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Daily Pivots: (S1) 150.32; (P) 150.69; (R1) 151.42; More

GBP/JPY's correction from 152.82 is still in progress and deeper fall could be seen. But downside should be contained by 38.2% retracement of 141.17 to 152.82 at 148.36 to bring rally resumption. Break of 152.82 will extend the larger rise from 122.36 to 61.8% projection of 122.36 to 148.42 from 139.29 at 155.39 next.

In the bigger picture, medium term rebound from 122.36 is in progress. 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.

AUDJPY Short Term Elliott Wave view suggests that the rally to 90.31 ended Intermediate wave (W). Intermediate wave (X) pullback remains in progress as a double three Elliott Wave structure. Down from 90.31, Minor wave (W) ended at 88.44 and Minor wave (X) ended at 89.68. Near term, while bounces stay below 90.31, expect pair to extend lower towards 87.36 – 87.8 area to complete Intermediate wave (X). Afterwards, pair should resume the rally to a new high or at least bounce in 3 waves. We don’t like selling the proposed pullback.

AUDJPY 1 Hour Elliottwave Chart

Double three ( 7 swings) is the most important pattern in Elliott wave’s new theory. It is also probably the most common pattern in the market these days. Double three is also known as a 7-swing structure. It is a very reliable pattern that gives traders a good opportunity to trade with a well-defined level of risk and target areas. The image below shows what Elliott Wave Double Three looks like. It has labels (W), (X), (Y) and an internal structure of 3-3-3. This means that all 3 legs has corrective sequences. Each (W) and (Y) is formed by 3 wave oscillations and has a structure of A, B, C or W, X, Y of smaller degrees.

Daily Pivots: (S1) 1.1390; (P) 1.1439; (R1) 1.1471; More...

Intraday bias in EUR/CHF remains on the downside for the moment. Correction from 1.1622 short term top is in progress and would target 1.1355 support first. Strong support is expected from 1.1257 (38.2% retracement of 1.0652 to 1.1622 at 1.1251) to bring rebound. On the upside, break of 1.1511 minor resistance will suggest that the pull back is completed and bring retest of 1.1622.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1198 resistance turned support holds.

Daily Pivots: (S1) 1.1745; (P) 1.1803 (R1) 1.1850; More...

The correction from 1.2091 is still in progress and intraday bias remains on the downside for 1.1661 support. Such decline is correcting whole rise from 1.0569. Break of 1.1661 will target 38.2% retracement of 1.0569 to 1.2091 at 1.1510, where we're expecting support to bring rebound. On the upside, above 1.1861 minor resistance will turn intraday bias neutral first. But break of 1.2029 resistance is needed to confirm completion of the pull back. Otherwise, deeper fall will remain in favor as the correction develops.

In the bigger picture, rise from medium term bottom at 1.0339 is still in progress for 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall from 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside. But after all, break of 1.1661 is needed to indicate medium term topping. Otherwise, outlook will remain bullish in case of pull back.

Daily Pivots: (S1) 1.3406; (P) 1.3460; (R1) 1.3511; More....

GBP/USD continues to gyrate lower as correction from 1.3651 extends. Intraday bias remains neutral for the moment. We'd continue to expect strong support from 38.2% retracement of 1.2773 to 1.3651 at 1.3316 to contain downside and bring rally resumption. Break of 1.3651 will turn bias back to the upside for 1.3835 support turned resistance next. Break there will target 55 month EMA (now at 1.4405).

In the bigger picture, current development argues that the long term trend in GBP/USD has reversed. That is, a key bottom was formed back in 1.1946 on bullish convergence condition in monthly MACD. Current rise from 1.1946 will target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 next. In any case, medium term outlook will now stay bullish as long as 1.2773 support holds.

Daily Pivots: (S1) 0.9649; (P) 0.9688; (R1) 0.9723; More....

USD/CHF continues to engage in consolidative trading and intraday bias remains neutral at this point. On the upside decisive break of 0.9772 resistance will suggest that whole down trend form 1.0342 has completed. In that case, near term outlook will be turned bullish for 0.9860/1.0099 resistance zone. Nonetheless, with 0.9772 resistance intact, outlook remains bearish. Below 0.9587 minor support will turn bias back to the downside for retesting 0.9420 low.

In the bigger picture, current development suggests that 0.9443 key support (2016 low) could be taken out firmly as down trend form 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.

Daily Pivots: (S1) 111.65; (P) 112.06; (R1) 112.63; More...

USD/JPY is still staying in range below 112.71 and intraday bias remains neutral first. Outlook is unchanged that further rise is expected as long as 111.07 support holds. Sustained break of medium term channel resistance (now at 112.90) will argue that whole correction from 118.65 has completed. In that case, further rise should be seen to 114.49 resistance for confirmation. However, break of 111.07 minor support will raise the risk of rejection from channel resistance and turn bias back to the downside for 55 day EMA (now at 110.72) and below.

In the bigger picture, rise from 98.97 (2016 low) is seen as the second leg of the corrective pattern from 125.85 (2015 high). It's unclear whether this this second leg has completed at 118.65 or not. But medium term outlook will be mildly bearish as long as 114.49 resistance holds. And, there is prospect of breaking 98.97 ahead. Meanwhile, break of 114.49 will bring retest of 125.85 high. But even in that case, we don't expect a break there on first attempt.

Daily Pivots: (S1) 1.2311; (P) 1.2362; (R1) 1.2394; More....

At this point, USD/CAD is still holding on to 1.2412 support turned resistance. Intraday bias remains neutral first. We'd remain cautious on strong support from 1.2048 to bring sustainable rebound. But still, break of 1.2412 support turned resistance is needed to be the first sign of trend reversal. Otherwise, outlook will remain bearish. Firm break of 1.2048 will pave the way to next fibonacci level at 1.1424. Break of 1.2412 will bring stronger rise back to 55 day EMA (now at 1.2520) and above.

In the bigger picture, focus remains on 50% retracement of 0.9406 to 1.4869 at 1.2048. As long as this level holds, we'd still favor that case that fall from 1.4689 is a correction. Rebound from 1.2048 could extend the larger up trend from 0.9406. However, firm break of 1.2048 will indicate that fall from 1.4689 is at least a medium term down trend and should target 61.8% retracement at 1.1424 and below.

Daily Pivots: (S1) 0.7848; (P) 0.7898; (R1) 0.7937; More...

AUD/USD drops to as low as 0.7856 so far and correction from 0.8124 extends. Overall, with 0.7807 support intact, larger rally is still expected to resume later. Above 0.7985 minor resistance will turn bias to the upside for retesting 0.8124 high first. Break will target 00% projection of 0.6826 to 0.7833 from 0.7328 at 0.8335 next. However, considering bearish divergence condition in daily MACD, firm break of 0.7807 will indicate near term reversal and turn bias back to the downside for 55 week EMA (now at 0.7670).

In the bigger picture, rise from 0.6826 medium term bottom is still in progress. At this point, there is no confirmation of trend reversal yet and we'll continue to treat such rebound as a corrective pattern. But in any case, break of 55 month EMA (now at 0.8090) will target 38.2% retracement of 1.1079 to 0.6826 at 0.8451. Break of 0.7807 support is needed to to be the first sign of completion of the rebound. Otherwise, further rise is now in favor.

Dollar remains broadly firm today, unmoved by the cautious comments from Fed Chair Janet Yellen. Traders are eagerly awaiting the long-awaited tax reform from US President Donald Trump. Meanwhile, Euro and Kiwi continue to suffer post election weakness. It's reported that German Chancellor Angela Merkel have begun the coalition talk between CDU, CSU, GDP and Greens. But the common currency could stay pressured until the picture becomes clearer. And, it's consistent with the technical development that EUR/USD is in a medium term correction that would take some more time to complete.

Trump to deliver long awaited tax plan

Trump is expected to speak in Indiana on tax reform today. Yet, the details remained unclear with reports suggesting that Treasury secretary Mnuchin, Trump's chief economic adviser Gary Cohn, House Speaker Paul Ryan, Senate majority leader Mitch McConnell, House Ways and Means committee Chairman Kevin Brady and Senator Orrin Hatch still can't compromise of a number of issues. The biggest debate is on whether there should be any net tax cut on the wealthiest Americans, even if the top rate of income tax is lowered to 35% from 39.5% as proposed.

Fed Yellen still expects gradual tightening

Fed Chair Janet Yellen spoke at the National Association for Business Economics in Cleveland yesterday. Regarding the slowdown in inflation, Yellen noted that policy makers "may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation." That highlights Fed's difficulty in forecasting inflation and thus its own rate path. Currently, there is a 30% chance that inflation could range anywhere from 1% to 3%. Any outcome could change the rate path drastically.

For now, Fed "continues to anticipate that, with gradual adjustments in the stance of monetary policy, inflation will rise and stabilize at around 2 percent over the medium term." And, "without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession." Hence, "we should be wary of moving too gradually."

EC Tusk: No sufficient progress on Brexit negotiation yet

After meeting with UK Prime Minister Theresa May, European Council President Donald Tusk said he's "cautiously optimistic about the constructive and more realistic tone in the prime minister's speech in Florence and of our discussion today." But he reiterated EU's stance that discussion on future relations will start once there is "so called sufficient progress". And for now, "there is no sufficient progress yet".

May's office said in a statement that her Florence speech last week "had been intended to create momentum in the ongoing talks." And she urged "EU negotiators to now respond in the same spirit." And, May also said earlier that "by being creative in the ways we approach these issues, we can find solutions that work both for the remaining (EU) 27 but also for the UK and maintain that cooperation and partnership between the UK and the EU." 

French Macron laid out plans for EU transformation

French President Emmanuel Macron set out his plans for a "profound transformation" of the US in his speech yesterday. He warned time time was running out for the EU to reinvent itself to counter the rise of far-right nationalism and "give Europe back to its citizens". He acknowledged that the Europe is "too slow, too weak too ineffective" and that's why isolationist attitude had resurfaced, with a far right party entering Bundestag for the first time in 70 years. In short, Macron called for a common finance minister for the Eurozone, budget and parliament. And he also proposed a common European defence force, a European intelligence agency to fight terrorism, a European-wide asylum office and stronger EU border force.

On the data front

Swiss will release UBS consumption indicator in European session. Eurozone will release M3 while UK will release CBI realized sales. But main focus will be on durable goods orders from US. Pending home sales will also be featured.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7848; (P) 0.7898; (R1) 0.7937; More...

AUD/USD drops to as low as 0.7856 so far and correction from 0.8124 extends. Overall, with 0.7807 support intact, larger rally is still expected to resume later. Above 0.7985 minor resistance will turn bias to the upside for retesting 0.8124 high first. Break will target 00% projection of 0.6826 to 0.7833 from 0.7328 at 0.8335 next. However, considering bearish divergence condition in daily MACD, firm break of 0.7807 will indicate near term reversal and turn bias back to the downside for 55 week EMA (now at 0.7670).

In the bigger picture, rise from 0.6826 medium term bottom is still in progress. At this point, there is no confirmation of trend reversal yet and we'll continue to treat such rebound as a corrective pattern. But in any case, break of 55 month EMA (now at 0.8090) will target 38.2% retracement of 1.1079 to 0.6826 at 0.8451. Break of 0.7807 support is needed to to be the first sign of completion of the rebound. Otherwise, further rise is now in favor.

Economic Indicators Update