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The Sterling continued an upmove in the Wednesday morning, though previous gains were partially offset after the disappointing report on the UK average earnings. After the drop of 0.13% against the Greenback the British Pound resumed depreciation to fall below the 1.3245 level.

The Office for National Statistics reported that both its Average Earnings Indexes including and excluding bonuses showed the same as previously annual increase of 2.1% in the three months period ended in July. On the positive side, data revealed that unemployment rate in the UK edged lower to 4.3% in the reported term, while analysts’ anticipated an unchanged reading of 4.4%. The release muted expectations for the Bank of England to change its interest rate policy due to a higher inflation.

Due to release of negative data in the US on the PPI the currency exchange rate made suddenly dropped down to the monthly PP, which is located at the 1.1881 level. In result of this action, the pair broke through the lower trend-line of a three month long senior ascending channel. At the moment, the only barrier that it faces from the south is the bottom edge of another more recently formed ascending channel. In this sense, the buck might drag the pair even lower. On the other hand, the pair is likely is stuck near the above monthly PP for some time, while traders are anticipating a release of data on the US CPI at 12:30 GMT. Accordingly, the positive result will strengthen the downside momentum even more, while the negative will give the Euro a necessary impulse to recover from yesterday’s loss.

As it was expected, a mismatch with experts’ forecasts on the UK Average Hourly Earnings forced the pair to make a premature rebound and retreat towards the closest combined support level formed by the 100-hour SMA and the monthly R1 at 1.3208. However, over the last ten hours the exchange rate did not make any significant moves. The reason behind such low volatility is anticipation of announcement of the Official Bank Rate by the Bank of England. Most probably, this event will lead to quite sharp depreciation of the Pound. In the first hour the downfall might be stopped by a combination of the 200-hour SMA and the weekly PP at 1.3110. However, then the pair is likely to slip even further, tending to reach the weekly S1 and the monthly PP near 1.2990.

In line with expectations, the Dollar continued to advance against the Yen in a junior ascending channel, successfully crossing the upper boundary of a formed dominant formation. However, an effect from release of data on the US PPI was not as strong, as with other currency pairs. Namely, the pair made two attempts to climb above the 110.68 level but failed. Due to pressure from the 55-hour SMA, which is moving along the pattern, the pair is likely to make one more attempt to reach the weekly R2 at 110.98. At the moment, the only factor that could push the pair through this resistance, which is additionally strengthened by the monthly R1 at 111.26, is a release of data on the US CPI and Core Retail Sale. Otherwise, these technical indicators will force the rate to make a rebound.

A release of update on the US PPI led to 0.97% appreciation of the buck against the yellow metal. Fortunately, this time an effect from the above fundamental event matched with the technical analysis, which also pointed out on the further downfall of the rate. However, after reaching the lower trend-line of a long-term ascending channel the pair made a rebound. From a larger perspective, this turn around means that the gold once again has to start gaining value and try to soar towards the monthly R2, which is located at the 1,374.50 level. From a short-term perspective, the surge is likely to be neutralized by a combination of the 100- and 200-hour SMAs. In addition to that, there is a need to take into account an effect from release of data on the US CPI, which can alter the above scenario.

EUR/USD

Current level - 1.1881

Despite the negative bias, my outlook is counter-trend against 1.1830 support, for a reversal and another bounce towards 1.2070.

USD/JPY

Current level - 110.42

The bias is still positive as the pair is heading for a tight test of 111.00 resistance area. My outlook is rather counter-trend against 111.00, for a corrective pattern below the mentioned hurdle, before advancing higher. Initial intraday support lies at 110.30 and trigger on the downside is 109.90.

GBP/USD

Current level - 1.3211

The test of 1.3340 resistance has failed and the sell-off broke through 1.3220 support, so the pair is heading for a test of 1.3157 area. Initial intraday resistance lies at 1.3250.

Daily Pivots: (S1) 145.49; (P) 146.08; (R1) 146.51; More

With 143.52 minor support intact, intraday bias in GBP/JPY remains on the upside for 147.76/148.42 resistance zone. Decisive break there will confirm resumption of medium term rebound from 122.36. On the downside, below 145.32 minor support will turn intraday bias neutral first. Overall, for the moment, GBP/JPY is still bounded in sideway consolidation pattern from 148.42.

In the bigger picture, the sideway pattern from 148.42 is still unfolding. In case of deeper fall, we'd expect strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Medium term rise from 122.36 is expected to resume later. And break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. However, firm break of 135.58/39 will dampen the bullish view and turn focus back to 122.36 low.

GBP/USD – 1.3212





Original strategy :

Buy at 1.3170, Target:1.3370, Stop: 1.3110

Position: -

Target:  -

Stop: - 




New strategy :

Buy at 1.3140, Target:1.3340, Stop: 1.3080

Position: -

Target:  -

Stop:- 



As cable has retreated after rising to 1.3329 yesterday, retaining our view that minor consolidation below this level would be seen and pullback towards support at 1.3161 is likely, however, reckon downside would be limited to 1.3130-40 and bring another upmove later, above 1.3290-00 would bring retest of said resistance at 1.3329, break there would extend recent upmove to 1.3350-55 (50% projection of 1.2109-1.3269 measuring from 1.2774) but overbought condition should limit upside to 1.3390-00 and price should falter below 1.3440-50, bring retreat later.

In view of this, would not chase this rise here and would be prudent to buy sterling on subsequent pullback as said support at 1.3130-40 should limit downside, bring another rise later. Only below previous resistance at 1.3080-85 would defer and risk test of 1.3030-33 support, break there would suggest a temporary top is formed instead, risk correction to 1.2990-00 first.

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. 


USDJPY maintains its neutral picture in the medium term after it bounced sharply last week from near the key 108-area which acted as the lower end of the range that was established over the past 6 months.

After a strong rally from 107.31 last Friday, prices hit 110.72 today. USDJPY is now being capped by the 50-day moving average near this level. The market’s upward trajectory has slowed down as can been seen in the flat RSI and MACD, warning that there is risk of a pullback. Failure to record a daily close above the 50-day MA would add to near-term corrective risks and would shift the focus back to the downside.

Immediate support lies at 109.91, which was yesterday’s low. It is also the 50% Fibonacci retracement level of the rise from 101.18 to 118.66 (November to December 2016 upleg). A move below this would target the bottom of the 6-month range near the key 108 level. Further weakness would push the market out of the range and shift the medium-term trend to bearish from neutral.

A sustained move from current levels towards the 38.2% Fibonacci level at 111.94 would help improve short-term prospects for USDJPY for further gains towards 114.49 (July 11 high and 23.6% Fibonacci). This is the top of the range and so breaking above this level would shift the trend to bullish.

Bearish trend indicators and flat momentum signals on the daily chart are pointing to more range trading ahead. The 200-day MA is horizontal while the RSI and MACD are lacking direction, suggesting little impetus for a break out of the range at the moment.

GBP/JPY - 145.85

Original strategy:

Buy at 145.00, Target: 147.00, Stop: 144.40 

Position: -
Target: -
Stop: -

New strategy :

Buy at 144.75, Target: 146.75, Stop: 144.15

Position: -
Target:  -
Stop:-

As sterling has retreated after rising to 146.65 yesterday, suggesting consolidation below this level would be seen and initial downside risk is for pullback to 145.00-10, however, this week’s rally signals early fall from 147.75 has ended at 139.35 (tentatively the final e leg of larger degree wave B), downside should be limited to 144.70 and bullishness remains for another test of resistance at 146.80, break there would add credence to this view and encourage for headway to 147.30-40, then retest of previous resistance at 147.75 which is likely to hold from here due to overbought condition,

In view of this, we are looking to buy sterling on pullback as 144.70-75 should limit downside. Only below said previous resistance at 143.00 (tentatively wave i top) would abort and signal top is formed instead, bring weakness to 142.50, then 142.20-25, however, reckon support at 141.30-35 would remain intact, bring another rebound 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.