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In line with expectations, the yellow metal continued to lose value against the buck yesterday, in the process crossing the weekly S1 at 1,310.77. From a daily perspective, the downfall should continue today as well.

But in order to do that, the exchange rate has to break through a combined support set up by the weekly S2 at 1,301.03 and the monthly PP at 1,300.04. The fact that this barrier is located at the psychological level and also coincides with the bottom edge of a descending channel suggests that a rebound might happen at least in the short run. However, even in the case of a rebound recovery of the gold is unlikely to last for long due to pressure from the slipping 55- and 100-hour SMAs.

The pressure from the 20- and 55-hour SMAs as well as formation of a minor ascending triangle expectedly led to further appreciation of the back against the Yen. Currently, the pair is confidently approaching to the weekly R1, which is located at the 112.07 level. The fact that the rate experiences pressure from the above MAs as well as the fact that the rate is fluctuating in an ascending channel point out on the further surge. However, after crossing this level there is a high chance that the pair will retreat, as an area between the 112.20 and 112.55 levels represents a location of the monthly R2, the 200-day SMA and, most importantly, the upper edge of a long-term falling wedge. So, from a daily perspective after reaching the 112.55 mark, the Yen is expected to take the lead once again.

As it was expected, a steady horizontal movement represented an anticipation of the speech that was delivered by Governor Carney yesterday. On the one hand, it did not let to the anticipated appreciation of the Pound. But on the other hand, the plunge of the rate was expectedly neutralized by a combination of the 55-hour SMA and the monthly R2 at 1.3485. At the moment, the currency rate is not facing any resistance on its way up until the monthly R3, which is located at the 1.3701 level. In contrast, the opposite direction contains a whole package of technical indicators, including the weekly PP and the approaching 100-hour SMA, which altogether form a combined support level. Accordingly, the Sterling is likely to continue to pave the path to the top.

As it was forecasted, the rate failed to make any substantial moves yesterday. To be precise, bears tried to push the pair to the bottom at least three times but all these attempts were neutralized by a combination of the 55- and 100-hour SMAs. Accordingly, today it is testing an area between the 1.1985 and 1.1995 levels. Certain technical suggests that this attempt will fail, as the pair is overbought. On the other hand, the rate experiences constant pressure from the above moving averages, which now became also strengthened by the 200-hour SMA. From this perspective, the surge towards the weekly R1 seems a more likely scenario. In addition, if the German ZEW Economic Sentiment will justify expectations that could give the Euro a necessary impulse to reach the above target.

The British Pound depreciated against the Greenback by 49 base points or 0.36% falling further to touch an intraday low at the 1.3483 mark, after the Bank of England's Governor Mark Carney delivered a speech on Monday.

Mark Carney provided no signs that could undermine the last week's BoE decision to keep key rates unchanged at 0.25%, but noted that the Central Bank would need to raise interest rates gradually and at a limited extent in the coming months given higher inflationary pressures and the lingering erosion of slack in the country's economy. The Bank of England's monetary stimulus withdrawal would be capable of returning inflation to its 2% target, down from the 2.9% registered in August.

The Euro added only 3 base points against the US Dollar after the reports on the European consumer inflation were published. Other data also failed to determine the leading sentiment in EUR/USD, while the currency pair entered into a symmetrical triangle at short, trading in a narrow range between the 1.194 and 1.196 levels.

The Eurostat released its final inflation data for the month of August, showing that the headline Index rose 1.5% in line with estimates, while the core figure also matched forecasts with a 1.2% increase. The Euro is set to remain strong, while the only occasion able to undermine the European single currency's stability is expected to be a speculation ahead of the Germany's Federal Election on September 24.

GBP/USD – 1.3491

 
Sterling did rallied again after brief pullback to 1.3153 (we recommended in our previous update to buy at 1.3165 and a long position was entered), the subsequently surged to as high as 1.3619 (our upside target at 1.3365 was met basically on the same day with 200 points), this anticipated move adds credence to our bullish view that the medium term erratic rise from 1.1986 low has resumed and upside bias remains for this move to extend further gain to 1.3650-55 (100% projection of 1.1986-1.3048 measuring from 1.2589) and 1.3700-10, however, overbought condition should limit upside to 1.3800 and price should falter well below 1.3955-60 (50% Fibonacci retracement of intermediate downtrend from 1.5930-1.1986). 

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 possibly ended at 1.7192, below support at 1.4232 would add credence to this count, then further fall to 1.4000 level would follow but reckon downside would be limited to 1.3655 support and price should stay above previous support at 1.3500.

On the downside, although current pullback from 1.3619 suggests initial downside risk is for minor correction to 1.3450-55, reckon downside would be limited to 1.3380-85 and bring another rise later to aforesaid upside targets. Below previous resistance at 1.3329 (now support) would defer and suggest a temporary top is possibly formed, bring retracement of recent rise to 1.3290-00, then 1.3240-50 but said support at 1.3153 should remain intact, bring another upmove later.

Recommendation: Long entered at 1.3165 met target at 1.3365 with 200 points profit and would buy again at 1.3390 for 1.3590 with stop below 1.3290.

 
Longer term - Cable's rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver with wave (A) ended at 1.3500 (23 Jan 2009), wave (B) itself is labeled as A: 1.6733, triangle wave B: 1.4813 and wave C as well as top of wave (B) ended at 1.7192 (2014), hence the selloff from there is an impulsive wave (C) with wave I : 1.4566, wave II 1.5930, an extended wave III is unfolding and already exceeded our downside target at 1.3500 and 1.3000, hence weakness to 1.2500 and possibly 1.2000 cannot be ruled out, however, price should stay well above psychological level at 1.0000.

The Aussie regained traction in early Europe and returned near Asian peak at 0.7993 after release of RBA's last meeting minutes.

The minutes of central banks last meeting showed that the RBA is encouraged by recent jobs data but wages are expected to stay low for some time. The minutes also pointed at stronger than expected economic growth in China but high debt weighing on the outlook.

Fresh recovery after strong fall on Monday probes above broken main bull-trendline (0.7988) and needs sustained break above 0.8000 zone (bull-trendline / psychological point / Fibo 38.2% of 0.8124/0.7939 downleg) to signal higher low formation at 0.7939 (Monday's low) and open way for further recovery.

Extension above next key barrier at 0.8032 (daily Tenkan-sen / Fri/Mon double upside rejection) is needed to confirm reversal.

Res: 0.8000, 0.8010, 0.8032, 0.8054
Sup: 0.7966, 0.7939, 0.7929, 0.7902

GBP/CHF – 1.2960

  






 

Sterling found decent demand at 1.2343 earlier this month and has rallied very strongly, price even penetrated previous resistance at 1.3069, signaling early erratic rise from 1.1475 has resumed and upside bias is seen for this move to extend further gain to 1.3100, then previous resistance at 1.3208 but near term overbought condition should prevent sharp move beyond 1.3300 and reckon 1.3526 (previous support) would remain intact, bring retreat later. 



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, as price has retreated after rising to 1.3078, suggesting consolidation below this level would be seen with initial downside bias for pullback to 1.2900, however, reckon 1.2800-10 would limit downside and bring another rise later. Only below support at 1.2716 would defer and suggest a temporary top is formed instead, bring correction to 1.2650-60 and later towards 1.2600 before prospect of another upmove.  


Recommendation: Buy at 1.2800 for 1.3100 with stop below 1.2700.


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.

The pair remains bid on Tuesday and probes above key barriers at 111.61/75 (daily cloud top / Fibo 61.8% of 114.49/107.31 descend), in extension of strong rally in past two days.

Sustained break here is needed to generate strong bullish signal for further advance and test of 200SMA at 112.23.

Another bullish signal came from yesterday's close above weekly cloud top (111.21) which underpins today's action.

However, bulls may show hesitation before firm break above 111.61/75 pivots, as strongly overbought slow stochastic on daily chart warns, but so far without clearer bearish signal.

Downticks should ideally stay above 111.00 support zone (Monday's low / broken 100SMA) to keep immediate bulls intact.

Otherwise, deeper pullback could be anticipated. Key support lies at 110.75 )daily cloud base / 55SMA) and sustained break here would generate stronger reversal signal.

Res: 111.75, 111.87, 112.23, 112.80
Sup: 111.36, 111.21, 111.00, 110.75