Sample Category Title

USD/CHF - 0.9605

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the greenback has remained under pressure after yesterday’s selloff from 0.9699, suggesting near term downside risk remains for the fall from 0.9766 to extend weakness towards previous support at 0.9583, however, break there is needed to retain bearishness and signal another leg of decline from 0.9773 is underway and extend subsequent fall to 0.9550 which is likely to hold on first testing.

In view of this, would not chase this fall and stand aside for now. Above 0.9660-65 would bring another bounce to 0.9699 resistance but break there is needed to signal the fall from 0.9766 has ended, bring a stronger rebound to 0.9720-30, however, as broad outlook remains consolidative, said resistance at 0.9766 should hold. 

GBP/USD - 1.2886

Original strategy :

Sell at 1.2920, Target: 1.2820, Stop: 1.2955

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.2935, Target: 1.2835, Stop: 1.2970

Position : -

Target :  -

Stop : -

As cable has recovered after falling to 1.2842 earlier this week, suggesting consolidation above this level would be seen and corrective bounce to 1.2920 cannot be ruled out, however, reckon  previous support at 1.2933-40 would turn into resistance and limit upside, bring another decline later, below said support at 1.2842 would extend recent selloff to 1.2825-30 (61.8% projection of 1.3269-1.2940 measuring from 1.3032), having said that, oversold condition should limit downside to 1.2800 and reckon 1.2770 would hold from here, bring rebound later.

In view of this, would not chase this fall here and would be prudent to sell sterling on recovery as said previous support at 1.2933 should cap cable’s upside, bring another decline. Above 1.2950 would defer and risk a stronger rebound to 1.2990-00 before another decline.

EUR/USD - 1.1743

Original strategy  :

Bought at 1.1715, Target: 1.1815, Stop: 1.1680

Position : - Long at 1.1715

Target :  - 1.1815

Stop : - 1.1680

New strategy  :

Hold long entered at 1.1715, Target: 1.1815, Stop: 1.1680

Position : - Long at 1.1715

Target :  - 1.1815

Stop : - 1.1680

Although the single currency fell briefly to 1.1662 yesterday, the subsequent rebound suggests a temporary low is possibly formed there and consolidation with mild upside bias remains for another test of indicated resistance at 1.1790, however, break there is needed to add credence to this view, bring further gain to 1.1820 but resistance at 1.1847 should hold from here.

In view of this, we are holding on to our long position entered at 1.1715. Below 1.1680-85 would risk retest of 1.1662, break there would extend the erratic decline from 1.1910 top to 1.1640-50 (50% Fibonacci retracement of 1.1370-1.1910 and previous support) but reckon 1.1600 would hold from here.

USD/JPY - 109.02

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Although the greenback has fallen again after meeting renewed selling interest at 110.37 and near term downside risk remains for weakness towards previous support at 108.73, as broad outlook remains consolidative, reckon downside would be limited and bring rebound later due to near term oversold condition. A firm break below said support at 108.73 would signal recent decline has finally resumed and extend weakness to 108.50 first.

In view of this, would not chase this fall here and would be prudent to stand aside for now. Above 109.50-55 would bring recovery to the Kijun-Sen (now at 109.67) but upside should be limited to the lower Kumo (now at 110.13) and said resistance at 110.37 should hold from here, bring another decline.

Central banks around the globe have been increasingly vocal this year, with their trend of repeated verbal interventions sending foreign exchange markets on a wild roller-coaster ride.

The era of cheap money is coming to a timely end, with central banks now on a quest to raise rates at a pace that supports both growth and inflation. Markets will be closely watching the Jackson Hole Symposium on the 24th-26thAugust, which could provide a joint opportunity for financial heavyweights to signal policy shifts. Although there have been reports that European Central Bank President Draghi, will not deliver a new policy message at the conference, there is still a possibility that he will talk down the resurgent Euro. With July's ECB meeting minutes revealing concerns over the strengthening Euro, complicating the European Central Bank's efforts to hit the 2% inflation target, Draghi may verbally intervene at Jackson Hole to weaken the currency.

Other heavyweights such as Janet Yellen and Mark Carney, will also be on the scene with market players, closely scrutinizing any comments made regarding monetary policy. With concerns over stubbornly low inflation and political drama in Washington, weighing on the prospects of higher US interest rates, Yellen may avoid discussions on policy shifts altogether. The unsavory combination of Brexit uncertainty and soft economic fundamentals in the UK continues to weigh on the prospects of higher UK rates and this may be reflected in Mark Carney's rhetoric at the pending Jackson Hole.

Will EURGBP hit parity?

There is growing speculation that the EURGBP is on a positive trajectory towards parity in the longer term and this is understandable when considering how the pair has appreciated over 800 pips from the 0.8300 support. The improving macro-fundamentals from Europe, continue to support the Euro, while Brexit uncertainty has pressured the Sterling. With the expectations of the ECB QE tapering - fueling the bullish sentiment towards the EURGBP, further upside is on the cards.

From a technical standpoint, the EURGBP is heavily bullish on the daily charts, as there have been consistently higher highs and higher lows. Bulls remain in control above the 0.9000 higher low,with a breakout above 0.9150 encouraging a further increase towards 0.9300. A monthly close above 0.9300 should open a path higher towards 0.9600.

EUR/JPY - 128.25





Despite staging a rebound initially this week, as the single currency ran into renewed selling interest at 130.40 and has retreated quite sharply, retaining our view that further consolidation below recent high of 131.40 would be seen and risk of another test of 128.05 (last week’s low) cannot be ruled out, break there would bring retracement of recent upmove to 127.96 (38.2% Fibonacci retracement of 122.38-131.40), then test of support at 127.44 but break of latter level is needed to provide confirmation, bring further fall to 126.45-50, having said that, price should stay above previous resistance at 125.82 (now support) and euro may head north again from there. Only a sustained breach below this level would signal correction of recent upmove has commenced for further fall to 125.15-20 but previous resistance at 124.65 would hold from here. 

The daily chart is labeled as attached, early selloff from 169.97 (July 2008) to 112.08 is wave (A) of B instead of end of entire wave B and then the rebound from there to 139.26 is wave (B), hence, wave (C) has possibly ended at 94.12 with a diagonal triangle as labeled in the daily chart, hence upside bias is seen for further gain. Recent rally above indicated retracement level at 116.69 (50% Fibonacci retracement of the intermediate fall from 139.26-94.12) adds credence to this view and signal major reversal has commenced but first leg of this wave C has possibly ended at 149.79, hence wave 2 has commenced with wave A ended at 126.09, followed by wave B at 141.06, wave C commenced and could have ended at 109.49, above 126.00 would add credence to this view, then headway to 130.00 would follow. 



On the upside, whilst initial recovery to 129.50-60 cannot be ruled out, reckon upside would be limited to 130.00 and said resistance at 130.40 would remain intact, bring another decline later. Above said resistance at 130.40 would signal the retreat from 131.40 has ended instead, risk a stronger rebound to 130.80-85 and price should falter below 131.40, bring another leg of corrective decline later this month. Only above said resistance at 131.40 would extend medium term upmove from 109.49 low (2016 low) to extend further gain to 132.00-10, however, overbought condition should prevent sharp move beyond 132.90-00 (1.236 times projection of 109.49-124.10 measuring from 114.85) and price should falter well below previous chart resistance at 134.59.


Recommendation: Stand aside for this week.

To re-cap the corrective upmove from the record low of 88.93 (18 Oct 2000), the wave A from there is subdivided as: 1:88.93-113.72, 2:99.88 (1 Jun 2001), 3:140.91 (30 May 2003), 4:124.17 (10 Nov 2003) and 5 ended at record high of 169.97 (21 Jul 2008). The brief but sharp selloff to 112.08 is viewed as a-b-c x a-b-c wave (A) of B. The subsequent rebound to 139.26 is (B) of B and (C) of (B) has possibly ended at 94.12 and in any case price should stay well above previous chart support at 88.93, bring rally in larger degree wave C towards 150.00.

• Cohn resignation would cap off a dreadful week for Trump;
• Gold could breach $1,300 if Cohn resigns;
• USD softening as traders bet against another rate hike.

We're seeing risk aversion in the markets again on Friday, with the possibility of a self-inflicted crisis within Donald Trump's White House and another terror attack, this time in Barcelona, weighing on risk appetite.

Trump has been no stranger to controversy in his short time as President but the latest entirely unnecessary and avoidable situation could prove quite costly for him. Trump has already this week been forced to dissolve his manufacturing council and the strategic and policy forum, while his infrastructure council never even got off the ground, after numerous CEO's withdrew from the initiatives due to his response to the white supremacy rally in Charlottesville, Virginia, last weekend.

The next casualty could be the most costly of the lot, with speculation growing that Gary Cohn – a key figurehead in Trump's tax reform and spending initiatives – could resign from his position as National Economic Council Director. This would be a bitter blow for Trump and be the icing on the cake of what has been a dreadful week for the President. The negativity is flowing through to the markets as well as such a move would cast doubt over whether Trump will deliver on his tax reform and spending promises in the foreseeable future, two things that have been at least partly responsible for the post-election rally in the markets.

The traditional safe havens are once again being preferred today, with Gold up half a percent to trade close to $1,300 once again. It seems there's a number of factors driving the bullish case for Gold at the moment – a weak dollar, US political risk, geopolitical risk – and a Gary Cohn resignation could be the straw that breaks the camels back and drives it through $1,300. Gold has already hit a 9 month high today but a break through $1,300 could trigger much bigger gains, with $1,340 potentially offering the next test.

The yen is being favoured once again in the fx space and is now on course for a third consecutive day of gains. The yen is looking particularly bullish against the pound and a break below 140 in the pair could be the catalyst for another push lower. The dollar is a little soft once again, with Wednesday's minutes providing the dovish undertones that traders have been waiting for in recent months. With Treasury yields continuing to creep lower and the probability of a rate hike now standing at only 42%, the Fed may now have a job on its hands delivering on a third increase this year.

The preliminary UoM consumer sentiment figure is the only notable economic release on Friday but we will also hear from the Fed's Robert Kaplan again after he yesterday called for patience on rates in the face of weak US inflation.

USD/CHF –  0.9643

 
Although the greenback rebounded initially this week, as price has retreated again after faltering below resistance at 0.9773, suggesting initial downside risk is for weakness to 0.9583 support, however, as early strong rebound from 0.9438 to 0.9773 signals a temporary low has possibly been formed at 0.9438, reckon downside would be limited to 0.9540-50 and bring another rebound later. Above 0.9700 would bring another bounce to 0.9773 resistance but break there is needed to add credence to this view and extend the rebound from 0.9438 low for further gain to 0.9845-50 (61.8% Fibonacci retracement of 1.0100-0.9438) but reckon upside would be limited to 0.9890-00 and price should falter well below psychological resistance at 1.0000. 

Our preferred count on the daily chart is that early selloff to 0.9630 is an end of the larger degree wave III and major correction is unfolding from there with a leg ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b ended at 0.9910 with (a): 1.0370, (b): 1.1967, (c): 0.9910. The rise from there to 1.1730 is the wave c which also marked the end of wave IV and wave V has possibly ended at 0.7068.


On the downside, whilst initial pullback to 0.9580-85 cannot be ruled out, reckon 0.9550-55 would limit downside and bring another rebound to aforesaid upside targets. Only a drop below said recent low at 0.9438 would revive bearishness and signal the erratic decline from 1.0344 top (formed back in late 2016) is still in progress and downside bias remains for this move to extend weakness to 0.9390-00, however, loss of downward momentum should prevent sharp fall below 0.9300-10, risk from there has increased for a rebound to take place probably later.
 
Recommendation: Buy at 0.9555 for 0.9755 with stop below 0.9455

Dollar's long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) with wave III ended at 0.9630 (Mar 2008). Under this count, correction in wave IV has possibly ended at 1.1730 and wave V already broke below support at 0.9630 and met indicated downside target at 0.7500 and 0.7400. The reversal from 0.7068 suggests the wave V has possibly ended and the breach of resistance at 0.9595 add credence to this view and indicated upside target at 1.0000 had been met, however, the sharp retreat from 1.0296 to 0.7401 suggests choppy trading would be seen but price should stay above said record low at 0.7068.

Notes/Observations

Market sentiment turning towards safe-haven flows; terrorist attacks in Spain's Barcelona and Cambrils as well as rumors about the possible resignation of Trump's economic advisor Gary Cohn boost risk aversion

Overnight

Europe:

Islamic State claimed responsibility for van attack in Barcelona that killed over a dozen and injured over 100

UK Govt to issue position papers on Aug 21st on confidentiality of EU information obtained before Brexit and goods placed on supply chains in single market before Brexit

Americas:

Fed Chair Yellen scheduled to speak at Jackson Hole Symposium on Friday, Aug 25th with her remarks to focus on "financial stability"

Fed's Kashkari (dove, voter): Fed will consider debt ceiling debate when deciding the start of running down balance sheet. Difficult to see how the math works for fast US GDP growth

Economic data

(DE) Germany July PPI M/M: 0.2% v 0.0%e; Y/Y: 2.3% v 2.2%e

(EU) Euro Zone Jun Current Account (Seasonally Adj): €21.2B v €30.5B prior; Current Account NSA: €28.1B v €17.9B prior

(IT) Italy Jun Current Account Balance: €5.3B v €2.3B prior

(IT) Italy Jun General Government Debt: €2.281T (record high) v €2.279T prior

(EU) Euro Zone Jun Construction Output M/M: -0.5% v -0.2% prior; Y/Y: 3.4% v 2.7% prior

Fixed Income Issuance:

(IN) India sold total INR150B vs. INR150B in 2022, 2029, 2033 and 2051 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -1.0% at 373.3, FTSE -1.1% at 7310, DAX -0.9% at 12093, CAC-40 -1.2% at 5083, IBEX-35 -1.2% at 10321, FTSE MIB -0.9% at 21601, SMI -1.0% at 8857, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes:

European Indices trade sharply lower following on from the steep losses seen on Wall Street overnight, with the French CAC and Spanish IBEX leading declines. Yesterday's terror attack in Spain weighed on sentiment with Travel and Leisure stocks the leading the decliners, with sharp falls in some of Europe's major airlines.

Elsewhere Vopak shares trade sharply lower after cutting its FY17 outlook, whilst shares of Fiat Chrysler trades lower after Guangzhou Auto said it has no plans to acquire Fiat.

Looking ahead notable earners include Deere & Co, Footlocker and Estee Lauder.

Equities

Consumer discretionary [Air France [AF.FR] -2.8%, Int Con Airlines [IAG.UK] -2.5% (Earnings), Lufthansa [LHA.DE] -1.6%, Easyjet [EZJ.UK] -2.2%, Ryanair [RYA.UK] -2.5% (Barcelona Terror Attack), Fiat [FCA.IT] -1.6% (Guangzhou Auto notes no current plan to acquire Fiat )]

Telecom: [Medivir [MVIRB.SE] +3.6% (Licenses exclusive rights to MIV-802 for Greater China to Ascletis)]

Healthcare: [ Nicox [COX.FR] +5.8% (Announces that its Exclusive Licensee Submits response to CRL for latanoprostene bunod ophthalmic solution, 0.024%), Astrazeneca [AZN.UK] -1.1% (FDA approves ovarian cancer treatment Lynparza Tablets) ]

Real Estate: [Vopak [VPK.NL] -8.6% (Earnings)]

Speakers

South Africa Mining Min Zwane stated that mining charter requirements are achievable and would continue to strengthen its laws in the sector

Taiwan Fin Min Sheu Yu-Jer: To raise corporate tax rate and cut individual rates

China Banking Regulator (CBRC) Xiao Yuanqi: To issue new regulations to crackdown on illicit banking activities. To limit impact on economy amid stronger supervision

S&P affirmed South Korea sovereign rating at AA; outlook stable. Geopolitical risks on Peninsula would not escalate with a direct armed conflict unlikely

Currencies

FX markets were subdued on Friday with focus turning to next week’s Jackson Hole symposium. Currency flows favored safe-haven assets with Yen and Swissie slightly firmer (spot gold probing the $1,300/oz)

EUR/USD trying to recover from perceived ECB concern over any FX overshoot. USD remains vulnerable to President Trump's inability to date in trying to push through the pro-growth measures

Fixed Income

Bund futures trades at 164.36 up 4 ticks as thin summer trading continues. Downside targets 163.50 followed by 162.56. To the upside the 164.50 to 165.20 remains key resistance.

Gilt futures trades at 127.83 up 13 ticks as Bunds and Treasuries remain underpinned by tensions in the White House. A resumption to the upside could eye 128.25 then 128.75. A move back below 126.51 targets 125.97

Friday’s liquidity report showed Thursday's use of the marginal lending facility fell to €123M from €174M prior.

Corporate issuance saw $1.15 come to market via 2 issuers headlined by Ipalco Enterprises $405M senior secure offering, and H&E $750M senior notes offering. For the week ending August 16th IG Funds reported inflows of $2.43B, while High Yields funds reported inflows of $2.19B

Looking Ahead

(ZA) South Africa to sell combined ZAR650M in 2025, 2029 and 2046 I/Lbonds

(BR) Brazil Aug CNI Industrial Confidence: No est v 50.6 prior

06:00 (PT) Portugal July PPI M/M: No est v -0.2% prior; Y/Y: No est v 2.7% prior

06:00 (UK) DMO to sell combined £5.5B in 1-month, 3-month and 6-month bills

06:30 (IS) Iceland to sell bills

07:00 (BR) Brazil Aug IGP-M Inflation (2nd Preview): 0.0%e v -0.7 % prior

07:30 (CL) Chile Q2 GDP Q/Q: 0.7%e v 0.2% prior; Y/Y: 1.0%e v 0.1% prior

07:30 (CL) Chile Q2 Current Account Balance: -$1.3Be v -$1.0B prior

07:30 (IN) Weekly India Forex Reserve data

08:00 (PL) Poland July Sold Industrial Output M/M: -6.7%e v +2.7% prior; Y/Y: 8.4%e v 4.5% prior; Construction Output Y/Y: 13.3%e v 11.6% prior

08:00 (PL) Poland July Retail Sales M/M: 1.4%e v 0.9% prior; Y/Y: 7.9%e v 6.0% prior; Real Retail Sales Y/Y: 7.4%e v 5.8% prior

08:00 (PL) Poland July PPI M/M: 0.0%e v -0.4% prior; Y/Y: 2.0%e v 1.8% prior

08:00 (UK) Baltic Dry Bulk Index

08:30 (CA) Canada July CPI M/M: 0.0%e v -0.1% prior; Y/Y: 1.2%e v 1.0% prior; Consumer Price Index: 130.4e v 130.4 prior

08:30 (CA) Canada CPI Core- Common Y/Y: No est v 1.4% prior;CPI Core- Trim Y/Y: No est v 1.6% prior; CPI Core- Median Y/Y: No est v 1.2% prior

10:00 (US) Aug Preliminary University of Michigan Confidence: 94.0e v 93.4 prior

11:00 (EU) Potential Sovereign ratings following European close

(EG) Egypt Sovereign Debt to be rated by Moody's

(RO) Romania Sovereign Debt to be rated by Moody's

(GR) Greece Sovereign Debt to be rated by Fitch

(IE) Ireland Sovereign Debt to be rated by Canadian rating agency DBRS

(BE) Belgium Sovereign Debt to be rated by Canadian rating agency DBRS

13:00 (US) Weekly Baker Hughes Rig Count data

13:00 (CO) Colombia Central Bank Quarterly Inflation Report

Copper contract for September delivery is holding firm tone on Friday but stays below fresh highs at 2.9780 and 2.9810, posted on Wed/Thu (the highest traded since Nov 2014.

Strong bullish sentiment keeps meta well supported as expectations that reforms in China’s metal industry will curb supply against a background of strong demand as China is world’s top consumer of copper.

Toppish daily studies suggest that price may extend consolidation before resuming its steep uptrend, as strong fundaments and weaker dollar continue to underpin the metal’s price.

Break above former top at 2.9540 (peak of 05 May 2015), requires weekly close above for confirmation, with psychological 3.0000 barrier coming in focus.

Broken Tenkan-sen offers initial support at 2.9257 and guarding higher base at 2.8745.

Res: 2.9575, 2.9780, 2.9810, 3.0000
Sup: 2.9257, 2.9000, 2.8745, 2.8590