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Currency pair EUR/USD

The EUR/USD is showing bearish continuation as expected in the wave analysis earlier this week. Price is building a potential ABC (purple) correction within a larger wave 4 (green). The main target of the ABC are the Fibonacci levels of wave 4 vs 3 (green).

The EUR/USD broke below the support trend line (dotted blue) but was unable to break below the bottom (green line). Price is now building a pullback, which could be a wave 4 (brown). A break above the 61.8% and resistance trend line (red) makes a wave 4 less likely. A break below support (greens) could see price continue towards 23.6% Fib.

Currency pair GBP/USD

The GBP/USD broke below the support trend line (dotted blue) and continued the downtrend.

The GBP/USD is building an extension within the 5th wave with another 5 waves (grey). The current pullback is a bear flag chart pattern and could be a wave 4 (grey). A break above the 61.8% Fibonacci level invalidates the wave 4.

Currency pair USD/JPY

The USD/JPY breakout managed to reach the 38.2% Fibonacci resistance level of the wave B (brown), which could cause a bearish bounce and complete wave A (orange).

The USD/JPY seems to have completed wave 5 (purple) within wave A (orange). A bullish break above resistance (orange) could see an extension the uptrend whereas a bearish break of the support trend lines could see an ABC (purple) within wave B (orange).

Global Markets:

• Asian stock markets: Nikkei rose 0.01 %, Shanghai Composite fell 0.22 %, Hang Seng climbed 0.73 %, ASX up 0.21 %
• Commodities: Gold at $1278.79 (- 0.05 %), Silver at $16.68 (- 0.16 %), WTI Oil at $47.78 (+0.48 %), Brent Oil at $51.11 (+0.61 %)
• Rates: US 10-year yield at 2.26, UK 10-year yield at 1.08, German 10-year yield at 0.43

News & Data:

• AUD Wage Price Index q/q 0.5 % vs 0.5 % expected
• NZD GDT Price Index -0.4 % vs – 1.6 % previous
• USD Retails Sales m/m 0.6 % vs 0.3 % expected
• USD Core Retails Sales m/m 0.5 % vs 0.3 % expected
• GBP CPI y/y 2.6 % vs 2.7 % expected
• GBP PPI Input m/m 0.0 % vs 0.4 % expected
• CHF PPI m/m 0.0 % vs -0.1 % previous

Markets Update:

Asian equity markets continued to inch ahead today as global Markets are starting to settle down after a tumultuous few days spurred by heightened tensions between the U.S. and North Korea

AUD/USD broke its two-day decline and started moving a little higher on the session after the wages data came in as expected, Price moved in from lows under 0.7820 to around 0.7840 gaining over 0.2 % against the US Dollar

USD/JPY was little changed in Wednesday's Asian session with price currently seen trading around it's opening price of 110.65 per dollar. It is worth mentioning that the yen had taken an added blow from the easing in risk aversion and lost 1.4 % against the dollar yesterday.

EUR/USD was little changed in the Asian session today. The Euro had experienced another wave of selling on Tuesday, exacerbated by a broad-based advance in US retail sales falling to lows of 1.16872 before recovering some ground going into the US segment as price struck above the 1.17 handle

GBP/USD slumped heavily after UK inflation numbers came in below expected, losing over 100 pips breaching key support levels against the US dollar. The pound is currently seen trading at $1.2870, having shed over 1.0 % overnight.

Upcoming Events:

• 08:30 GMT – (GBP) Average Earnings Index 3m/y
• 08:30 GMT – (GBP) Claimant Count Change
• 08:30 GMT – (GBP) Unemployment Rate
• 09:00 GMT – (EUR) Flash GDP q/q
• 12:30 GMT – (CAD) Foreign Securities Purchases
• 12:30 GMT – (USD) Housing Starts
• 12:30 GMT – (USD) Building Permits
• 14:30 GMT – (USD) Crude Oil Inventories
• 18:00 GMT – (USD) FOMC Meeting Minutes
• 22:45 GMT – (NZD) PPI Input q/q

Daily Pivots: (S1) 0.7792; (P) 0.7834; (R1) 0.7861; More...

AUD/USD's correction from 0.8065 extends to 0.78907 so far but outlook is unchanged. We'd still expect strong support from 0.7785 cluster support (38.2% retracement of 0.7328 to 0.8065 at 0.7783) to contain downside and bring rebound. Break of 0.7918 minor resistance will suggest that such pull back is completed. In this case, intraday bias will be turned back to the upside for retesting 0.8065. However, firm break of 0.7785 will extend the fall back to 0.7570/7711 support zone.

In the bigger picture, rise from 0.6826 medium term bottom is still in progress. At this point, there is no confirmation of trend reversal yet and we'll continue to treat such rebound as a corrective pattern. But in any case, break of 55 month EMA (now at 0.8100) will target 38.2% retracement of 1.1079 to 0.6826 at 0.8451. Break of 0.7328 support is needed to confirm completion of the rebound. Otherwise, further rise is now expected.

Dollar pares back some gains today but remains the strongest one for the week. FOMC minutes will be a main focus for the day which could decide whether the greenback can extend its rebound. So far, technically, such rebound in Dollar doesn't warrant a trend reversal yet. For example, EUR/USD is held above 1.1688 minor support and well above 1.1606 fibonacci level. That is, EUR/USD's near term outlook remains bullish. USD/CHF is help below 0.9772 resistance and thus, not confirming resumption of rebound from 0.9473. AUD/USD is also held well above 0.7785 cluster support, and the pull back from 0.8065 is seen as a correction. The main exception is GBP/USD which is building up the case of bearish reversal, thanks to Sterling's own weakness.

Regarding minutes of July FOMC meeting, the markets will be particularly interested in knowing policymaker's view on inflation outlook. In the accompanying statement of the meeting, policymakers acknowledged that the overall inflation and the measure excluding food and energy prices (core inflation) have "declined" and are "running below 2%". The removal of the word "somewhat" signaled the weakness in inflation is more than the Fed had anticipated. We would look to see if the Fed maintained the view that weak inflation is "transitory".

So far, Fed officials have been rather cautious regarding the chance of another rate hike by the end of the year. The main exception is New York Fed President William Dudley while remained "favor of doing another rate hike later this year". After his comments earlier this week, market pricing of Fed rate path returned to normal. For now, Fed fund futures are pricing in 98.6% chance for Fed to stand pat in September. Chance of a rate hike in December is roughly 50%.

German FM Schaeuble defends ECB asset purchases

Germany's constitutional court requested European Court of Justice for a ruling on whether ECB's asset purchase program as violated the ban on financing governments. ECB quickly acted to defend and said in a statement that "the extended asset purchase programme is in our opinion fully within our mandate." German Finance Minister Wolfgang Schaeuble also said that ECB's "mandate is being implemented" ECB was exhausting its tools to "fulfil its hellishly difficult task of devising a monetary policy for many different countries".

UK Job, Eurozone GDP to highlight European session

On the data front, Australia Westpac leading index rose 0.1% mom in July, wage cost index rose 0.5% qoq in Q2. UK job data will be a major focus in European session, which could decide whether Sterling's broad based decline will extend. Eurozone GDP is another focus. Later in US session, US will release housing starts and building permits before FOMC minutes.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7792; (P) 0.7834; (R1) 0.7861; More...

AUD/USD's correction from 0.8065 extends to 0.78907 so far but outlook is unchanged. We'd still expect strong support from 0.7785 cluster support (38.2% retracement of 0.7328 to 0.8065 at 0.7783) to contain downside and bring rebound. Break of 0.7918 minor resistance will suggest that such pull back is completed. In this case, intraday bias will be turned back to the upside for retesting 0.8065. However, firm break of 0.7785 will extend the fall back to 0.7570/7711 support zone.

In the bigger picture, rise from 0.6826 medium term bottom is still in progress. At this point, there is no confirmation of trend reversal yet and we'll continue to treat such rebound as a corrective pattern. But in any case, break of 55 month EMA (now at 0.8100) will target 38.2% retracement of 1.1079 to 0.6826 at 0.8451. Break of 0.7328 support is needed to confirm completion of the rebound. Otherwise, further rise is now expected.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the AUD declined 0.45% against the USD and closed at 0.7821.

LME Copper prices rose 0.5% or $31.0/MT to $6382.0/MT. Aluminium prices rose 1.3% or $26.0/MT to $2056.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7830, with the AUD trading 0.12% higher against the USD from yesterday's close.

Earlier today, data revealed that Australia's Westpac leading index rebounded 0.12% in July. In the prior month, the index had fallen by a revised 0.15%.

The pair is expected to find support at 0.7800, and a fall through could take it to the next support level of 0.7770. The pair is expected to find its first resistance at 0.7868, and a rise through could take it to the next resistance level of 0.7906.

Moving ahead, market participants will closely monitor Australia's unemployment rate data for July, due to release in the early hours tomorrow.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the EUR declined 0.32% against the USD and closed at 1.1740.

Data indicated that Germany's seasonally adjusted flash gross domestic product (GDP) advanced 0.6% on a quarterly basis in the second quarter of 2017, as households and state authorities increased their spending and companies boosted investment. However, market participants had envisaged the nation's GDP to climb 0.7%, compared to a revised rise of 0.7% in the prior quarter.

The US Dollar nudged higher against its key peers, lifted by upbeat US economic data.

Data showed that advance retail sales in the US climbed more-than-expected by 0.6% in July, posting its sharpest increase in seven months and suggesting that consumer spending was off to a good start in the third quarter. Market participants had expected advance retail sales to gain 0.3%, after recording a revised increase of 0.3% in the previous month. Further, the nation's New York Empire State manufacturing index jumped to a level of 25.2 in August, notching its highest level since September 2014 and beating market expectations of a rise to a level of 10.0. In the previous month, the index had registered a reading of 9.8. Moreover, the nation's business inventories surged to a seven-month high, after it advanced 0.5% in June, surpassing market expectations for a rise of 0.4%. In the previous month, business inventories had risen 0.3%.

Other economic data showed that the US NAHB housing market index recorded an unexpected rise to a level of 68.0 in August, confounding market expectations for the index to remain steady at a level of 64.0. Also, the nation's import price index rose 0.1% MoM in July, meeting market expectations. In the previous month, the index had registered a drop of 0.2%. Also, the nation's export price index rebounded above expectations by 0.4% MoM in July, compared to a drop of 0.2% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.1736, with the EUR trading a tad lower against the USD from yesterday's close.

The pair is expected to find support at 1.1687, and a fall through could take it to the next support level of 1.1637. The pair is expected to find its first resistance at 1.1786, and a rise through could take it to the next resistance level of 1.1835.

Moving ahead, investors will keep a close watch on the Euro-zone's flash 2Q GDP numbers, slated to release in a few hours, to gauge strength in the European economy. Additionally, in the US, the FOMC July meeting minutes coupled with the nation's housing starts and building permits data, both for July, all scheduled to release later in the day, will be closely watched by investors.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP declined 0.73% against the USD and closed at 1.2867, following weaker-than-expected UK inflation data.

Britain's consumer price index (CPI) climbed 2.6% on an annual basis in July, compared to a similar rise in the previous month. Market participants had expected the CPI to advance 2.7%.

In the Asian session, at GMT0300, the pair is trading at 1.2863, with the GBP trading marginally lower against the USD from yesterday's close.

The pair is expected to find support at 1.2816, and a fall through could take it to the next support level of 1.2769. The pair is expected to find its first resistance at 1.294, and a rise through could take it to the next resistance level of 1.3017.

Going forward, UK's ILO unemployment rate data for the three months to June, slated to release in a few hours, will grab a lot of market attention.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.8% against the JPY and closed at 110.60.

In the Asian session, at GMT0300, the pair is trading at 110.66, with the USD trading slightly higher against the JPY from yesterday’s close.

The pair is expected to find support at 110.25, and a fall through could take it to the next support level of 109.84. The pair is expected to find its first resistance at 110.96, and a rise through could take it to the next resistance level of 111.26.

Looking ahead, traders will focus on Japan’s adjusted merchandise trade balance data for July, slated to release overnight.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD marginally rose against the CHF and closed at 0.9724.

On the data front, Switzerland’s producer and import price index remained flat on a monthly basis in July, at par with market expectations. In the prior month, the index had recorded a drop of 0.1%.

In the Asian session, at GMT0300, the pair is trading at 0.9727, with the USD trading slightly higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9700, and a fall through could take it to the next support level of 0.9672. The pair is expected to find its first resistance at 0.9757, and a rise through could take it to the next resistance level of 0.9786.

Amid a lack of macroeconomic releases in Switzerland today, investor sentiment would be governed by global macroeconomic factors.

The currency pair is showing convergence with its 20 Hr moving average and trading above 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.22% against the CAD and closed at 1.2753.

Macroeconomic data showed that Canada’s existing home sales eased 2.1% on a monthly basis in July, dropping for the fourth consecutive month. In the previous month, existing home sales had recorded a fall of 6.7%.

In the Asian session, at GMT0300, the pair is trading at 1.2761, with the USD trading 0.06% higher against the CAD from yesterday’s close.

The pair is expected to find support at 1.2728, and a fall through could take it to the next support level of 1.2695. The pair is expected to find its first resistance at 1.2786, and a rise through could take it to the next resistance level of 1.2811.

The currency pair is showing convergence with its 20 Hr moving average and above its 50 Hr moving average.