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Gold maintains a bullish market structure on the 4-hour chart and is consolidating around a key level at 1257.62. This is the 23.6% Fibonacci retracement level of the rally from 1204.79 to 1274.09 (July 10 to August 1 uptrend). This level has provided both support and resistance in the past, as far back as mid-June.

The market paused the rally at 1274.09 after becoming overextended as RSI reached overbought territory at 70. Consequently, gold prices declined from their peak. RSI fell below 50 into bearish territory, leaving room for further downside in the market.

The August 4 low of 1254.17 is expected to provide support. A further decline would target the 38.2% Fibonacci level at 1247.57. From here, the July 26 low of 1243.72 comes into view (also a Bollinger band level). A drop below 1239.35 (50% Fibonacci) would likely bring about a deeper decline and risk reversing the recent uptrend.

Alternatively, a bounce higher from current levels away from 1257.62 could target the 1274.09 peak. A sustained break of the upper Bollinger band is needed in order to increase upside momentum for a move towards 1280.00. Clearing this level would open the way towards the key 1300.00 level.

The market remains under pressure in the near-term as RSI is sloping down and is below 50 in bearish territory. Meanwhile, prices are still trading close to the lower Bollinger band, keeping the bias in gold to the downside.

Key Highlights

• The Euro remains in an uptrend and placed well above the 1.1750 against the US Dollar.
• There is a crucial ascending channel with support at 1.1760 forming on the 4-hours chart of EUR/USD.
• The German Industrial Production for June 2017 posted a decline of 1.1% (MoM).
• Today, the labor market conditions index for July 2017 will be released, which is forecasted to remain around 1.5.

EURUSD Technical Analysis

The Euro remains poised for more gains above 1.1780 against the US Dollar. The EUR/USD pair is following a nice bullish path and trading well above the 1.1750 support.

Looking at the 4-hour chart, there is a crucial ascending channel forming with support at 1.1760. The pair recently tested the channel support zone at 1.1730 and currently recovering.

It is currently trading above the 23.6% Fib retracement level of the last decline from the 1.1910 high to 1.1728 low. An initial resistance is around the 50% Fib retracement level of the same wave at 1.1819.

Above 1.1820, the next important hurdle for buyers is near the last swing high of 1.1910. The H4 RSI has moved below the 50 level, which is the only negative sign for EUR/USD below 1.1820 at the moment.

German Industrial Production

Today in the Euro Zone, the Industrial Production for June 2017 was released by the Statistisches Bundesamt Deutschland. The market was aligned for an increase of 0.2% compared with the previous month.

However, the actual result was on the lower side as there was a decline of 1.1% (MoM). In terms of the yearly change, there was an increase of 2.4% compared with the last +4.8%. Looking at the production in industry excluding energy and construction, there was a decrease of 1.4%.

The report added that:

Within industry, the production of capital goods decreased by 1.9% and the production of intermediate goods by 1.2%.The production of consumer goods showed a decrease of 0.7%. Energy production was up by 1.4% in June 2017 and the production in construction decreased by 1.0%.

Overall, the EUR/USD pair remains in an uptrend as long as there is no daily close below the 1.1750 support area. On the upside, the most important resistance sits at 1.1820.

EURUSD maintains a bullish outlook despite falling sharply following a peak at 1.1907 last week – its highest level since January 2015. The market reached overbought levels as indicated by RSI rising above 70.

Prices have since retreated below the key 1.1800 level, which is acting as an immediate resistance level so far today. Upside momentum has faded and RSI has moved out of extreme conditions and is moving sideways. This suggests there could be some consolidation in the market in the near-term.

The current move lower is seen as a correction, with the Fibonacci level at 1.1722 expected to provide immediate support. This is the 23.6% retracement of the recent rally from 1.1118 to 1.1907. This level held as support last week. A breakdown of this support would target the next Fibonacci (38.2%) at 1.1604. From here the focus will turn to 1.1510. This is an important level as it is the 50% Fibonacci and so a break below this would start to weaken the bullish bias.

While the overall trend structure shows that the bull run is expected to remain intact, EURUSD needs to remain above the 1.1500 level. A successful break of resistance at 1.1800 could see a further move higher with scope to re-test the August 2 peak of 1.1907. Clearing this level would see the resumption of the uptrend to target 1.2000.

The technical picture shows that EURUSD is bullish and rising in an ascending channel. The crossover of the 50-day moving average above the 200-day MA on May 23 confirms the bullish outlook. A consolidation phase is seen in the near-term.

Forex markets have started the week on a relatively quiet note regarding economic releases. During the Asian session, New Zealand inflation expectations and German industrial output in June were the main figures of interest. The dollar gave up on some of Friday’s gains against most majors, including the yen and the euro.

The greenback weakened modestly against most majors during Asian trading, following its surge on Friday amid a better-than-expected jobs report. The report pointed to a healthy and growing labor market, as 209K new jobs were created last month against the upwardly revised 231K payrolls in June, while the expectation was for 183 thousand. Following the release, the dollar index rallied to 93.77, retracing all its weekly losses. However, the index was soft today, falling back to 93.38, mirroring last week’s starting level. Euro/dollar rose to 1.1783, while dollar/yen fell to 110.70.

New Zealand business managers tempered their inflation expectations for the next two years. The country’s Reserve Bank survey of expectations showed local firms see annual inflation expanding at 1.8% in one year, down from 1.9% in last quarter’s survey. In two years, it is expected to be 2.1%, down from 2.2% in the prior survey. Annual inflation was 1.7% in the second quarter as lower fuel prices offset expansion in household basics like rent, food and electricity. These figures confirmed trader doubts that the RBNZ will delay rate hikes at its Thursday meeting. The kiwi weakened against its US counterpart, with the kiwi/dollar pair last trading at 0.7388.

Europe’s largest economy cooled in June, a survey of German industrial production showed. German industrial output fell 1.1% in June down from a 1.2% gain the prior month and faring much worse than the expected 0.2% gain. Excluding energy and construction, industrial production dropped 1.4%. Another breakdown of the data showed the production of capital goods fell 1.9% and intermediate goods by 1.2%. The production of consumer goods slid 0.7%. By contrast, energy production grew 1.4%.

Despite the negative data out of Germany, the euro managed to regain some strength against the dollar, with euro/dollar rising to 1.1783, following the opening level of 1.1772.

Sterling also rose against the greenback, with the pair last trading at 1.3045.

In other news over the weekend, media in China warned of sanctions on North Korea following an agreement between South Korea and the US. Earlier on Saturday, the UN Security Council unanimously imposed new sanctions on North Korea aimed to pressure the country to end its missile testing and nuclear program.

In the UK, the Sunday Telegraph reported that Britain is ready to pay 40 billion euros as part of its divorce from the EU, citing three unnamed sources. So far, the country officials have not given an indication of how the UK would be willing to pay.

Oil prices eased on rising output, though holding close to their nine-week highs. WTI was last trading at $49.40 a barrel while Brent was at $52.53 a barrel. Also starting today is a two-day meeting between OPEC and participating non-OPEC members in the deal to reduce production by about 1.8 million barrels per day.

Gold was broadly steady during Asian trading, with the precious metal last trading at $1,257.44 an ounce.

GBP/USD – 1.3055


Recent wave: Wave V of larger degree wave (III) has ended at 1.1986 and major correction has commenced from there for gain to 1.3000 and 1.3140-50




Trend: Near term up




Original strategy :

Exit long entered at 1.3145,

Position: - Long at 1.3145



Target:  -



Stop: - 




New strategy :

Sell at 1.3150, Target: 1.2980, Stop: 1.3210

Position: -



Target:  -



Stop:- 



As cable met renewed selling interest at 1.3165 and has tumbled on Friday in part due to dollar’s broad-based rebound, suggesting top has been formed at 1.3269 last week and downside bias is seen for this move to bring retracement of recent upmove, hence further weakness to support at 1.2999 is likely, break there would add credence to this view, bring further fall to 1.2955-60, however, near term oversold condition should limit downside and reckon support at 1.2933 would hold on first testing. 

In view of this, would be prudent to sell cable on recovery as said resistance at 1.3165 should cap upside, bring another decline. A firm break above this level would defer and suggest first leg of decline from 1.3269 has ended instead, risk a strong rebound to 1.3200, however, price should falter well below said resistance and bring another decline later.

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has ended at 1.7192, the subsequent selloff is the larger degree wave (C) which is still unfolding with minor wave (III) of larger degree wave 3 ended at 1.1986, hence wave (IV) correction is in progress which could either be a triangle wave (IV) of a complex formation but upside should be limited to 1.3500 and price should falter well below 1.4000, bring another decline in wave (V) of 3 for weakness to 1.1500, then 1.1200.

NZD/USD drops like a rock on the short term and is very close to take out the static support from the 23.6% retracement level and the 0.7375 static support. A valid breakdown will open the door for more declines towards the warning line (wl4) and towards the 38.2% retracement level.

Gold continues to trade in the red on the Daily chart, but has touched a strong support area. Technically, a throwback is favored because is located in the buyer’s territory. It moves in range maintaining a bullish perspective after the breakout from the red descending pitchfork’s body.

We may have a buying opportunity from here if the support will hold, the next upside targets will be at the 382.% retracement level and higher at the $1295 per ounce.

AUD/USD increased in the morning, but could drop much deeper in the upcoming days as the USDX may climb higher after the Friday's rally. USDX decreased a little in the fresh start of the week, that's why the greenback has lost some ground versus its rivals.

The USD could dominate the currency market on the short term if the dollar index will make an accumulation movement above the 92.49 major static support. We may see a minor decrease on the USDX because could try to correct after the Friday's impressive jump.

The Aussie increased a little on good Australian data, the AIG Job Advertisements rose by 1.5% in July, while the AIG Construction Index jumped from 56.0 to 60.5 points in the last month.

Price is trading in the green right now, but he could still drop towards the median line (ml) of the minor ascending pitchfork. Support can be found at the lower median line (LML) of the major ascending pitchfork as well. I want to remind you that the perspective remains bullish on the Daily chart if the support levels will hold.

Technically, the current retreat was expected after the false breakout above the 50% Fibonacci line (ascending dotted line). Only a valid breakdown below the lower median line (LML) will signal a major drop.

However, we may have a buying opportunity from the mentioned support levels if these will reject the price, right now is better to stay away because we don't have any trading opportunity.

Daily Pivots: (S1) 0.7887; (P) 0.7933; (R1) 0.7975; More...

Intraday bias in AUD/USD remains neutral as consolidation from 0.8065 is still in progress. As long as 0.7877 support holds, another rise remains mildly in favor. Break of 0.8065 will target 100% projection of 0.6826 to 0.7833 from 0.7328 at 0.8335. Nonetheless, break of 0.7877 will indicate short term topping, with bearish divergence condition in 4 hour MACD. In such case, intraday bias will be turned back to the downside for 0.7711 resistance turned support.

In the bigger picture, current development suggests that rebound from 0.6826 is developing into a medium term rise. 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.

The financial markets are trading in risk-on mode as another week starts, boosted by last week's record run in US equities. In addition to being supported by the set of solid job data, comments from White House economic adviser Gary Cohn also provided some optimism to investors. Nonetheless, in the currency markets, Dollar has turned into consolidative mode instead and is waiting for fresh inspirations. Euro, on the other hand, is regaining some growth. New Zealand Dollar and Yen are trading as the weakest ones so far. In other markets, gold failed to stand firm above 1280 handle last week and retreated on Dollar's rebound. it's hovering in tight range of 1260/5 for the moment. WTI crude oil is also struggling to regain momentum for another attempt of 50 handle yet.

US Cohn: Tax bill to be completed "early in the fall"

Comments from White House economic adviser Gary Cohn raised hopes of better US growth outlook. Cohn noted that the current US corporate tax rate, at 35%, is too high when compared with the average of 23% in OECD economies. Cohn reiterated that the government's timetable of getting a comprehensive tax bill completed "early in the fall", adding that top priority "for now until the end of the year is taxes". Recall that pro-growth tax plan outlined by the Trump administration in April proposed a 15% rate. Trump also proposed to reduce the number of individual income tax bracket from seven to three, with the highest marginal tax bracket dropping from 39.6% to 33%.

Kiwi lower ahead of RBNZ

New Zealand Dollar trades notably lower today as RBNZ's survey showed inflation expectation eased. The survey showed that respondents expect 1.77% annual inflation in 1 year and 2.09% in 2 years. That's much lower than the survey result three months ago, at 1.92% in 1 year and 2.17% in 2 years. For growth, firms expected GDP to grow 2.7% in 1 year and 2.64% in 2 years, comparing to prior 2.81% and 2.58% respectively.

The data comes just head of RBNZ meeting this week on August 9, which is a major focus of the week. RBNZ is widely expected to stand pat and keep OCR unchanged at 1.75%. The central bank will likely maintain a dovish tone and keep its own forecast that rates would be on hold until September 2019.

NZD/JPY's breach of 81.66 support last week indicates short term topping at 83.90, after failing to sustain above 83.76 resistance. Bias is back on the downside for 55 day EMA (now at 81.29). Sustained break there should confirm completion of whole rise from 75.65. And deeper fall would then be seen back to 61.8% retracement of 75.65 to 83.90 at 78.80 and below before getting support for rebound.

Elsewhere, Japan leading index rose to 106.3 in June. German industrial production dropped -1.1% mom in June. Swiss foreign currency reserves rose to CHF 714b in July. Swiss CPI rose slightly to 0.3% yoy in July. Eurozone Sentix investor confidence is the only feature for today.

US CPI as main focus of the week

Looking ahead, US CPI is the most important data to watch. The July report, due Friday, probably shows that inflation improved to 1.8% yoy, from 1.6% in June. Core CPI probably stayed unchanged at 1.76. Both readings are expected to stay below the Fed's target of 2%. Recall that the Fed delivered a dovish tone at the July meeting statement, noting that "on a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2%". In June the Fed only noted that inflation has "declined recently". It is advised to pay attention to the upcoming FOMC minutes and see if the Fed would continue to describe weak inflation as "transitory".

Here are some highlights for the week ahead:

• Tuesday: China trade balance; Australia business confidence; Swiss unemployment rate; German trade balance; Canada housing starts
• Wednesday: China PPI and CPI; Australia home loans; Canada building permits; US non-farm productivity
• Thursday: RBNZ rate decision; UK RICS house price balance; Japan domestic CGPI, tertiary industrial index; UK productions, trade balance; US jobless claims, PPI
• Friday: German CPI final, US CPI

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7887; (P) 0.7933; (R1) 0.7975; More...

Intraday bias in AUD/USD remains neutral as consolidation from 0.8065 is still in progress. As long as 0.7877 support holds, another rise remains mildly in favor. Break of 0.8065 will target 100% projection of 0.6826 to 0.7833 from 0.7328 at 0.8335. Nonetheless, break of 0.7877 will indicate short term topping, with bearish divergence condition in 4 hour MACD. In such case, intraday bias will be turned back to the downside for 0.7711 resistance turned support.

In the bigger picture, current development suggests that rebound from 0.6826 is developing into a medium term rise. 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