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In result of announcement of the EU Minimum Bid Rate as well as the subsequent Mario Draghi press conference, the Euro expectedly broke to the top and appreciated against the Greenback by 1%. Today, two scenarios might happen. First, once the markets will calm down the buck might make an attempt to recover, thus dragging the pair back to the weekly R1 at 1.2013. But most likely the currency rate will continue the surge towards the monthly R1 at 1.2099. If this target will be reached, the will be another two options. Either the pair will make a rebound from the upper trend-line of a medium-term ascending channel, or it will continue to soar in a junior ascending channel towards the northern boundary of a long-term formation.

An upside momentum provided by the junior ascending channel in conjunction with release of information on the Halifax HPI as well as Mario Draghi speech helped the Pound to break through the upper trend-line of a senior descending channel.

On the one hand, the pair has all chances to continue the surge towards the weekly RR3 at 1.3158. On the other hand, the further direction will very depend on release of data on the UK Manufacturing Production.

If the numbers will be negative, the pair might slip back until a combined support set up by the weekly R2 at 1.3077 and the approaching 55-hour SMA.

Even though a release of information on the Japanese GDP was worse than analysts anticipated, the last day of the week the currency pair started in a sharp downfall. To certain extent, this breakout from a dominant descending channel was triggered by a combined resistance level set up by the weekly and monthly S1 as well as the 55- and 100-hour SMAs. As a result, the next two likely targets for the pair will be the weekly and monthly S2 at 107.33 and 106.98. But starting from the next week, the buck most probably will try to restore some of the lost positions.

However, there is a need to take into account that development of this currency pair will quite strongly depend on geological situation surrounding North Korea.

As it was expected, most of the previous trading day the yellow metal spent in an advance against the buck. On the one hand, this movement was triggered by a combined support created by the 55- and 100-hour SMAs. On the other hand, there is also a need to take into account a pressure from the lower trend-line of a rising wedge, which was moving along the above technical indicators. For this reason, today the pair is expected to make a rebound from the upper trend-line of this long -term formation and, starting from next week, resume the fall towards the monthly R1 at 1,348.36. However, there is a need to carefully monitor development of the North Korean crisis, as its further escalation might continue to stir interest in the gold.

A stronger-than-anticipated drop in Canadian building permits contributed to further decline in the USD/CAD exchange rate. The Greenback weakened against the Canadian Dollar by 0.020% to continue trading lower in the 1.216-1.218 area.

Statistic Canada released its monthly report showing the value of building permits within the country dropped 3.5% in July, exceeding expectations for a modest 1.5% decline. The fall was sparked by fewer intentions for commercial projects, while residential construction decreased for the first time in the three-month period. The latest figures suggested that construction activity is likely to soften in the following months, as almost all categories marked a decline in the reported period.

EUR/USD revealed muted reaction on the ECB rate announcement ahead of the Central Bank's policy statement. However, the first half an hour of the Mario Draghi speech put the European single currency 72 pips higher against the US dollar, while the further course of press conference managed to keep the Euro above the 1.2000 level.

The ECB President Mario Draghi noted that volatility in the Euro exchange rate was a source of unclarity, causing the necessity to monitor the FX rate impact on price stability being very important for inflation targets and growth. Mr. Draghi stated that underlying inflation trends had improved, but continued to be relatively subdued, while confidence surrounding the future economic growth remained strong.

USDJPY (108.17): USDJPY slipped to 108.26 marking the lower end of the support zone that has been established. This potentially means that the US dollar could be posting further losses on a daily close below this level. The double bottom pattern that initially formed has been breached and exposes the downside in the currency pair. The next main support is at 108.00 level with major resistance likely to be established at 109.15.

GBPUSD (1.3128): The British pound has managed to post gains as price action rallied above the 1.3033 resistance level. Currently, GBPUSD is testing the trend line break out level which could still offer some near term resistance. The current extension above 1.3033 weakens the potential head and shoulders pattern. If support is established at 1.3033, then the GBPUSD could be seen posting stronger gains in the near term.

EURUSD (1.2064): The EURUSD rallied past the 1.2000 handle yesterday which saw price action following through with the bullish momentum. Currently, the euro currency is seen testing 1.2058 highs from August 29th. A breakout above this level will be required for the common currency to push higher. However, the new range of 1.2058 where resistance is seen and 1.1882 where support is seen could keep the common currency to consolidate within these levels. Minor support at 1.1962 could be tested in the near term in case of a pull back off the 1.2058 resistance level.

GBP/USD – 1.3127





Original strategy :

Buy at 1.2990, Target:1.3160, Stop: 1.2930

Position: -

Target:  -

Stop: - 




New strategy :

Buy at 1.3040, Target:1.3200, Stop: 1.2980

Position: -

Target:  -

Stop:- 



As cable has rallied this week and broke above 1.13100 level, adding credence to our bullish view that the rise from 1.2774 is still in progress and bullishness remains for this move to extend further gain to 1.3200-10, however, as broad outlook remains consolidative, we are keeping our view that top has possibly been formed at 1.3269, reckon upside would be limited to 1.3230-40 and said resistance at 1.3269 should remain intact, bring retreat later.

In view of this, would not chase this rise here and would be prudent to buy sterling on subsequent pullback as support at 1.3033 should contain downside. Below previous resistance at 1.2996 (minor wave i top) would abort and signal top is formed instead, bring correction to 1.2950, then test of support at 2.2909, break there would confirm and correction to 1.2852 support would follow. 

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.