Sample Category Title

USD/CHF - 0.9610

Original strategy :

Buy at 0.9480, Target: 0.9580, Stop: 0.9445

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9550, Target: 0.9650, Stop: 0.9515

Position : -

Target :  -

Stop : -

The greenback extended the rebound from 0.9421 (last week’s low) in line with our bullish expectations, this anticipated rise together with the breach of previous resistance at 0.9595 add credence to our view that low has been formed at 0.9421 and consolidation with upside bias remains for further gain to 0.9635-40 (61.8% Fibonacci retracement of 0.9773-0.9421), however, near term overbought condition would limit upside and reckon resistance at 0.9680 would remain intact.

In view of this, we are looking to reinstate long on dips as 0.9550-55 should limit downside and bring another upmove later. Below 0.9525-30 would defer and risk correction to 0.9500 but downside should be limited and 0.9450-60 would remain intact, bring another rebound later.

The price is trading in the red and seems poised to hit fresh new lows till the end of the day. EUR/GBP plunged and resumed the bearish movement, but now is very close to reach another downside target. Is pressuring the 0.9000 psychological level, a valid breakdown will signal a further drop in the upcoming days. The Cable rallies and should reach new highs as the United Kingdom inflation data have come in better than expected.

The Pound has surged aggressively also versus the Yen and versus greenback, not only versus the Euro. The UK's CPI surged by 2.9% in August, bearing the 2.8% estimate and the 2.6% growth in the former reading period, while the Core CPI rose by 2.7%, exceeding the 2.5% estimate and the 2.4% growth in the former reading period.

The PPI Input, PPI Output, RPI and the HPI indicators have come in better than expected and have boosted the Cable.

The currency pair drops and is pressuring the 0.9000 psychological level. Should drop further and is expected to reach the third warning line (wl3) of the descending pitchfork. Technically it could be attracted by the confluence area formed at the intersection between the warning line (wl3) with the median line (ML) of the major ascending pitchfork and with the lower median line (lml) of the minor ascending pitchfork. The retreat is natural after the false breakout above the 0.9226 static resistance and above the upper median line (UML) of the ascending pitchfork.

A valid breakdown below the mentioned support levels will confirm a drop at least till will reach the lower median line (LML) of the major ascending pitchfork.

EUR/USD has failed to resume the upside movement and now has started another leg lower. I've said in the previous report that it could drop if will stay within the descending pitchfork's body. The false breakout above the 1.2041 level and above the 50% Fibonacci line (ascending dotted line) signaled an exhaustion. The next downside target will be at the median line (ml) of the descending pitchfork, actually could be attracted by the confluence area formed between the median line (ml) of the ascending pitchfork with the median line (ml) of the ascending pitchfork.

USD/CAD increased a little today as the pressure is still high. You can see that has failed to reach the lower median line (lml) of the descending pitchfork and the sliding line (descending dotted line), signaling that has lost the bearish momentum. I've added an ascending pitchfork, a retest of the lower median line (lml) will confirm a rebound on the short term.

The Canadian dollar continues to have a quiet week. Currently, USD/CAD is trading at 1.2148, up 0.31% on the day. On the release front, there are no Canadian releases on the schedule. Later in the day, the US releases JOLTS Jobs Openings, which is expected to slow to 5.96 million. On Wednesday, the US releases PPI, with an estimate of 0.3%.

With only one Canadian event this week, much of this week's movement of USD/CAD will be due to readings from US indicators, notably inflation and retail sales data. Will the Canadian dollar resume its rally? The currency has now put together 4 consecutive winning weeks, and was boosted last week by the Bank of Canada, which caught markets by surprise when it raised the benchmark rate 25 basis points to 1.00%, up from 0.75%. Last week, USD/CAD dropped to a low of 1.2060, its lowest level since May 2015. Will the pair fall below the symbolic 1.20 level this week?

With North Korea celebrating its 69th anniversary of independence, there were concerns that Pyongyang would use the occasion to flex some muscle and test a nuclear bomb or missile. North Korea marked last year's anniversary by exploding its fifth nuclear test. This occasion passed without incident, although the US, along with its allies Japan and South Korea, remain on alert for further provocations from the north. Asian and European stock markets have started the week with solid gains, as investors are displaying a greater appetite for risk. This could translate into gains for risk currencies such as the Canadian dollar.

The US economy has been performing well in the second quarter. Preliminary GDP came in at a sizzling 3.0%, and the labor market remains close to capacity. Still, the Achilles heel of the economy remains stubbornly low inflation levels. Wage pressure has been limited, despite the fact that many businesses cannot fill job openings. Weak inflation has hampered the Fed's plans to raise interest rates a third time this year, and the odds of a December hike have dipped to just 31%, as the markets are increasingly doubtful that the Fed will make a move before next year. Will the inflation picture improve? We could see better numbers this week for August inflation – PPI is expected to improve to 0.3% on Tuesday, and the same gain is forecast for CPI on Wednesday. Both estimates are higher than the July readings.

GBP/USD - 1.3254

Original strategy :

Buy at 1.3125, Target: 1.3225, Stop: 1.3090

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.3175, Target: 1.3275, Stop: 1.3140

Position : -

Target :  -

Stop : -

Cable’s intra-day breach of previous chart resistance at 1.3269 confirms medium term upmove has resumed and bullishness remains for further gain to 1.3290-00, however, loss of near term upward momentum should prevent sharp move beyond 1.3330 and reckon 1.3350-60 (61.8% projection of 1.2909-1.3224 measuring from 1.3161) would hold from here, risk from there has increased for a retreat to take place later. 

In view of this, would not chase this rise at current level and would be prudent to buy cable on subsequent pullback as support at 1/3161 should contain downside and bring another upmove. Below 1.3145-50 would defer and risk correction to 1.3115-20 but downside should be limited and support at 1.3082 (previous resistance) should remain intact.

EUR/USD - 1.1938

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the single currency has fallen again after brief recovery, suggesting the decline from last week’s high of 1.2093 is still in progress for retracement of recent rise, hence weakness to 1.1900 cannot be rule out, however, loss of near term downward momentum should prevent sharp fall below previous support at 1.1868 and price should stay well above another previous support at 1.1823, bring rebound later.

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Above the Kijun-Sen (now at 1.1966) would bring recovery to 1.1978-80, however, reckon upside would be limited to 1.2000 and resistance at 1.2030 should remain intact, bring another decline.

Daily Pivots: (S1) 1.3141; (P) 1.3182; (R1) 1.3203; More...

GBP/USD's rally resumed quickly after brief consolidations. Break of 1.3267 resistance also confirms resumption of whole rise from 1.1946. Intraday bias is back on the upside for 1.3444 key resistance next. At this point, we'd maintain that price actions from 1.1946 are still seen as a corrective pattern. Hence, we'd expect strong resistance from 1.3444 to limit upside to bring larger down trend reversal eventually. On the downside below, 1.3158 minor support will turn intraday bias neutral again.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern. While further rise cannot be ruled out, larger outlook remains bearish as long as 1.3444 key resistance holds. Down trend from 1.7190 (2014 high) is expected to resume later after the correction completes. And break of 1.2773 support will be the first sign that such down trend is resuming.

The British Pound surges sharply today as boosted by strong inflation reading. BoE is still widely expected to keep bank rates and asset purchase target unchanged on Thursday. But there is now more reasons for the central bank to reiterate its stance on interest rates. That is, BoE would like to remind households and businesses that markets are under-estimating the scale of interest rate hikes in the coming years. Following Sterling, commodity currencies and Dollar are the strong ones on full return of risk appetite. But Canadian Dollar lags behind as it continues to digest recent gains. Meanwhile, Yen and Swiss Franc remain the weakest ones. Both maintains this week's loss after United Nations Security Council approved watered down sanctions on North Korea. And risks of immediate military conflicts are much reduced.

UK CPI jumps to year high, Sterling soars

Sterling soars today as boosted by stronger than expected consumer inflation reading. Headline CPI accelerated to 2.9% yoy in August, up from 2.6% yoy, and beat expectation of 2.8% yoy. That's also the highest level in a year. Core CPI also accelerated to 2.7% yoy, up from 2.4% yoy and beat expectation of 2.5% yoy. RPI rose to 3.9% yoy, up from 3.6% yoy and beat consensus of 3.8% yoy. PPI input rose to 7.6% yoy, PPI output rose to 3.4% yoy and PPI output core was unchanged at 2.5% yoy. Also from UK, house price index rose 5.1% yoy in July, above expectation of 4.8% yoy.

The data come just two day ahead of BoE rate decisions. With re-acceleration in headline CPI, there is very little chance that hawks Michael Saunders and Ian McCafferty would change their mind. Both are very likely to continue to vote for a 25bps hike. The question is now on whether chief economist Andy Haldane would finally put his hawkish comments into a vote for hike. But still even, if Haldane votes for hike, two more are needed in the 9-member MPC to approve it. BoE is still generally expected to keep bank rate unchanged at historical low at 0.25%. Money markets are pricing in one-in-three chance of a rise by the end of the year, comparing with one-in-five a week ago. And based on Sonia fixings, markets are pricing in a full 25bps rise by August 2018.

Nonetheless, technically, today's rally in the pound is decisively bullish in near term. GBP/USD's break of 1.3267 confirms resumption of recent rally from 1.1946 and it's set to test 1.3444 key medium term resistance. EUR/GBP's sharp fall also confirms near term reversal and opens up the case of deeper fall back to 0.8303/12 support zone. GBP/CHF's strong rally should also confirm that the three wave pattern from 1.3067 has completed at 1.2219. Further rise would be seen to 1.2852 resistance next. Break there will put long term fibonacci level of 38.2% retracement of 1.5570 (2015 high) to 1.1684 (2016 low) at 1.3216 into focus.

German Merkel "guaranteed" to reject refugee cap

In Germany, ahead of the federal election on September 24, Chancellor Angela Merkel ruled out imposing an upper limit on refugee intake. She told voter yesterday that a cap of refugees entering into Germany would not be "practical". And she "guaranteed" she will reject any such policy. Meanwhile, she also warned Hungary that it's unacceptable to ignore a ruling by the European Court of Justice. And Hungary must accept refugees under the EU-wide plan.

Based on recent polls, Merkel's Christian Democrats (CDU) is likely to win the election. CDU is generally in high 30's, with running up Social Democrats (SDP) at low 20%. The ex-Communist Left, Greens, Free Democrats (FDP) and right wing Alternative for Germany (AFD) are all between 7% and 11%. Should FDP and and CDU win a combined majority, it's highly likely that they will form a coalition.

USD/CNY surged as PBOC removed capital control

USDCNY continues to recover after the pair slumped to the lowest level since December 2015 last Friday. The rebound is long-awaited as the broad-based USD weakness has caused the pair to decline over the past 4 months. It is facilitated by PBOC's announcement to remove the requirement for banks to hold the equivalent of 20% of clients' FX forward positions as reserve for a year at 0% interest. For more than a decade, China has been implementing reforms in its currency, with the ultimate goal of achieving a floating exchange rate regime and convertibility for renminbi - a movement widely described as renminbi internationalization. However, the government has only been moving back and forth, without making significant progress in transforming renminbi into a market-oriented exchange rate. More in PBOC Removes Capital Control. Yet, Renminbi Internationalization Remains Distant

Australia business confidence dropped below long term average

Australia NAB business condition rose to 15 in August up from 14, and hit the highest level since 2008. However, business confidence tumbled notably to 5, down from 12. It's also the first time it dropped below its long-term average since mid-2016. NAB chief economist Alan Oster noted that "for those indicating deterioration in confidence, the biggest concerns appear to be customer demand, government policy, as well as cost pressures - both energy and wages." But, it's "it is probably too early to read much into the drop in confidence this month." And, "household consumption is a notable point of difference between our relatively subdued growth outlook and the RBA's more sanguine forecasts, and will be key to the economy's sustained return to trend growth."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3141; (P) 1.3182; (R1) 1.3203; More...

GBP/USD's rally resumed quickly after brief consolidations. Break of 1.3267 resistance also confirms resumption of whole rise from 1.1946. Intraday bias is back on the upside for 1.3444 key resistance next. At this point, we'd maintain that price actions from 1.1946 are still seen as a corrective pattern. Hence, we'd expect strong resistance from 1.3444 to limit upside to bring larger down trend reversal eventually. On the downside below, 1.3158 minor support will turn intraday bias neutral again.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern. While further rise cannot be ruled out, larger outlook remains bearish as long as 1.3444 key resistance holds. Down trend from 1.7190 (2014 high) is expected to resume later after the correction completes. And break of 1.2773 support will be the first sign that such down trend is resuming.

Economic Indicators Update

USD/JPY - 109.97

Original strategy  :

Sold at 109.35, stopped at 109.70

Position :  - Short at 109.35

Target :  -

Stop : - 109.70

New strategy  :

Buy at 109.30, Target: 110.30, Stop: 108.95

Position :  -

Target :  -

Stop : -

As the greenback has surged again today after brief pullback, dampening our bearishness and suggesting the rise from 107.32 low is still in progress, hence further gain to resistance at 110.49 would be seen, however, near term overbought condition should limit upside to resistance at 110.67, risk from there has increased for a retreat to take place soon.

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as 109.25-30 should limit downside. Below 109.00 would defer and risk correction to 108.6570 but still reckon downside would be limited to 108.35-40 and bring another rally later.