Sample Category Title

EUR/JPY - 132.79

Original strategy:

Exit long entered at 131.35,

Position: - Long at 131.35
Target: -
Stop: -

New strategy :

Buy at 132.20, Target: 134.20, Stop: 131.60

Position: -
Target:  -
Stop:-

Although the single currency slipped to as low as 130.62, as renewed buying interest emerged there and euro has rallied above resistance t 132.01 today, reviving our bullishness and signal recent upmove is still in progress, hence further gain to 133.00-10, then 133.50-60 would be seen, however, near term overbought condition should prevent sharp move beyond 134.00-10 and reckon 134.50-60 would hold from here, risk from there has increased for a retreat later. 

In view of this, we are looking to reinstate long on pullback as 132.20 should limit downside and previous resistance at 132.01 (should turn into support) and bring another rise later. Below 131.60-70 would defer and risk retreat to 131.00-10 but said support at 130.62 should remain intact, bring another rise later. 

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

The euro has edged higher in the Friday session. Currently, the pair is trading at 1.1945, up 0.27% on the day. On the release front, the eurozone trade surplus, which narrowed to EUR 18.6 billion in July, well short of the estimate of EUR 20.1 billion. This marked the smallest trade surplus since February. In the US, it's a busy day, so we could see some movement from EUR/USD. Today's highlights are Retail Sales and Core Retail Sales. As well, the US will release the Empire State Manufacturing Index and UoM Consumer Sentiment.

The German economy continues to impress. Unemployment levels remain low, growth is steady, and the country even has a budget surplus. However, analysts are divided on the extent of the momentum. The German Economy Ministry is predicting that the economy could slow in the second half of 2017, and is holding to its forecast of 1.5% growth this year. The BDI Group is projecting an expansion of just above 2.0%, while the International Monetary Fund has pegged growth at 1.8% for 2017. Strong German growth in the second half would be good news for the streaking euro.

Germany will hold a federal election on September 24, and Angela Merkel is widely expected to win her fourth term as prime minister. French President Emmanuel Macron, a staunch supporter of a unified Europe, is hoping to work with Merkel and reform the eurozone. Macron's proposal includes a eurozone finance minister who would be in charge of a eurozone budget. Macron's call for greater cooperation is linked to Britain's exit from the EU, which could lead to divisions among the remaining 27 members in the bloc. However, the French ambitious plan will need Germany's support before it can become a reality. Will Germany embrace the idea? Angela Merkel's has indicated that she is open to the idea, but on Wednesday, Jean-Claude Juckner, head of the European Commission, dismissed the plan, saying he favored a finance minister for the EU but was against a separate eurozone budget and finance minister. Even if the plan is not adopted, we can expect a Macron-Merkel alliance to take steps which will strengthen Franco-German ties and further unify the eurozone.

The typical risk-off trade did come into play
It would be a mistake to undermine the geopolitical tensions
The sterling-dollar pair is in no mood in giving up its gains from yesterday

North Korea took no time to show its reaction to the new sanctions imposed on the country by the U.N. It was largely expected that North Korea would take that path. And here you are again, North Korea fired a missile which passed over northern Japan and fell in the sea. The typical risk-off trade did come into play but traders are getting more used to these sorts of provocations. Although, I would argue that these threats should not be taken light-heartedly. They can get out of hand much quicker than anyone can anticipate, and if appropriate risk measures are not in place, the situation would look immensely vile.

President Trump has demanded a direct action from China. The Japanese prime minister has made it clear that the "fire and fury" statement only isn't going to resolve the situation. Therefore, it would be a mistake in our opinion to undermine the geopolitical tensions. This situation is like an elastic band which is being stretched on both ends and if it continues like this, it would be only a matter of time before it breaks.

European markets and US futures are trading lower but noiseless during the early hours of trading. This quietness in the market could change rapidly if we have any serious action by Russia or China (which President Trump has requested). However, the chances of that taking place are minuscule.

For Sterling, the message was clear, tightening is coming and the market is underestimating this fact. But we have heard this song over and over again. However, something has changed and the market has started to price that in. The BOE seems serious this time and it is likely that it would tighten the belt. The sterling-dollar pair is in no mood in giving up its gains from yesterday, in fact, it is building on them and broke the 1.34 resistance today. Only a bad string of economic data could dial back the interest rate hike or some sort of other monetary policy action. The MPC member Vlieghe will be speaking later today and his comments could bring some swing for the currency and the possibility of a tailspin move cannot be ignored

Bitcoin is extending its losses after finding some peace. The cryptocurrency is suffering its longest streak of losses in a year thanks to the Chinese regulator's news. The gap from the 7th August is very much a target now and we do think it is highly likely, that the price fills up that gap first before any possible meaningful bounce. The next support is between 3000 and 2877.

Sterling surged above target at 1.3473 and psychological 1.3500 barrier, hitting the highest levels since June 2016 after receiving fresh boost on hawkish comments from BoE MPC member Vlieghe.

Gertjan Vlieghe was previously seen as the most dovish member of the committee, but his today's comments were seen as hawkish steer.

He said that the BoE might need to raise interest rates in the coming months, echoing Thursday's comments from BoE. Vlieghe shifted his stance from further patience ahead of rate hike action to push for faster action of BoE in coming months.

British pound which already maintained strong bullish sentiment from yesterday's BoE's statement and extended rally to the levels last seen over two years ago.

Cable is on track for the second straight bullish weekly close, with close above weekly cloud to generate another strong bullish signal for extension towards next target at 1.3835 (29 Feb low/Fibo 61.8% of 1.5016/1.1930 descend).

Corrective actions on overbought studies could be anticipated in coming sessions.

Res: 1.3550, 1.3574, 1.3600, 1.3646
Sup: 1.3500, 1.3473, 1.3381, 1.3328

AUD/USD – 0.8024

Original strategy:

Sell at 0.8090, Target: 0.7900, Stop: 0.8150

Position: -
Target:  -
Stop:-

New strategy :

Sell at 0.8090, Target: 0.7900, Stop: 0.8150

Position: -
Target:  -
Stop:-

As aussie found support at 0.7956 yesterday and has rebounded, suggesting consolidation would be seen and corrective bounce to 0.8040-45 is likely, however, as top has been formed at 0.8125, upside should be limited to 0.8090 and bring retreat later, below said support at 0.7956 would add credence to this view, bring retracement of recent rise to 0.7920-25 and later 0.7890-00 but support at 0.7867-71 should remain intact.

In view of this, we are looking to sell aussie on recovery as 0.8090-00 should limit upside. Above said resistance at 0.8125 would (last week’s high) would extend recent upmove in wave v of (iii) to 0.8150, then towards 0.8200, however, loss of upward momentum should prevent sharp move beyond 0.8225-30 and price should falter below 0.8250-60, risk from there is seen for a retreat later.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

EURUSD

The EURUSD attempted to push lower yesterday bottomed at 1.1837 but closed higher at 1.1918. The bias is bullish in nearest term testing 1.2000 region. Immediate support is seen around 1.1870. A clear break below that area could lead price to neutral zone in nearest term retesting 1.1823 key support area which remains a good place to buy with a tight stop loss as a clear break and daily/weekly close below that area could trigger further bearish correction testing 1.1700 – 1.1600 region next week. Overall I remain bullish and still prefer to buy on dips with nearest target seen at 1.2175 area.

GBPUSD

The GBPUSD had a strong bullish momentum yesterday topped at 1.3405 after bounced off 1.3150 support area and the EMA 200 as you can see on my H1 chart below . The bias is bullish in nearest term testing 1.3500 area. Immediate support is seen around 1.3330. A clear break below that area could lead price to neutral zone in nearest term testing 1.3265 region but overall I am bullish on this pair and any downside pullback should be seen as a good opportunity to buy.

USDJPY

The USDJPY attempted to push higher yesterday slipped above 111.00 key resistance but whipsawed to the downside and closed lower at 110.21 and hit 109.54 earlier today in Asian session. We have a bearish pin bar formation as you can see on my H4 chart below suggests a bearish view. The bias is bearish in nearest term testing 109.25/00 area. Immediate resistance is seen around 110.50. A clear break above that area could lead price to neutral zone in nearest term retesting 111.00 key resistance area. As long as stay below 111.00, my H4 chart bias remains bearish. Overall I remain neutral.

USDCHF

The USDCHF attempted to push higher yesterday slipped above 0.9700 resistance area but whipsawed to the downside and closed lower at 0.9628, formed a bearish pin bar formation as you can see on my daily chart below. The bias is bearish in nearest term testing 0.9585 area. Immediate resistance is seen around 0.9700. A clear break above that area could lead price to neutral zone in nearest term as direction would become unclear. On the downside, a clear break and daily/weekly close below 0.9585 would retest 0.9450 key support area next week.

Equities have been holding strong this week and USD/JPY has seen a recovery from its lows making a diving board pattern/V shaped reversal. At this point it stands at the important levels 110.70 and if we see a momentum break of 110.78 it could proceed towards 111.22-30 zone. In the case of profit taking (It's Friday) pay attention to 110.10-20 zone (historical gap support, 38.2, channel bottom, EMA89) as the POC could again spike the price towards 110.78 and above.

W L3 - Weekly Camarilla Pivot (Weekly Interim Support)

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

USD recovery was short-lived ahead of next week FOMC meeting

The US dollar got a fresh boost yesterday after the release of better-than-expected inflation report. The headline CPI gained 1.9%y/y, against median forecast of 1.8%, up from 1.7% in July. The core gauge also beat expectations of 1.6% by rising 1.7%y/y. This upside surprise may have renewed expectations of an upcoming tightening move from the Fed. However, many clouds remain on the horizon.

First of all, real average weekly earnings grew only 0.9%y/y, down from 1.1% in the previous month, suggesting that the significant recovery of real wage growth that started at the beginning of the year may have come to an end, which is definitely not of good omen for the Fed normalization cycle.

Second, hurricanes Harvey and Irma have substantially blurred the Fed’s vision by distorting the economic data. Unfortunately, it will take months for the dust to settle down, which could prompt the Fed to act with caution. New York fed President Dudley mentioned this point as he argued that the hurricanes could affect temporarily the timing of the next rate hike.

The dollar recovery was short-lived as the greenback reversed gains against most of its peers. The single currency rose 0.13% to $1.1940. Commodity currencies were also better bid with the AUD, NZD and CAD rising 0.25%, 0.66% and 0.16%, respectively. We believe investors will remain cautious ahead of next Wednesday FOMC meeting as there is a growing sentiment that the Fed will play for time, once again.

Russia: Markets strongly expect a rate cut

The Central Bank of Russia will decide about its key rate today. There is a significant likelihood that the central bank lower its key rate to 8.5%. In July, the CBR decided to remain on hold, markets expectations for a rate cut are now strong.

There are a major reason for that, it has been a while that Russian inflation is on its way lower. Consumer prices have increased 1.7% year-to-date. Annualized figure is 3.3% below the central bank expectations. The central bank has now some room to act to normalize its monetary policy.

Currency-wise, the ruble is trading at the highest levels for the last two years against the dollar at 52 ruble for one single dollar note. It is important to remember that before 2013, the USDRUB was trading around 30. We consider that the CBR is willing to strengthen the currency by lowering its key rate. Today’s event should not appear as a non-event but as a remainder of benefiting from the likely strengthening of the Russian currency over the medium-term.

Aussie has been in bearish trend this week, but because of overlapping price action we suspect that breakdown may not occur just yet. But it's still a five wave decline as a leading diagonal, so be aware of a three wave rise before downtrend may resume; ideally next week from 0.8040 zone.

AUDUSD, 1H

EURGBP is at the lows after a new sharp wave down yesterday from 0.9090 which we see it as a fifth wave within extended black wave iii. We also see pair trading at some Fibonacci levels where downside can be limited for a short period of time, as we think that wave iv bounce may follow soon.

EURGBP, 1H

The BoE kept its policy unchanged yesterday via a 7-2 vote, as was widely anticipated. In line with our view, the Bank tilted hawkish, signaling that some withdrawal of stimulus is likely over the coming months in order for inflation to return sustainably to target. In addition, officials reiterated that policy may need to be tightened faster than the market currently expects if the economy grows as expected. Sterling surged in the aftermath of the decision, as the implied probability for a rate hike by year-end rose to 68%.

Moving forward, we believe that the most important upcoming data points to watch may be wages and inflation, as they could determine whether a hike will actually materialize in the next months. Of course, business investment is critical as well, but we will not be getting updated prints for Q3 until late November. As for sterling, we think that its outlook remains positive in the near-term, as the market continues to focus on the prospect of a rate hike by the BoE soon. Looking further ahead, however, we think that the continued delays and the uncertainty surrounding the Brexit negotiations could begin to weigh once again on the currency in a few months, especially if the BoE under-delivers with any future rate hikes.

GBP/USD surged yesterday following the BoE's hawkish signals. The rate rebounded from near the 1.3160 support and rallied to break above the 1.3360 (S1) hurdle. The price structure on the 4-hour chart continues to suggest a short-term uptrend and thus, we believe that the break above 1.3360 (S1) may have opened the way for our next obstacle of 1.3450 (R1). Having said that though, given that the rally appears overextended, we would stay careful of a corrective setback before the bulls take charge again.

As for the bigger picture, the rate continues to trade above the medium-term upside support line taken from back at the low of the 7th of October. Actually, the latest recovery started after the rate rebounded from that line. This is another point enhancing our view that the rate could continue trading north for a while, perhaps until it tests the long-term downside resistance line, drawn from the peaks of July 2014.

North Korea strikes again, but JPY can't hold onto gains

Overnight, North Korea launched yet another missile that flew over Japan to land in the Pacific Ocean. The yen strengthened on the news, but quickly gave back its gains to trade relatively unchanged in the following minutes. We see three potential reasons for this rapid pullback.

Firstly, this strike probably came as a surprise to nobody given North Korea's provocative warnings in recent days. As early as yesterday, the regime threatened to sink Japan and turn the US to “ashes and darkness”. What's more, there may be a diminishing impact to any market reaction given how frequently this has occurred in recent weeks. Finally, the inability of the JPY to hold onto gains may be partly due to USD dip-demand, amid encouraging signals about tax reform. Overnight, US Secretary Treasury Mnuchin said that tax plan details will be released in the week September 25-29. We see the prospect for the dollar to continue recovering overall in the next days, potentially fueled by optimistic remarks on this subject.

USD/JPY tumbled overnight following North Korea's missile launch. However, the bulls were quick to take advantage of the dip and drive the battle higher. The rate recovered all the missile-related losses and during the European morning Friday, it looks to be headed towards the 111.00 (R1) key resistance.

The pair continues to trade within the sideways range that's been in place since the 28th of July, between that key resistance and the support zone of 108.70 (S1). As such, we still believe that the short-term outlook is flat for now. We would like to see a decisive break above 111.00 (R1) before we get confident on larger bullish extensions.

Today's highlights:

In the US, the headline retail sales rate for August is expected to have declined, while the core one is anticipated to have held steady. This combination could weigh on the dollar somewhat, but given the recent theme of tax reform, any dip in USD could remain relatively short-lived. We also get the nation's NY Fed manufacturing and U of M consumer sentiment indices, both for September, as well as industrial production for August.

There's only one major speaker on the schedule: BoE MPC member Gertjan Vlieghe.

GBP/USD

Support: 1.3360 (S1), 1.3320 (S2), 1.3225 (S3)

Resistance: 1.3450 (R1), 1.3500 (R2), 1.3550 (R3)

USD/JPY

Support: 110.10 (S1), 109.55 (S2), 109.25 (S3)

Resistance: 111.00 (R1), 111.70 (R2), 112.20 (R3)