Sample Category Title

EUR/USD

The EUR/USD pair surged pass 1.1800 this Monday, settling around 1.1820, its highest in five days, as speculative interest resumed dollar's selling. The pair traded uneventfully during the first half of the day, helped by a scarce macroeconomic calendar, but headlines coming from the US keep feeding risk aversion, sending US equities and bond yields sharply lower with Wall Street's opening, resulting in the greenback falling against all of its major rivals. Furthermore, the only piece of fundamental news coming from the US disappointed, as the Chicago Fed National Activity index for July, came in at -0.5%, below the previous 0.9% and the expected -0.4%. This Tuesday, attention will center on the German ZEW sentiment survey for August, expected below July's readings.

The pair has broken above a descendant trend line coming from this year high of 1.0909 set early August, currently around 1.1780, also a former static resistance, now a key support, as bulls will likely prevail as long as the price remains above it. In the 4 hours chart, the pair has surpassed all of its moving averages, with the 20 SMA gaining upward traction, but still below the 100 SMA. Technical indicators in the mentioned time frame have eased partially from near overbought readings, but given that the price remains near its highs, chances remain towards the upside. August 11th daily high at 1.1846 is the immediate resistance, with a break above it favoring additional gains up to the mentioned 1.1909 yearly high and beyond.

Support levels: 1.1780 1.1745 1.1715

Resistance levels: 1.1846 1.1880 1.1910

USD/JPY

The USD/JPY pair settled at 108.70, not far from this month low of 108.59, neither from the yearly one, set last April at 108.12. Yen's daily advance was backed by softer equities worldwide, and a down-tick in US T-yields, as risk aversion prevailed. The US and South Korea started their annual defensive military exercises this Monday, getting an infuriated response from North Korea, which once again menaced with a nuclear attack, not just on Guam, but also on Hawaii and the rest of the US territory. Japan won't release any macroeconomic reading during the upcoming Asian session, which means that sentiment will keep on leading the way, whilst movements will probably remain limited. From a technical point of view, the 4 hours chart supports additional declines ahead, as the price remains well below bearish 100 and 200 SMAs, whilst technical indicators hover within negative territory, although with limited bearish strength. Below 108.59, the low set last week, the pair has room to extend its decline down to 108.12, the mentioned yearly low.

Support levels: 108.55 108.15 107.70

Resistance levels: 109.10 109.50 109.90

GBP/USD

The British Pound benefited from dollar's weakness, with the pair surging up to 1.2915 to end the day slightly below the level. Early Monday, the UK Rightmove House Price index showed that home prices fell 0.9% in August and when compared to the previous month, the largest fall for this year. When compared to a year earlier, prices rose by 3.1%. In the meantime the UK has prepared a proposal to ensure trade in goods and services can continue after the Brexit, ahead of the third round of talks in Brussels next week, but is well-known that the EU won't discuss any trade issue before other issues, including citizens' rights and the Brexit bill, which means that little progress should be expected once again. The pair settled at the upper end of its latest range, but further gains can't be confirmed just yet, as the pair settled above a still flat 20 SMA, while technical indicators remain within neutral territory, with no certain directional strength. An upward acceleration through 1.2930 could see the pair extending up to 1.2965, but it would take a clear break above this last to confirm additional gains ahead, something quite unlikely at the time being.

Support levels: 1.2875 1.2830 1.2795

Resistance levels: 1.2930 1.2965 1.3000

GOLD

Spot gold regained its positive momentum and settled at $1,291.60 a troy ounce, as demand for safe-haven assets returned on mounting geopolitical tensions between North Korea and the US, and persistent uncertainty about Washington's agenda. US Treasury Secretary Steven Mnuchin and Senate Majority Leader Mitch McConnell made a joint appearance at CNBC in the US afternoon, trying to pour some cold water on the latest, talking about looking forward to working alongside with the Congress on the tax reform and on rising the debt limit. Gold, however, retains its bullish stance according to the daily chart, as the price is well above a bullish 20 DMA that stands far above the larger ones, whilst technical indicators resumed their advances within positive territory. Shorter term, and according to the 4 hours chart, the price managed to hold above a modestly bullish 20 SMA that attracted selling interest on intraday declines, while technical indicators lost upward momentum within positive territory, rather reflecting the limited volume at the end of the day than suggesting upward exhaustion.

Support levels: 1,281.65 1,273.95 1,261.20

Resistance levels: 1,292.10 1,300.90 1,309.25

WTI CRUDE OIL

Crude oil prices edged sharply lower on Monday, weighed by estimates showing that the OPEC's compliance to the output cut agreement fell to its lowest this year, and stood around 75% in July according to the international Energy Agency's latest monthly report. The cartel is holding a meeting with non-OPEC producers in Vienna to discuss compliance levels. West Texas Intermediate crude futures ended the day around $47.54 a barrel, after trading as high as 48.86 at the beginning of the day. The daily chart shows that the benchmark settled right above its 100 DMA, whilst technical indicators retreated from their mid-lines, now heading lower within bearish territory, supporting a new leg lower ahead particularly on a break below the daily low of 47.20. Shorter term, and according to the 4 hours chart, the technical picture is neutral-to-bearish, as WTI settled below its 100 and 200 SMAs, while the Momentum indicator turned flat around its 100 level and the RSI within bearish territory, now at 44.

Support levels: 47.20 46.60 45.90

Resistance levels: 48.10 48.80 49.50

DJIA

US indexes closed mixed after a soft start to the day, but not far from their daily openings, as political uncertainty within the US kept risk aversion as the main market motor. The Nasdaq Composite closed in the red at 6,213.13, down by 3 points, while the DJIA managed to add 29 points, to end at 21,703.75 and the S&P added 0.12%, to 2,428.37. Within the Dow, Nike was the worst performer, ending the day 2.38% lower, followed by Goldman Sachs that shed 0.70%. Home Depot on the other hand led advancers, gaining 1.19%, followed by Cisco Systems that gained 1.07%. The daily chart for the Dow shows that the index posted an intraday low of 21,597, its lowest in almost a month, holding well below its 20 DMA, despite the late recovery and with technical indicators maintaining their bearish slopes near oversold readings, in line with further slides ahead. In the shorter term, and according to the 4 hours chart, technical indicators have recovered from oversold levels, but remain within bearish territory, as the index remains below all of its moving averages, and with the 20 SMA aiming to cross below the 200 SMA, this last around 21,765, offering a strong dynamic resistance.

Support levels: 21,642 21,603 21,566

Resistance levels: 21,765 21,792 21,840

FTSE100

The FTSE 100 closed the day at 7,318.88, down by 5 points or 0.07%, as risk aversion dominated equities across all Europe. A sharp decline in financial-related equities was offset by an advance in mining-related ones, backed by an advance in gold prices. Insurer Provident Financial was the worst performer, down 5.78% followed by the pharmaceutical giant Shire that shed 4.02% after its chief financial officer quit. On the winning side, Micro Focus led advancers with a 3.17% gain, followed by Pearson that added 2.31%. The London benchmark maintains the negative tone seen on previous updates, as in the daily chart, it held at the lower end of last week's range, and well below its moving averages, whilst technical indicators keep heading south within negative territory. In the 4 hours chart, the index also presents a bearish stance, holding well below all of its moving averages, and with the RSI indicator hovering around 38 while the Momentum indicator heads marginally lower well below its mid-line.

Support levels: 7,293 7,257 7,218

Resistance levels: 7,337 7,369 7,401

DAX

The German DAX closed the day at 12,065.99, down 98 points or 0.82%, as European indexes were weighed by financial and banks' shares and following Wall Street's Friday sour tone, also hit by arising geopolitical tensions between the US and North Korea. Within the DAX, only Deutsche Lufthansa closed with gains, up 1.01, while leading decliners was ThyssenKrupp, down 2.99%, followed by Deutsche Bank that shed 2.48%. The index is bearish according to the daily chart, as it was again rejected by a bearish 20 SMA, whilst technical indicators failed to enter positive territory, and turned south, now presenting an increasing bearish momentum. In the 4 hours chart, the index is well below all of its moving averages that present bearish slopes, whilst technical indicators stabilized near oversold readings, also favoring a new leg lower for this Tuesday.

Support levels: 12,020 11,985 11,939

Resistance levels: 12,091 12,126 12,263

GBP/JPY - 140.25

Original strategy:

Sell at 141.20, Target: 139.20, Stop: 141.80

Position: -
Target: -
Stop: -

New strategy :

Sell at 141.40, Target: 139.40, Stop: 142.00

Position: -
Target:  -
Stop:-

As the British pound has remained under pressure, suggesting recent decline is still in progress and bearishness remains for the selloff from 147.75 top to resume after consolidation and below last week’s low at 139.80 would extend this decline to 139.50 but loss of downward momentum should prevent sharp fall below 139.00-10 and price should stay well above previous support at 138.70.

In view of this, we are looking to sell sterling on subsequent recovery as 141.40-50 should limit upside and bring such a decline. Only a break of resistance at 142.05 would suggest low is possibly formed instead, bring a stronger rebound to 142.50-60 but resistance at 143.20 should remain intact and bring another decline 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.


Spot Gold returned to red on Tuesday following Monday’s recovery rally rejection at $1292 barrier and repeated failure today.

Mild recovery of US dollar put gold price under pressure with downside attempts being so far contained by rising daily Tenkan-sen at $1282, but risk of further easing exists as bearish divergence has formed on daily RSI / slow stochastic.

Extension below Tenkan-sen support and Monday’s low / Fibo 61.8% of $1267/$1300 at $1280 would generate stronger bearish signal for deeper pullback, following strong rejection at $1300 last Friday.

Conversely, close above $1292 would sideline immediate downside threats and shift near-term focus higher.

Res: 1289, 1292, 1296, 1300
Sup: 1282, 1280, 1272, 1267

EUR/JPY - 128.54

Recent wave: A 5-waver is unfolding from 114.85 with wave iii and iv ended at 125.82 and 122.40 respectively, wave v has possibly ended at 131.40.

Trend: Near term up

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Although the single currency rebounded again to 129.18, lack of follow through buying and current retreat suggest consolidation would be seen and weakness to 128.10-15 cannot be ruled out, however, break of support at 127.84 is needed to signal the rebound from 127.56 (last week’s low) has ended, bring retest of this level, break there would signal the fall from 131.40 top is still in progress for retracement of early upmove to 127.00, then towards 126.50-60.

On the upside, whilst recovery to 129.00 cannot be ruled out, break of said resistance at 129.18 is needed to signal low has been formed at 127.56, bring a stronger rebound to 129.50-60 and possibly towards 130.00. Looking ahead, only break of indicated resistance at 130.40 would revive bullishness and signal the fall from 131.40 has ended, then gain to 130.90-00 would follow. As near term outlook is mixed, would be prudent to stand aside for now.

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).

AUD/USD – 0.7912

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: 0.7865

Position: - Long at 0.7895
Target:  - 0.8050
Stop:- 0.7835

As aussie has retreated after faltering below resistance at 0.7963, suggesting further consolidation would be seen, however, as long as support at 0.7869 holds, bullishness remains for another rebound, above indicated resistance at 0.7963 would add credence to our view that low has possibly been formed at 0.7808 early last week, bring a stronger rebound to 0.8000 but 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 0.7869 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/USD

Current level - 1.1786

The intraday bounce is over with the recent peak at 1.1827 and my outlook is bearish, for a break through the trigger at 1.1730, towards 1.1580.

USD/JPY

Current level - 109.22

The consolidation pattern above 108.60 should be close to completion, so I favor a reversal around 109.60, for a sell-ff towards 108.10, en route to 107.00 area.

GBP/USD

Current level - 1.2853

The outlook is still bearish, for a break through 1.2800 zone, towards 1.2600 area. Key hurdle remains projected at 1.2930.

The Aussie dollar eases on Tuesday after repeated upside rejections under 0.7967 (Fibo 61.8% of 0.8065/0.7807 downleg), which could generate bearish signal of recovery rally stall on deeper pullback. In addition, falling weekly 200SMA (0.7978) continues to weigh heavily on near-term price action. Full bearish setup of daily studies has been dented on return below 20SMA (0.7924), as fresh weakness pressures 0.7900 handle, with stronger bearish signal to be expected on bearish extension below 10SMA/daily Tenkan-sen (0.7891/85). Dip-buying scenario would be favored while the price stays above daily Tenkan-sen.

Res: 0.7950, 0.7967, 0.7978, 0.8000
Sup: 0.7900, 0.7885, 0.7867, 0.7838

Are EU and US government yields set to recover?

Treasuries across the globe have in been in growing demand recently as investors are becoming increasingly worried about the monetary outlook on both side of the Atlantic. US yields have been moving within a downtrend channel since the beginning of the summer. US 10-year rate slid as much as 20bps, from 2.395% down to 2.20% as investors discounted a hawkish unwinding program for Janet Yellen. The 2-year rate fell 13bps to 1.30%. Similarly, Germany’s benchmark 10-year government bond yield lost 22bps to 0.40%, while the 2-year rate gave up 16bps and returned to -0.71%.

However, it seems that the rush for bonds is coming to an end as even the recent risk-off move failed to send yields lower. We are therefore ahead of a recovery in treasury yields, especially in the euro zone and the US. Given the fact that investors will most likely get rid of EU and US bonds at the same time, the effect on EUR/USD will be hard to predict. Nevertheless, the situation is quite different from that of commodity exporter countries such as Australia, New Zealand and Canada. Indeed, the spread has widened during the entire summer. A contraction of the interest rate differential would add incentive to sell those currencies as yield hungry investors reallocate their portfolios.

Still room to fade risk off trade

The current round of risky asset weakness and rise in volatility been partially blamed on Trumps decision to deploy additional troops into Afghanistan. In reaction to news of his announcement, the VIX spiked to a high of 16, US equities fought to sustain gains (clear weakness in Tech and Financial) while USDJPY slid to 108.60. While the speech provides a meaningful shift in campaign rhetoric the lack of details indicate investors should not assume long term structural consequence. Trump acknowledged that he had been critical of the unending war and advocated total withdrawal but as President his generals persuaded him to avoid creating a power vacuum in Afghanistan.

Some Washington pundits have suggested that this was Trumps attempt to stabilize a turbulent administration (following Bannon’s chaotic exit). However, we suspect that this stark reversal reflects Trumps lack of foreign policy experience and broader agenda. Elsewhere, suggestions that Trump pro-growth agenda is further of track, is a trade that has left the station months ago. In investment terms, our short-term view is the current risk-off trade as unjustified, opting to go long risk. We remain focused on Jackson Hole symposium in expectations that Yellen’s remarks indicating the markets are mispricing Fed-tightening risk.

Swiss trade balance widens

The Swiss trade balance has increased in July to 3.51 billion from 2.81 billion in June mostly due the continued decrease of imports growth that accelerated. The Franc overvaluation is pushing down the exports but the trade balance resists well and is still largely positive for July. Watch exports are one of the major exports driver with a growth of 3.6% y/y.

The CHF was down this morning against the single currency and is back towards 1.14 CHF for one euro. Markets did not react much on the trade balance data and focuses on the next ECB meeting the 7th of September. The summer is definitely quiet for Switzerland.

Upside pressures on the EURCHF should continue to happen before the European central bank meeting. Markets seem to buy the rumours. We stand ready to sell the news at the ECB meeting. One week later the September 14th the SNB will likely remains its rate unchanged

In accordance with expectations, the common European currency continued the surge against the US Dollar in a short-term ascending channel until it met a resistance barrier formed by the upper trend-line of a senior descending channel.

For this reason, the currency exchange rate is expected to move downwards. This course is supported by the overall market sentiment, which is 71% bearish. On the other hand, a summary of various technical indicators for the upcoming trading day sends a strong buy signal. However, both the situation and the forecasts can be altered after release of information on the German Economic Sentiment, which might slightly devaluate the Euro and accelerate the fall.

The latest developments in the GBP/USD currency pair forced to partially review the situation. On the one hand, the Pound expectedly rose and bounced off from the weekly PP at 1.2910. On the other hand, the subsequent fall through the 55- and 100-hour SMAs entails that the pair is rather moving in a rectangle or triple bottom formation that in the descending triangle. If the first assumption is true, the Pound has to eventually break through the 1.2846 level to the bottom and continue to move in a downtrend. This scenario seems rational since the 200-hour SMA is located way above the current market price. But if the second assumption is true, the pair should change the direction and start to move to the north.