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GBPUSD Short Term Elliott Wave view suggests that the rally from 8/24 low is unfolding as an impulse Elliott Wave structure. Up from 8/24 low (1.2773), Minor wave 1 ended at 1.2979 and Minor wave 2 ended at 1.2851. Minor wave 3 is in progress and the subdivision is unfolding as an impulse Elliott Wave structure. Minute wave ((i)) of 3 ended at 1.2947, Minute wave ((ii)) of 3 ended at 1.2907, Minute wave ((iii)) of 3 ended at 1.3082 and Minute wave ((iv)) of 3 ended at 1.303. Minute wave ((v)) of 3 is expected to end soon within 1.3104 – 1.3182 area. Afterwards, pair should pullback in Minor wave 4 before the rally resumes. We don’t like selling the proposed pullback.

GBPUSD 1 Hour Elliott Wave Chart

Daily Pivots: (S1) 107.91; (P) 108.59; (R1) 109.13; More...

Firm break of 108.12 support confirms resumption of whole medium term decline from 118.65. Intraday bias back on the downside for 61.8% retracement of 98.97 to 118.65 at 106.48. We'll look for support from there again to bring rebound. On the upside, above 108.45 minor resistance will turn intraday bias neutral first. But outlook will now stay bearish as long as 110.66 resistance holds.

In the bigger picture, pull back from 118.65 is viewed as a corrective pattern for the moment and downside should be contained by 61.8% retracement of 98.97 to 118.65 at 106.48 and bring rebound. Rise from 98.97 is expected to extend later to retest 125.85 high. However, sustained break of 106.48 will dampen this view and bring deeper fall to retest 98.97 instead.

Market movers today

With little interesting data out markets will focus on the situation in North Korea, the hurricane Irma hitting Florida and further digest the ECB meeting yesterday.

North Korea is expected to launch another Interballistic Missile (ICBM) tomorrow when it celebrates its founding day. China voiced support yesterday for further sanctions against North Korea but also wants to see renewed efforts to begin a dialogue.

Hurricane Irma is expected to hit Florida on Sunday after causing severe damage in the Caribbean.

The ECB left its policy measures unchanged and President Mario Draghi confirmed that the bulk of decisions regarding the QE purchases beyond 2017 will most likely be taken in October. We still believe the ECB will announce a reduction in its QE purchases to EUR40bn per month in H1 18 at the next meeting in October.

In terms of economic data releases, it is a quiet day today. In the UK, keep an eye on the NIESR GDP estimate for August , as it is usually a good predictor of actual GDP growth. In Germany, labour costs data for Q2 are due to be released at 08:00.

In Sweden, household consumption in July is due while in Denmark, current account and trade balance data for July are being released this morning. The Riksbank left a dovish message yesterday despite keeping its policy measures including the reporate path unchanged. The Riksbank also announced that CPIF inflation is now the formal target variable and reintroduced a +/-1 percentage point variation band. Neither has any implication for actual policymaking.

Selected market news

With uncertainty in the market prevailing, US stock markets and Asian markets are treading water with little clear direction. While FX markets interpreted Draghi on the hawkish side sending EUR/USD above 1.20, bond yields took another nose-dive yesterday.

In a speech yesterday Fed Vice President Bill Dudley (voter, dove) reiterated his view that ‘even though inflation is currently somewhat below our longer-run objective, I judge that it is still appropriate to continue to remove monetary policy accommodation gradually’. However, he refrained from saying whether that meant another hike this year. Fed member Esther George (non-voter, hawk) overnight said thatitis ‘time to continue to move that interest rate higher’. Dudley and George have given some counterweight to speeches made recent ly by some of the Fed doves (Brainard, Kaskhari and Kaplan) that have argued for patience due to low inflation. The Fed is currently splitinto two camps – one that wants to pause and another that wants to continue with gradual rate increases.

Chinese trade data overnight disappointed slightly with export growth being 6.9% y/y (consensus 8.7% y/y) down from 11.2% y/y in July.

Weekly
    •    Last Candlesticks pattern: Window
    •    Time of formation: 24 April 2017
    •    Trend bias: Up

Daily
    •    Last Candlesticks pattern: Hammer
    •    Time of formation: 18 May 2017
    •    Trend bias: Up



EUR/JPY – 130.00




Euro’s retreat after last week’s brief rise to 131.71 (a doji star was formed on the daily chart, followed by two black candlesticks) suggests a temporary top has been formed there and as the single currency has slipped again after meeting renewed selling interest at 131.09 yesterday, retaining our view that further consolidation below said resistance at 131.71 would be seen and another fall to support at 129.37 is likely. A drop below this level would add credence to our view that top has been made, bring retracement of recent rise to 129.00-10, then towards 128.45-50, however, break of latter level is needed to retain bearishness and encourage for subsequent weakness towards support at 127.56 which is likely to hold from here.

On the upside, whilst recovery to 130.50-60 cannot be ruled out, said resistance at 131.09 should hold, bring another decline later. A daily close above this level would suggest the retreat from 131.71 has ended, bring retest of this level but break there is needed to extend recent upmove to 132.50-60, however, euro’s upside is likely to be limited to 133.10-15 (61.8% projection of 122.40-131.40 measuring from 127.56) and reckon 133.50-60 would hold from here, price should falter well below 134.00-10, risk from there has increased for a retreat to take place later. 

Recommendation: Sell at 130.60 for 128.60 with stop above 131.60.

On the weekly chart, despite last week’s rise to 131.71, the subsequent retreat formed a doji star alike pattern and if this week ends with a black candlestick, this would suggest a potential bearish reversal pattern is formed, hence consolidation below 131.71 would be seen with mild downside bias for test of 129.37 support, break there would bring further fall to 129.00, then 128.00 but only break of previous support at 127.56 would confirm a temporary top is formed, bring retracement of recent upmove to 126.70-80, then towards 126.00-10 but previous resistance at 125.81 should turn into support and limit euro’s downside.

On the upside, expect recovery to be limited to 130.50-60 and resistance at 131.09 (this week’s high) should hold, bring another retreat later. A weekly close above 131.09 would signal the pullback from 131.71 has ended, bring retest of this level, break there would signal the erratic upmove from 109.49 (2016 low) is still in progress and may extend headway to previous chart resistance at 132.33, however, overbought condition should limit upside to 133.10-15 (61.8% projection of 122.40-131.40 measuring from 127.56) and price should falter well below 134.40 (61.8% Fibonacci retracement of entire fall from 149.79-109.49), risk from there is seen for a retreat to take place later.

Weekly
    •    Last Candlesticks pattern: Shooting doji
    •    Time of formation: 01 May 2017
    •    Trend bias: Sideway

Daily
    •    Last Candlesticks pattern: Bearish engulfing
    •    Time of formation: 5 May 2017
    •    Trend bias: Down



USD/CAD – 1.2115




The greenback finally resumed recent decline after running into renewed selling interest at 1.2663 late last week, adding credence to our bearishness, our short position entered at 1.2640 met target at 1.2440 with 200 points profit and this anticipated selloff has reinforced our bearishness for recent downtrend to extend further weakness to 1.2085-90 (50% projection of 1.3794-1.2414 measuring from 1.2778), then towards psychological level at 1.2000, however, near term oversold condition should prevent sharp fall below 1.1920-25 (61.8% projection), risk from there has increased for a rebound to take place later. 

On the upside, whilst initial recovery to 1.2240-50 cannot be ruled out, reckon 1.2340-50 would limit upside and bring another decline later to aforesaid downside targets. A daily close above resistance at 1.2415 would defer and risk a stronger rebound to the Kijun-Sen (now at 1.2458) but only a sustained breach above this level would abort and signal a temporary low is formed instead, bring retracement of recent decline to 1.2520-25, then towards 1.2600 but said resistance at 1.2663 should remain intact, bring retreat later.

Recommendation: Short entered at 1.2640 met target at 1.2440 with 200 points profit and would sella gain at 1.2340 for 1.2100 with stop above 1.2440.


On the weekly chart, this week’s selloff together with the breach of previous support at 1.2414 looks set to form another black candlestick and current anticipated resumption of recent decline adds credence to our bearish view for the fall from 1.4690 top to extend weakness to 1.2080-85, then towards psychological support at 1.2000, however, reckon downside would be limited to 1.1920-25 (61.8% projection of 1.3794-1.2414 measuring from 1.2778) and 1.1840-50 should hold from here, price should stay above 1.1750-60, bring rebound later this month. 

On the upside, although initial recovery to 1.2240-50 and then 1.2300 cannot be ruled out, reckon upside would be limited to 1.2340-50 and bring another decline. A weekly close above previous support at 1.2414 would risk test of this week’s high at 1.2429 but only above the Tenkan-Sen (now at 1.2532) would signal a temporary low is formed, bring retracement of recent decline to 1.2600, then towards indicated resistance at 1.2663 which is likely to hold from here. Only a break above 1.2663 would suggest recent decline has ended instead, bring subsequent bounce to 1.2700 and later towards previous resistance at 1.2778.

Daily Pivots: (S1) 1.2070; (P) 1.2155; (R1) 1.2202; More....

Intraday bias in USD/CAD remains on the downside as momentum remains strong. Firm break of long term fibonacci level at 1.2048 will carry larger bearish implication and target 61.8% projection of 1.3793 to 1.2412 from 1.2777 at 1.1924 next. On the upside, above 1.2245 minor resistance will turn intraday bias neutral first. But outlook will remain bearish as long as 1.2439 support turned resistance holds.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. Such corrective fall is expected to extend to 50% retracement of 0.9406 to 1.4869 at 1.2048. At this point, we'd look for strong support from there to contain downside and bring rebound. Break of 1.2777 resistance will indicate reversal and turn outlook bullish for 1.3793 key resistance. However, sustained break of 1.2048 will dampen this view and carry larger bearish implications and bring deeper decline to 61.8% retracement at 1.1424 and below.

USD/CHF - 0.9450

Most recent candlesticks pattern : N/A

Trend                                    : Down

Tenkan-Sen level                  : 0.9464

Kijun-Sen level                    : 0.9496

Ichimoku cloud top                 : 0.9571

Ichimoku cloud bottom              : 0.9566

Original strategy :

Bought at 0.9450, Target: 0.9550, Stop: 0.9415

Position : - Long at 0.9450

Target :  - 0.9550

Stop : - 0.9415

New strategy  :

Hold long entered at 0.9450, Target: 0.9550, Stop: 0.9415

Position : - Long at 0.9450

Target :  - 0.9550

Stop : - 0.9415

As the greenback has dropped again and has remained under pressure, marginal weakness from here cannot be ruled out, however, loss of near term downward momentum should prevent sharp fall below 0.9415-20 and prospect of a rebound remains, ab one the Kijun-Sen (now at 0.9496) would bring subsequent gain to 0.9550 but dollar needs to penetrate resistance at 0.9595 to signal low is formed.

In view of this, we are holding on to our long position entered at 0.9450. Below 0.9415-20 would risk weakness to 0.9390-00, having said that, further sharp fall below 0.9370-75 should not be repeated and reckon 0.9350 would hold from here, bring rebound later. 

GBP/USD - 1.3133

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3122

Kijun-Sen level                    : 1.3092

Ichimoku cloud top              : 1.3049

Ichimoku cloud bottom        : 1.2996

Original strategy :

Buy at 1.3000, Target: 1.3120, Stop: 1.2965

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.3075, Target: 1.3175, Stop: 1.3045

Position : -

Target :  -

Stop : -

As cable has surged again after brief pullback, adding credence to our bullish view that recent upmove from 1.2774 is still in progress and upside bias remains for further gain to 1.3175-80, then towards 1.3200, however, loss of near term upward momentum should prevent sharp move beyond 1.3225-30 and price should falter well below recent high at 1.3269, bring retreat later.

In view of this, would not chase this rise at current level and would be prudent to buy cable on subsequent pullback as 1.3070-80 should limit downside. Below the upper Kumo (now at 1.3049) would defer and risk test of support at 1.3033 (yesterday’s low) but only a drop below this level would confirm top is formed.

Asia Summary

Asian equity markets opened mixed in line with what was seen in the US trading session. September Nikkei futures and options settled at 19,279.

In Japan, Q2 GDP growth was revised lower amid weaker CAPEX. According to the Japanese government, the downward revision in the GDP data was the largest under the current calculation method adopted in 2010.

China's Aug Trade Surplus was below ests amid weaker than expected exports and higher imports.

Fed official Dudley commented earlier in the Asian session and did not repeat expectation for a rate hike this year.

China's PBoC set the yuan stronger for the 10th straight session and amid this move, other Asian currencies, including the Taiwan dollar (TWD) and Hong Kong dollar (HKD) have moved higher against the broadly weaker US dollar.

Venezuela's President Maduro said he was planning a new FX basket to be ‘free' of the US dollar and the exchange mechanism to work with the Chinese yuan.

EUR/USD and AUD/USD have traded at highs not seen since 2015.

As the weekend approaches, North Korea is in focus following the nuclear test that it conducted last weekend. Earlier in the week, it was reported in the South Korean press that North Korea was said to be preparing another intercontinental ballistic missile (ICBM) launch and that it could come around Sat, Sept 9th.

Key economic data

(CN) CHINA AUG TRADE BALANCE: $42.0B V $48.5BE

(JP) JAPAN Q2 FINAL GDP SA Q/Q: 0.6% V 0.7%E; ANNUALIZED: 2.5% V 2.9%E

(JP) JAPAN JULY BOP CURRENT ACCOUNT ADJUSTED ¥2.03T V ¥1.65TE; CURRENT ACCOUNT BALANCE: ¥2.32T V ¥2.03TE; Trade Balance BoP Basis: ¥566.6B v ¥518Be

(JP) JAPAN BANK LENDING EX-TRUSTS Y/Y: 3.2% V 3.4%E; INCL TRUSTS Y/Y: 3.2% V 3.3% PRIOR

(AU) AUSTRALIA JULY HOME LOANS M/M: 2.9% V 1.0%E; INVESTMENT LENDING: -3.9% V +1.6% PRIOR

(NZ) NEW ZEALAND Q2 MFG ACTIVITY Q/Q: 3.9% V 2.8% PRIOR; MFG ACTIVITY VOLUME: +1.0% V -0.3% PRIOR

(CN) China Aug Retail Auto Sales: 1.9M units, +5.8% y/y - PCA

Speakers and Press

China

(CN) China's Air Force said to have conducted exercises near Korean peninsula – China State Media

Other

(AU) RBA Assist Gov Debelle: To move open-market operations to earlier time

(KR) South Korea: Exports to continue driving recovery; reiterates North Korea and trade negotiations risks to growth

(US) US House Majority Leader Mccarthy (R): House will vote on Harvey package on Friday

(US) Fed's George (hawk, non-voter): US under full employment, sees labor market continuing to tighten; inflation relatively mild; It is time to continue to move rates higher.

(US) Fed's Dudley (voter): Reiterates balance sheet rolloff likely to start relatively soon; Don't expect Harvey to alter trajectory of US economy

(VE) Venezuela President Maduro: To adopt new FX basket to be 'free' of the US dollar, next week DICOM exchange mechanism to work with China yuan instead of US dollar

Asian Equity Indices/Futures (00:30ET)

Nikkei -0.5%, Hang Seng +0.6%, Shanghai Composite +0.2%, ASX200 -0.4%, Kospi -0.1%

Equity Futures: S&P500 -0.2 ; Nasdaq -0.1 , Dax -0.2% , FTSE100 -0.1%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.2018-1.2090 ; JPY 108.05-108.49; AUD 0.8043-0.8116; NZD 0.7228-0.7325

Aug Gold +0.2% at 1,354/oz; Aug Crude Oil +0.2% at $49.17/brl; Sept Copper -0.2% at $3.14/lb

GLD SPDR Gold Trust ETF daily holdings flat at 836.9 tons

(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.5032 V 6.5269 PRIOR (10TH STRAIGHT STRONGER YUAN SETTING); strongest yuan fix since May 12, 2016

(CN) PBOC SKIPS OMO V SKIPPED PRIOR; For the week drains a net of CNY330B in liquidity vs CNY280B prior week; PBoC: Reiterated bank liquidity at 'relatively high level'

(AU) Australia sells A$500M in 5.75% May 2021 Bonds, avg yield 2.0164%, bid to cover 7.04x (highest since at least 2007)

Equities notable movers

South Korea

Hyundai Motor, 005380.KR Negotiating payments with supplier for one of its Chinese plants; -2.9%

US markets on close: Dow -0.1%, S&P500 flat%, Nasdaq +0.1%, Russell -0.3%

Best Sector in S&P500: Health Care +1.1%

Worst Sector in S&P500: Financials -1.7%

At the close: VIX 11.55 (-0.08 pts); Treasuries: 2-yr 1.29% (-5bps), 10-yr 2.06% (-9bps), 30-yr 2.68% (-9bps)

US Market Summary

Equities traded flat to slightly lower today as the effects of Harvey and expectations for Irma begin to take their toll. US jobless claims came in the highest this week in two years. Media stocks were particularly hard hit after cautious management commentary at a conference, with Walt Disney and Comcast weighing on the broader market. The Nasdaq managed to buck the general trend with help from Microsoft and Amazon. Crude oil prices pared recent rises but held its ground on lower than expected increase in crude oil stocks; price dropped less than 0.1% on the day after having been lower. Treasury yields declined across the curve as investors reacted to more dovish comments from Fed officials; 10-year and 30-year yields dropped 6 bps each to 2.04% and 2.66% respectively. Gold continued to climb for a 9th consecutive session, reaching a new recent high at $1,349.52, before closing slightly lower.

US Afterhours Movers

KURA Announces positive Phase 2 study for Tipifarnib in HRAS Mutant Head and Neck Cancer; +22.3% afterhours

ZUMZ Reports Q2 -$0.02 v -$0.06e, Rev $192.2M v $191Me; Guides Q3 $0.43-0.48 v $0.43e, R$236-241M v $227Me, SSS +4-6%; +9.5% afterhours

BV Reports Q1 $0.04 v -$0.00e, Rev $52.2M v $49.7Me- Adjusted EBITDA $6.7M v $3.9M y/y; +6.2% afterhours

EFX Announces cybersecurity incident involving consumer information; potentially impacts 143M US consumers; credit card numbers for 209K consumers were accessed; -5.4% afterhours

FNSR Reports Q1 $0.40 v $0.40e, Rev $341.8M v $342Me; Guides Q2 $0.27-0.33 v $0.49e, Rev $322-342M v $375Me; -7.6% afterhours

AOBC Reports Q1 $0.02 v $0.11e, Rev $129M v $148Me; Guides Q2 adj EPS $0.07-0.12 v $0.23e, Rev $140-150M v $164Me; -17% afterhours

EUR/USD - 1.2063

Most recent candlesticks pattern   : N/A

Trend                      : Up

Tenkan-Sen level              : 1.2056

Kijun-Sen level                  : 1.2004

Ichimoku cloud top             : 1.1926

Ichimoku cloud bottom      : 1.1909

New strategy  :

Buy at 1.1985, Target: 1.2090, Stop: 1.1950

Position : -

Target :  -

Stop : -

Although the single currency has surged again after breaking above previous resistance at 1.2070 and bullishness remains for recent upmove to extend gain to 1.2100, loss of upward momentum should prevent sharp move beyond 1.2130-40 and reckon 1.2150-55 (61.8% projection of 1.1119-1.1910 measuring from 1.1662) would limit upside, price should falter below 1.2175-80, bring retreat later. 

In view of this, would not chase this rise here and would be prudent to buy euro on subsequent pullback as support at 1.1980-84 should limit downside and bring another upmove later. Below 1.1950 (previous resistance turned support) would signal a temporary top is formed instead bring weakness to 1.1925-30 first.