Sample Category Title

AUD/USD – 0.7945

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term up

Original strategy :

Bought at 0.7895, Target: 0.8050, Stop: 0.7865

Position: - Long at 0.7895
Target:  - 0.8050
Stop: - 0.7865

New strategy :

Hold long entered at 0.7895, Target: 0.8050, Stop: 0.7880

Position: - Long at 0.7895
Target:  - 0.8050
Stop:- 0.7880

Aussie found renewed buying interest at 0.7867 late last week and has staged a strong rebound, retaining our near term bullishness and consolidation with upside bias remains for another rebound to indicated resistance at 0.7963, break there would add credence to our view that low has possibly been formed at 0.7808 earlier this month, bring a stronger rebound to 0.8000, however, break there is needed to signal the pullback from 0.8066 top (wave iii peak) has ended at 0.7808 (wave iv) and bring eventual retest of this level.

In view of this, we are holding on to our long position entered at 0.7895. Below said support at 0.7865-67 would dampen this bullish scenario and suggest the rebound from 0.9808 has ended, bring another test of this level, below there would signal the wave iv correction from 0.8066 is still in progress for weakness to 0.7786 support, however, oversold condition should prevent sharp fall below 0.7750 and price should stay above i top at 0.7712, bring rebound later. We are keeping our latest bullish count that recent impulsive waves is unfolding as (1 2, (i)(ii), i ii) and may extend headway towards 0.8150. 

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.

EUR/CHF stalls as ECB meeting get closer

Despite failing to extend gains beyond the 1.15 threshold, EUR/CHF was able to consolidate gains. The pair has been trading between 1.1259 and 1.1538 for the past four weeks. However, the single currency has completed its catch-up rally against the Swiss franc. Further gains are therefore unlikely, especially against the backdrop of mounting uncertainties ahead of the ECB's September meeting and the current valuation of the EUR against its peers.

Since the beginning of the year, the single currency has risen more than 8.5% on a trade-weighted basis, while it has gained “only” 7.30% against the Helvetic currency, with the latter still making the most of its safe haven status. However the tide is slowing turning in favour of the CHF again as Draghi keeps investors in the dark. The resurgence of fears that Draghi under-delivers will most likely weigh on EUR/CHF over the next few days.

Looking at the SNB's total sight deposits, one notices that is has remained quite stable through the summer with domestic deposits shrinking by roughly CHF 17.3bln, while total deposits edged up by CHF 3.7bln. This stabilisation allowed the SNB to spend a nice and quiet summer. However the summer is coming to an end.

EUR/CHF eased to 1.1374 on Monday morning, down 0.20% from 1.1407 at the opening. On the downside, a support lies at 1.1259 (low from August 18th), while on the upside a resistance can be found at 1.1538 (high from August 4th). We maintain our bearish view on the pair as we expect investors will soon return to safe haven ahead of next week's ECB meeting.

Draghi sends the euro above 1.19 after Jackson Hole

The Eurodollar pair has spiked in Friday above 1.1950 on Draghi's comments, its highest level since January 2015. He mentioned that he is confident about the global recovery which he considers that is improving. Yet, he added that the economic recovery has still a long way to go in Europe and in Japan compared with the US recovery.

The single currency spiked and Mario Draghi failed to limit buying pressures on the single currency. Markets pared their gains after he mentioned that more accommodative monetary policy are still needed. Next ECB meeting will be held the 7th of September and markets seem to expect too much. We believe that there are strong room for further disappointment. The inflation target is far from reached and would take more time than needed to be attained. Yet, with the bonds scarcity issue, it is going to be tough for the ECB to maintain accommodative monetary policy too long. Markets' confidence in the ECB may be at stake at some point. The single currency will certainly head higher until the ECB meeting before bouncing lower.

Speaking at the Jackson Hole on Friday, Fed Chair Janet Yellen avoided the subject of monetary policy altogether. The absence of any signals regarding an imminent balance sheet reduction or the prospect of another rate hike this year probably disappointed investors looking for optimistic hints on these two issues. The result was a weaker dollar. Soon thereafter, the euro surged on ECB President Draghi's remarks, or the lack thereof, to be more precise. The ECB chief said nothing new regarding changes to QE, nor did he talk down the euro. Given that some market participants may have anticipated a warning about the euro's appreciation, the absence of any such concern probably gave traders the ‘green light' to reenter long-EUR positions.

The broader outlook for EUR/USD remains positive in our view. Fed rate-hike expectations are still subdued, while the ECB could very well provide some hints regarding an eventual reduction in its asset purchases as early as at the upcoming policy meeting next week. Having said that, the economic calendar is packed with critical data releases and events this week, which constitute a risk to further near-term rallies in the world's most traded currency pair. Specifically, almost all US data coming out this week are expected to be solid, while President Trump is anticipated to begin pushing for tax reform in speeches. Last but not least, EUR/USD's proximity to the psychological 1.2000 zone is yet another factor making us hesitant to call for further near-term upside. Therefore, even though the pair's broader outlook remains positive, we would stay cautious of a potential consolidation or even correction lower during this event-risk heavy week.

EUR/USD rallied on Friday, to break above the key resistance (now turned into support) of 1.1830 (S2) on Yellen's speech. Subsequently, Draghi's remarks helped it to overcome the 1.1900 (S1) zone, defined by the peaks of the 2nd, 3rd and 4th of August. Then, the rate retreated somewhat. In our view, the rally signaled the resumption of the prevailing medium-term uptrend and as such, we expect the bulls to regain control at some point soon and aim for a test near the 1.1980 (R1) resistance, or the round number of 1.2000 (R2). A break above that key zone is needed to make us confident on further advances. Such a break is possible to set the stage for extensions towards the 1.2100 (R3) territory.

As for the bigger picture, as we already noted, the medium-term outlook remains positive. EUR/USD has been printing higher peaks and higher troughs above the uptrend line taken from the low of the 17th of April. Even if we get a retreat from near the 1.2000 (R2) zone, as long as such a setback remains limited above the aforementioned uptrend line, we would treat it as providing renewed buying opportunities.

Tropical Storm Harvey intensifies, takes out a chunk of US oil production

Tropical Storm Harvey intensified over the weekend and hit the state of Texas, causing some US oil rigs as well as many refineries to shut down. However, the reaction in the oil market has been relatively muted, at least so far, with market participants not appearing worried that this will lead to a meaningful oil shortage. One reason for the subdued reaction may be that weather factors rarely disrupt supply for very long, implying investors may view this situation as temporary. Another explanation may be the fact that the US Department of Energy stated on Friday it stands ready to release crude oil from the nation's emergency stockpile (Strategic Petroleum Reserve) if it is deemed necessary. This suggests that even if the storm intensifies and cripples US supply further, the federal government may intervene. Thus, further intensification of Harvey could support prices somewhat, but if the impact is big enough to cause intervention, prices could come back down.

WTI traded in a consolidative manner on Friday, staying slightly above the support of 47.50 (S1). Since the 22nd of August, the price has been trading mostly between that level and the resistance of 48.55 (R1). As such, we consider the short-term outlook to be flat for now. Our view is also supported by our short-term momentum studies, both of which lie near their equilibrium lines, pointing sideways.

Having said that though, given that WTI is still trading above the upper bound of the downside channel that contained the price action from the beginning of February until the 25th of July, we still see a decent possibility for the bulls to take charge again. A break above the resistance of 48.55 (R1) could confirm the case and is possible to initially aim for our next resistance of 49.30 (R2).

As for today's economic data:

The only major indicators we get are Sweden's retail sales and the Eurozone's M3 money supply, both for July.

As for the rest of the week:

On Tuesday, there is nothing major on the economic calendar. On Wednesday, we get Germany's preliminary CPI and the US ADP employment report, both for August. On Thursday, Eurozone's preliminary CPIs for August will be closely watched. In the US, personal income and spending data for July as well as the core PCE price index for the same month, are all coming out. We also get Canada's GDP for Q2. Finally on Friday, the all-important US employment report for August is due out and expectations are for another strong report.

EUR/USD

Support: 1.1900 (S1), 1.1830 (S2), 1,1730 (S3)

Resistance: 1.1980 (R1), 1.2000 (R2), 1.2100 (R3)

WTI

Support: 47.50 (S1), 46.85 (S2), 45.50 (S3)

Resistance: 48.55 (R1), 49.30 (R2), 50.35 (R3)

The Aussie dollar is holding bullish tone on Monday and retests Friday's high at 0.7953 on renewed probe above the upper boundary of the triangle, formed on recent action.

Overall bullish structure is supportive for final break above pivots at 0.7962/67 (17 Aug recovery high / Fibo 61.8% of 0.8065/0.7807 corrective pullback) to confirm reversal from 0.7807 (15 Aug correction low).

Converged 10/20SMA's are forming bull-cross at 0.7908 which would further underpin bulls for retest of psychological 0.8000 barrier.

Alternative scenario sees increasing downside risk on return below 0.7908, while break below 0.7864 (Thu/Fri lows) would shift near-term focus towards key support at 0.7807.

Res: 0.7962, 0.7967, 0.8000, 0.8042
Sup: 0.7925, 0.7908, 0.7889, 0.7864

The pair is trading within narrow range in early Monday after repeated upside rejection at 109.83 on Friday, when 20SMA capped the action. Subsequent sharp fall on dollar's disappointment after Yellen's JH speech brought the pair back to the week-long range.

Break of either range boundary (108.60/109.83) is needed for clearer direction signal.

Negative dollar's sentiment and bearish daily studies keep near-term bias at the downside, with break below 108.60 to generate bearish signal for test of key med-term support at 108.11 (17 Apr low).

Alternatively, sustained break above 109.80/110.00 zone would generate bullish signal for stronger correction.

Res: 109.40, 109.77, 109.83, 110.00
Sup: 109.02, 108.84, 108.60, 108.11

Cable opened with gap-higher on Monday and spiked at 1.2924, probing briefly above daily cloud top (1.2912) but gains were so far short-lived and capped by 55SMA.

Subsequent pullback so far found footstep above strong support at 1.2857 (daily cloud base, reinforced by 10SMA). Good demand lies at this zone and bulls need to hold above here for renewed attempts higher.

Technical studies are mixed on daily chart but bullish signal was generated on completion of reversal pattern on Friday.

Sustained break above daily cloud/55SMA would open psychological 1.3000 barrier (also 30SMA for test). Conversely, return and close below daily cloud would be negative signal and shift near-term focus lower.

Res: 1.2912, 1.2924, 1.2962, 1.2992
Sup: 1.2873, 1.2857, 1.2811, 1.2793

The Euro maintains firm tone and holding near fresh high at 1.1959, posted in early hours of Asian session on Monday.

The single currency accelerated strongly on Friday, gaining 1.05% for the day, boosted after speech of ECB President Mario Draghi at Jackson Hole economic symposium, when the ECB’s chief avoided giving any comment about central bank’s monetary policy and indication of the start of tapering stimulus program.

Instead, Draghi said that the recovery in the Eurozone is gaining momentum.

Friday’s strong rally and eventual close above 1.1910 (former top of 02 August) was strong bullish signal for resumption of broader uptrend after completion of bullish flag continuation pattern.

Near-term focus turns towards 1.2000 target, which marks strong psychological / option barrier and the price may show stronger hesitation on approach. Overbought slow stochastic on daily chart supports the notion.

Mild downside action was seen so far, however, stronger dips cannot be ruled out. Good supports lay at 1.1900 zone and 1.1845 (Fibo 38.2% of 1.1662/1.1959 upleg) with 10/20SMA bull-cross forming at 1.1800 and underpinning the action.

Firm break above 1.2000 barrier would trigger large stops parked above and spark fresh acceleration towards targets at 1.2100 (round-figure) and 1.2166 (50% retracement of larger 1.3992/1.0340 descend).

Res: 1.1959, 1.2000, 1.2063, 1.2100
Sup: 1.1916, 1.1845, 1.1800, 1.1773

The Euro made most of the headlines on Friday, after extending gains to a 2.5 year-high and approaching the 1.2 key psychological level. The single currency has appreciated more than 13.4% since the beginning of the year, and many traders were looking for a signal to cover their long Euro positions. However, ECB President Mario Draghi didn't provide this opportunity; failing to touch on the Euro's recent display of strength at Jackson Hole, Mr. Draghi provided investors an opportunity to keep adding to long positions. On the other side, although Fed Chair Janet Yellen seemed optimistic about progress made to reach the full employment and inflation target of 2%, she didn't give away any hints on interest rates or balance sheet reduction. This disappointed dollar bulls who needed further guidance on monetary policy.

U.S. Wage growth remains the missing ingredient

Investors have probably priced in a September 'taper' by the ECB, but the big question remains - will the Euro manage to extend gains from current levels, or will it begin a short-term correction? I believe the answer lies in U.S. data this week. When looking at U.S. bonds behavior, spreads between 2-year and 10-year treasury bonds have been shrinking since 7 July and are currently standing at 0.83 basis points, which is not good news for the greenback. While the flattening yield curve may be partially explained by recent geopolitical tensions and a spike in equity market volatility, inflation expectations remain the key contributor. If inflation expectations remain low, the Fed will find it difficult to tighten monetary policy at the desired pace. That's why U.S. wage growth is the most significant piece of data to watch on Friday.

The U.S. jobs report, due for release on Friday, will likely show a slowdown in job creation. Markets expect 180k jobs to be added to the U.S. economy in August, versus 209k in July and 231k in June. Despite the expected slowdown, the numbers still look healthy. The key focus remains on wage growth; this has been disappointing, with little growth shown over the past two years and remaining flat at 2.5% since April. Expectations are to see a 0.1% uptick for August, but for the yield curve to steepen and convince investors of a third rate hike in December, we need to see wages accelerating further.

Brexit Negotiations

With no tier-one economic data on the calendar and markets in U.K. closed today, Sterling traders are awaiting the results of a new round of talks between the U.K. and the E.U. So far, there are no signs of progress and differing opinions of Brexit Secretary David Davis and his E.U. equivalent Michel Barnier suggest there's a lot to be done to bring both sides into an agreement. Although the pound seems oversold, it is likely to remain under some pressure until positive developments materialize.

Will Gold finally breach $1,300?

The yellow metal is trading slightly higher on Monday, and it seems gold bulls are trying another attempt to break above $1,300. Data from the Commodity Futures Trading Commission showed traders have continued to add long positions as yielding assets, and are still providing very little to encourage investors. However, I think U.S. politics will play a significant role in gold's next move. The debt ceiling and Nafta deal are amongst things to be watched closely. If gold gathers momentum and manages to close the week above $1,300, I believe we'll be seeing another leg higher, with a potential to test 2016 highs, around $1,375.

The results of the Jackson Hole symposium can be observed on the charts on Monday. The Euro has skyrocketed against the US Dollar. Both speeches of the ECB and the FED leaders have caused a surge in the currency pair. However, the impact of the speech of Janet Yellen was larger than the one of Mario Draghi.

Meanwhile, from a technical perspective it was a perfect break out from the triangle pattern that Dukascopy analysts were talking and writing about constantly. The breakout has occurred to the upside.

In regards to the future situation, it can be expected that the currency rate will reach for the 1.20 mark . However, a full review is required first.

GBP/USD was driven by strong upside momentum on Friday that resulted in the pair closing at the 1.2886 mark, as sluggish US Durable Goods Orders sent the rate for a 57-pip hourly surge.

The Pound opened at 1.2934 this session just below the monthly S1 and the weekly R1. Ths level, however, was not sustainable, as bears managed to push the pair back to the 1.2880 area by early Monday.

Technical indicators support the rate edging lower. A significant level of support is set by the weekly PP and the 200-hour SMA near 1.2860. As no strong market movers are expected today, the rate should remain between 1.2860/1.2940.