break of 131.39 resistance turned support is needed to be the first sign of near term reversal. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, current rise from 109.03 is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). as long as 124.08 resistance turned support holds, further rise is expected to 61.8% retracement of 149.76 to 109.03 at 134.20. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. On the downside, break of 127.55 support is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bullish.

Daily Pivots: (S1) 0.8846; (P) 0.8872; (R1) 0.8901; More

Intraday bias in EUR/GBP remains neutral for consolidation above 0.8773 temporary low. Near term outlook stays bearish as long as 0.8981 cluster resistance holds (38.2% retracement of 0.9305 to 0.8773 at 0.8976). Fall from 0.9305 is seen as the third leg of consolidation pattern from 0.9304. Below 0.8773 will target 61.8% retracement of 0.8312 to 0.9305 at 0.8691 and below. We'll look for bottoming signal again at it approaches 0.8303 support.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's still in progress with fall from 0.9305 as the third leg. Break of 0.8303 could be seen. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes.

Daily Pivots: (S1) 1.4932; (P) 1.4982; (R1) 1.5024; More....

EUR/AUD lost momentum after hitting 1.5031 and intraday bias is turned neutral again. Above 1.5031 will target 1.5173/5226 resistance zone first. Break will resume medium term rally from 1.3624. On the downside, below 1.4811 will turn bias to the downside and extend the fall from 1.5173 to retest 1.4421 support.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term has completed at 1.3624. Rise from 1.3624 is expected to extend to retest 1.6587. The corrective structure of the price actions from 1.5226 is affirming this view. Above 1.5226 will target a test on 1.6587 key resistance. However, break of 1.4421 support will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.

XAUUSD (1312.44): Gold prices were slightly bullish yesterday, but price action suggests cautious trading. The modest reversal off the lows near 1305.00 suggests a minor correction to the upside. Resistance is seen at 1320 - 1324 which will need to be breached in order for further gains to be logged. A breakout above this resistance will signal a move towards 1345.87. However, in the event that gold prices fail to break the resistance, the downside could see gold prices falling to 1300.00 support level.

GBPUSD (1.3522): GBPUSD has been seen consolidating after price touched highs of 1.3566. The consolidation in price action suggests a bullish flag pattern that has formed. A range has also been established with support at 1.3483 and 1.3589. A breakout from this level will suggest further direction in the currency pair. The bias is for an upside breakout. This will potentially suggest further gains to come with the price likely to target 1.3670 followed by 1.3830. In the event that the bullish flag fails, we can expect the downside to test 1.3236.