Sample Category Title

The pair stays in red on Friday following double upside rejection at 3.5183 (Fibo 76.4% of 3.5585/3.3883 downleg / near falling 100SMA) on Wed /Thu and yesterday’s Doji with long upper shadow, signaling formation of reversal pattern.

Fresh weakness of the greenback on geopolitical tensions works in favor of such scenario, as slow stochastic is reversing from o/b territory and generating negative signal.

Dips were so far contained by 200SMA (3.4838) with close below needed to confirm and signal deeper correction of 3.3883/3.5194 upleg and expose its Fibo 38.2% retracement at 3.4693.

The pair may stay in extended consolidation before generating fresh direction signal while 200SMA support holds.

Res: 3.5065, 3.5194, 3.5394, 3.5488
Sup: 3.4838, 3.4693, 3.4590, 3.4384

September 22: Five things the markets are talking about

Global equities have retreated a tad overnight as the market purchased safe haven assets, including gold and yen (¥111.82), after N. Korea intensified their threats against the U.S. The EUR (€1.1957) remains better bid as German voters prepare to go to the polls this weekend.

N. Korea's overnight threats have managed to temporarily divert attention away from this week's monetary-policy decisions that have dominated the markets focus in the past three-sessions.

Expect investors to continue to eye speeches by Fed officials, as they may serve up some clues on what the central bank is thinking after bets for higher rates by year-end were raised following this week's Fed meeting.

In Europe, U.K PM Theresa May is set to give a speech on her Brexit strategy in Florence (9:00 am EDT), while Germany is preparing to go to the polls on Sunday, with Chancellor Merkel expected to secure a fourth-term, although she may not win an outright majority.

In Vienna, OPEC prepares to meet today and there is mixed signals on whether they will discuss deeper or longer cuts.

Down-under, New Zealand heads to the polls tomorrow.

1. Stocks mixed results

In Japan, the Nikkei slipped from its two-year high overnight after N. Korea threatened to test a hydrogen bomb in the Pacific Ocean, again heightening tension with the U.S.

Despite the rhetoric, Japanese equities have recorded their second consecutive week of gains, led by financial shares, which have found support from sovereign bond yields backing up after the Fed's policy statement midweek. The Nikkei slipped -0.3%, while the broader Topix Japan's fell -0.2%.

Down-under, Australia's S&P/ASX 200 Index added +0.5%, while S. Korea's Kospi index slid -0.7%.

In Hong Kong, stocks posted their biggest decline in a month, erasing this week's gains, as the market cashed out following S&P's downgrade of China's sovereign credit rating and N. Korea's nuclear threats. The Hang Seng index dropped -0.8%, while the Hong Kong China Enterprises Index lost -0.9%.

Note: S&P downgrades Hong Kong sovereign rating to AA+ from AAA – outlook is revised to stable from negative.

In China, domestic equities recovered most of their early losses as investors played down S&P's downgrade of China's sovereign rating and N. Korea's threat of another nuclear test. The blue-chip CSI300 index closed changed, while the Shanghai Composite Index shed -0.2%.

In Europe, regional indices trade mixed on continuing geopolitical tensions. Investors attention now turns to U.K PM May's Brexit speech later this morning, and German elections over the weekend.

U.S stocks are set to open in the ‘red' (-0.2%).

Indices: Stoxx50 +0.1% at 3,544, FTSE -0.1% at 7,256, DAX +0.1% at 12,613, CAC-40 +0.2% at 5,280, IBEX-35 -0.1% at 10,284, FTSE MIB +0.2% at 22,531, SMI +0.1% at 9,137, S&P 500 Futures -0.2%

2. Oil prices higher as producers meet on output pact, gold rallies

Oil prices are a tad higher as the market waits to see whether OPEC and non-OPEC producers back an extension to output cuts beyond next March.

Brent crude futures are at +$56.51 a barrel, up +6c or +0.11%, while U.S West Texas Intermediate (WTI) crude futures are up +10c, or +0.2% at +$50.65 per barrel.

In January, OPEC and its allies agreed to reduce output by about -1.8m bpd until March 2018 in an attempt to empty inventories. The market is now anticipating an extension to that deal, possibly to the end of next year.

Note: Both contracts have risen more than +15% over the last three-months as global oil supply has tightened.

Ahead of the U.S open, gold has rebounded from its four-week low on sabre ratting rhetoric from N. Korea which prompted investors to seek safe-haven assets. Spot gold is up +0.4% at +$1,296.41 an ounce, after having hit a month low of +$1,287.61 Thursday.

Note: Bullion is down -1.7% for the week and heading for a second consecutive weekly decline.

3. Sovereign yield curves flatten

It appears that the Fed is determined to hike in December even if policy makers realize that inflation prints undershoot.

This week, Fed Chair Janet Yellen indicated that the drop in core price pressures this year – below the Fed's +2% target – a “mystery” while the board downgraded its long-run estimate for the fed-funds rate that keeps supply and demand balanced.

Since Wednesday, FI dealers have scrambled to price in a Dec. hike, pushing front-end U.S yields much higher (U.S 2's backed up to +1.43% for the first time since 2008). The net result is a flatter U.S yield curve, with the yield spread between 2-year Treasury's and U.S long-bond near the narrowest since June.

According to the CME, Fed fund future odds moved from pre-meet +50% to +73% possibility for a Dec. Fed rate hike.

Overnight, the yield on 10-year Treasuries fell -2 bps to +2.26%, the first retreat in more than a week, while in Germany the 10-year Bund yield declined less than -1 bps to +0.46%. In the U.K, the 10-year Gilt yield has advanced +1 bps to +1.375%, the highest in almost eight-months.

4. Where to for the EUR?

The EUR (€1.1957) remains better bid ahead of the U.S open, supported by stronger PMI data (see below) out of Germany, France and the Eurozone this morning.

Ahead of this weekend's German election, market consensus believes that if Chancellor Merkel's CDU party forms a coalition with the social democrats SPD party – the most likely scenario – then the EUR should trade little changed, focusing on regional data and ECB policy. However, if CDU allies itself with the liberal FDP and excludes the SPD, then the ‘single' currency could eventually come under pressure as politics will most likely shift towards a German domestic agenda, rather than Europe priority.

Note: Forming a German coalition could take weeks of negotiation.

5. Eurozone composite PMI higher than expected

Euro data this morning revealed that this months flash composite PMI for the region came in higher than expected, rising to 56.7 from 55.7 as against a market consensus forecast for a dip to 55.6.

The jump was led by manufacturing, which suggests that the EUR's (€1.1957) strength has not been much of a problem for growth.

Overall, today's report is another positive surprise from the eurozone economy, which many had been predicting slowing in H1 after a strong six-months.

The pickup is the latest positive surprise from an economy that has already outperformed most expectations this year.

Note: IHS Markit says the average PMI for Q3 points to acceleration in growth to +0.7%.

WTI oil price moves lower on Friday after Thursday's action ended in long-tailed Doji, signaling hesitation ahead of $51.00 barrier which was dented on Wednesday.

Today's easing was so far mild and suggesting the price may hold in extended consolidation while initial support at $50.00 (Thursday's low and strong downside rejection) holds.

Overall bullish structure was reinforced by formation of 10/200 SMA golden-cross, which underpins the action.

Sustained break above $50.83/$51.09 (cracked FE 100$ of the wave C from $46.99 trough/Wednesday's fresh four-month high) would signal bullish continuation and extension of the third wave (of five-wave sequence from $45.57) towards its FE 123.6% at $51.74.

Caution on break below $50.00 (as slow stochastic is reversing from o/b zone on daily chart and generating bearish signal) which may spark deeper pullback towards next pivotal support at $49.55 (200SMA).

Res: 50.83, 51.09, 51.55, 51.74
Sup: 50.44, 50.00, 49.74, 49.55

EUR/JPY - 134.15





The single currency opened higher again this week and we were unable to enter long at recommended entry at 132.00 as euro rallied from 132.38 (this week’s low), adding credence to our bullish view that the major rise from 109.49 low (2016 low) is still in progress, indicated upside targets at 133.50-60 and 134.00-10 had been met, upside bias remains for further gain to 134.59 (previous chart resistance), then 135.00-10 but overbought condition should prevent sharp move beyond 136.00-10 and reckon 136.95-00 would hold, price should falter well below 138.45-50 (1.618 times extension of 109.49-124.10 measuring from 114.85), risk has increased for a retreat to take place later.

The daily chart is labeled as attached, early selloff from 169.97 (July 2008) to 112.08 is wave (A) of B instead of end of entire wave B and then the rebound from there to 139.26 is wave (B), hence, wave (C) has possibly ended at 94.12 with a diagonal triangle as labeled in the daily chart, hence upside bias is seen for further gain. Recent rally above indicated retracement level at 116.69 (50% Fibonacci retracement of the intermediate fall from 139.26-94.12) adds credence to this view and signal major reversal has commenced but first leg of this wave C has possibly ended at 149.79, hence wave 2 has commenced with wave A ended at 126.09, followed by wave B at 141.06, wave C commenced and could have ended at 109.49, indicated upside targets at 126.00 and 130.00 had been met and further gain to 135.00 would follow. 



On the downside, whilst initial pullback to 133.50-60 is likely, reckon downside would be limited to 132.90-00 and bring another upmove later. Below this week’s low at 132.38 would bring test of previous resistance at 131.71 (now support) but a daily close below there is needed to signal a temporary top is possibly formed, bring retracement of recent rise to 131.00 and possibly test of support at 130.62 but downside should be limited to 130.00 and strong support at 129.37 should remain intact, bring another upmove later.


Recommendation: Buy at 132.70 for 135.00 with stop below 131.70.

To re-cap the corrective upmove from the record low of 88.93 (18 Oct 2000), the wave A from there is subdivided as: 1:88.93-113.72, 2:99.88 (1 Jun 2001), 3:140.91 (30 May 2003), 4:124.17 (10 Nov 2003) and 5 ended at record high of 169.97 (21 Jul 2008). The brief but sharp selloff to 112.08 is viewed as a-b-c x a-b-c wave (A) of B. The subsequent rebound to 139.26 is (B) of B and (C) of (B) has possibly ended at 94.12 and in any case price should stay well above previous chart support at 88.93, bring rally in larger degree wave C towards 150.00.

USD/CHF –  0.9696

 
The greenback only retreated to 0.9565 (we recommended in our previous update to buy at 0.9550 and missed the entry) before staging the anticipated rally, this move adds credence to our view that low has been formed at 0.9421, hence consolidation with upside bias remains for test of previous resistance at 0.9774, a sustained breach above this level would confirm and bring retracement of early decline to resistance at 0.9808, then test of previous support at 0.9859, having said that, near term overbought condition should limit upside to 0.9900 and price should falter well below psychological resistance at 1.0000, bring another decline later.

Our preferred count on the daily chart is that early selloff to 0.9630 is an end of the larger degree wave III and major correction is unfolding from there with a leg ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b ended at 0.9910 with (a): 1.0370, (b): 1.1967, (c): 0.9910. The rise from there to 1.1730 is the wave c which also marked the end of wave IV and wave V has possibly ended at 0.7068.


On the downside, whilst initial pullback to 0.9650 is likely, reckon downside would be limited to said support at 0.9565 and bring another rise later. Below 0.9525-30 would risk weakness to 0.9490-00 but still reckon downside would be limited to 0.9455-60 and said support at 0.9421 should remain intact, bring another rebound later. A drop below said support at 0.9421 would extend recent decline from 1.0344 top (formed back in late 2016) to 0.9350 and possibly 0.9300, however, loss of downward momentum should prevent sharp fall below 0.9250-60 and 0.9200-10 should hold.

 
Recommendation: Buy at 0.9575 for 0.9775 with stop below 0.9475.

Dollar's long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) with wave III ended at 0.9630 (Mar 2008). Under this count, correction in wave IV has possibly ended at 1.1730 and wave V already broke below support at 0.9630 and met indicated downside target at 0.7500 and 0.7400. The reversal from 0.7068 suggests the wave V has possibly ended and the breach of resistance at 0.9595 add credence to this view and indicated upside target at 1.0000 had been met, however, the sharp retreat from 1.0296 to 0.7401 suggests choppy trading would be seen but price should stay above said record low at 0.7068.

EURJPY - The pair continues to hold on to its broader medium term uptrend though facing price hesitation. On the downside, support comes in at the 133.50 level where a break if seen will aim at the 133.00 level. A cut through here will turn focus to the 132.50 level and possibly lower towards the 132.00 level. On the upside, resistance resides at the 134.50 level. Further out, we envisage a possible move towards the 135.00 level. Further out, resistance resides at the 135.50 level with a turn above here aiming at the 136.00 level. On the whole, EURJPY faces further bull pressure in the medium term.

GBP/USD – 1.3547





Original strategy :

Sell at 1.3600, Target:1.3400, Stop: 1.3660

Position: -

Target:  -

Stop: - 




New strategy :

Sell at 1.3620, Target:1.3420, Stop: 1.3680

Position: -

Target:  -

Stop:- 



Although cable found support at 1.3452 and has rebounded, if our view that top has possibly been formed at 1.3658 earlier this week is correct, upside would be limited to 1.3615-20 and bring retreat later, below 1.3500 would bring test of said support at 1.3452, break there would add credence to this view, bring weakness to 1.3380-85, however, break there would bring retracement of recent rally to 1.3350, then towards 1.3300-10 which is likely to hold form here.

In view of this, we are looking to turn short on further recovery as 1.3615-20 should limit upside. Above said resistance at 1.3658 (this week’s post-Fed high) would signal recent upmove is still in progress and may extend headway to 1.3700. Our preferred count is that (pls see the attached chart) 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, overbought condition should limit upside to 1.3770-75 and reckon 1.3800-10 would hold from here, bring retreat later.

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. 


Trump Lashed More Sanctions On Korea
Dust Settled And US Indices Reacted To Fed’s Decision
German Election Would Be The Focus For The Weekend

Trump Lashed More Sanctions On Korea

The Asian markets are focused on the geopolitical tensions because the ongoing war of words between Trump and Kim Jong-un could explode.

Donald Trump announced some new tighter and tougher sanctions on North Korea. The sanctions will involve individuals, companies and banks which have anything to do with North Korea in terms of business. He has also asked Theresa May to join him to add more pressure on North Korea. He has called Kim Jong-un a 'rocket man' and the war of words between the two leaders has no sign of cooling off. Jim Jong has called President Trump 'mentally deranged'.

After these new sanctions, North Korea is not going to sit quiet. We do expect a reaction and it may be another nasty surprise for President Trump. If there is any kind of reaction from North Korea, the gold price could easily jump above the 1300 mark.

Dust Settled And US Indices Reacted To Fed’s Decision

The bears had it their way finally as the US markets closed in a negative territory for the first time in the last 10 days. The dust from the Fed meeting has finally settled and traders are showing some nervousness ahead of the potential upcoming rate hike. The US Jobless claims data came much better than the forecast and this reinforced the Fed outlook about the labour market. The Philadelphia Fed’s business outlook was also strong and came ahead of the expectations. If the Fed continues its rate hike glide path, repositioning in some portfolio rearrangement would be inevitable. The US financial sector is one of the most loved sectors by investors because higher rates would benefit the banking stocks.

German Election Would Be The Focus For The Weekend

Going into the weekend, a lot of attention will remain on the main event which will be unfolding on Sunday - the German elections. The German Chancellor is poised to win this election for the fourth time but the focus would be on whether she can secure the majority. Investors will be looking at her and they will be highly interested in the new form of collation which she is going to put together.

Sterling Traders To Focus On May

Another important event on Friday is the speech by the UK prime minister. The sterling has been roaring and literally paying no attention to how the Brexit negotiations have been choking off. For traders it is all about the BOE and when they will be increasing the interest rate. It is highly likely that the BOE may actually increase the interest rate in November but that doesn’t mean that the BOE will be on a rate hike glide path. The Brexit negations and the final outcome are both very significant. In her speech, May is expected to outline her new vision of Brexit. There are certainly chances that her new vision creates more political turmoil in the UK’s political system because the foreign secretary of the country has already made it clear that it is his way or the high way. So we would expect some major mover for the sterling

GBP/JPY - 151.80

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Despite rising to 152.85 yesterday, the subsequent retreat suggests consolidation below this level would be seen and test of support at 150.15 is likely, however, a firm break below there is needed to suggest a temporary top is possibly formed, bring further fall to 149.70-80, then towards 148.90-00, only a drop below there would add credence to this view, bring retracement of recent rise to 148.50 and then 148.00 later.

In view of this, would be prudent to stand aside in the meantime. Above 152.35-40 would bring another test of said resistance at 152.85 but break there is needed to signal upmove has once again resumed and extend headway to 153.00-10 and possibly towards 153.50-60, however, 154.00 should hold, risk from there has increased for a retreat to take place later. 

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.


Crude oil is edging higher above the $50 level. Key support is given at 45.40 (17/08/2017 high). Strong resistance found at 50.43 (31/07/2017) has been broken. Expected to show another leg higher.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).