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In accordance with expectations, boundaries of a symmetrical triangle proved to be not strong enough to confine the falling Greenback shortly after announcement of the US Advance GDP. However, the fact that the drop was neutralized already by closest support level set up by the weekly S1 at 110.48 indicates that it was not severe. That, in turn, allows assuming that the pair might successfully reach the combined resistance level formed by the 55-hour SMA and the updated weekly PP at 111.16. Given that the further road upstairs is blocked by the 100- and 200-hour SMAs as well as the monthly PP at 111.38, suggests the currency rate is going to make a rebound and begin to move to the south in line with the general downtrend.

An announcement of the US Advance GDP last Friday resulted in a 0.76% increase of the yellow metal price. Nevertheless, the impulse given by this fundamental event in conjunction with the monthly PP at 1,258.37 was not enough to allow the rate to reach the upper trend-line of an ascending channel. In the beginning of Monday's trading session it made a rebound near the 1,270.93 level and started to move towards the updated weekly PP at 1,281.80, which is additionally secured by the 55-hour SMA. In order to stay in the channel, the pair needs to reach its southern boundary. If it fails to do so and rebounds from the above support level, this might be a sign of a formation of a rising wedge.

AUD/USD – 0.7973

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 :

Buy at 0.7880, Target: 0.8080, Stop: 0.7820

O.C.O.

Sell at 0.8020, Target: 0.7880, Stop: 0.8080

Position: -
Target:  -
Stop: -

New strategy :

Buy at 0.7880, Target: 0.8080, Stop: 0.7820

O.C.O.

Sell at 0.8030, Target: 0.7880, Stop: 0.8090

Position: -
Target:  -
Stop:-

Aussie’s retreat after last week’s rally to 0.8066 suggests the wave iii top is possibly formed there and consolidation with mild downside bias is seen for correction in wave iv, hence weakness to 0.7900 is likely, however, reckon previous support at 0.7875-78 would hold and renewed buying interest should emerge there, bring another rise later. Above said resistance at 0.8066 would signal recent upmove is still in progress for headway to 0.8100, then 0.8140-50 but overbought condition should limit upside to 0.8190-00, bring retreat 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 to aforesaid upside targets. 

In view of this, whilst we are looking to buy aussie on subsequent pullback, we would turn short on recovery as 0.8020-30 should limit upside. A sustained breach below support at 0.7875 would defer and risk correction to 0.7810-20, however, still reckon downside would be limited to 0.7786 and price should stay well above wave i top at 0.7712.

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.

Daily Pivots: (S1) 110.36; (P) 110.84; (R1) 111.14; More...

USD/JPY recovers mildly today but stays well below 112.18 resistance. Intraday bias remains on the downside for the moment. Current decline from 114.49 should extend to 108.81 support first. Break there will resume whole correction from 118.65 and target 61.8% retracement of 98.97 to 118.65 at 106.48. Nonetheless, break of 112.18 resistance will dampen this bearish view and turn focus back to 114.49 resistance instead.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85. If fall from 118.65 extends lower, down side should be contained by 61.8% retracement of 98.97 to 118.65 at 106.48 and bring rebound.

Dollar recovers mildly today but momentum has been weak. There is no change in it's general down trend against Euro, Yen and Sterling. And, not the mention the greenback's weakness against Canadian and Aussie. Political uncertainty in US is one of the key factors in limiting any rebound attempt in the greenback. Fed fund futures are now pricing in less than 50% chance of another rate hike by end of the year. And indeed, markets are starting to question that even if Fed does hike, the sluggish inflation outlook will keep it standing pat next year. The drama in the White House seems never-ending with US President Donald Trump replacing his chief of staff Reince Priebus last Friday. Retired General John Kelly was installed in the place. Some analysts noted that could be a turning point for Trump as he's now shaking up his top team.

Russia orders 755 US diplomats to leave

Meanwhile, Russian President Vladimir Putin said on Sunday that he ordered US to cut diplomatic staff in the country. Putin said that was a response to the "illegal restrictions" imposed by US. That came days after US Congress passed a new round of sanctions for punishing Russia for interfering in last year's election and military agrees in Ukraine and Syria. It's initially reported that Russia asked 755 US diplomats to go. And after that, the total number of American diplomats in Russia will be brought down to 455, same as Russian diplomats in US.

Non-farm payroll not likely to help Dollar

There are a number of important economic data from US this week, including ISM indices and non-farm payroll. While the data will be watched closely as usual, we believe it's unlikely to revive the expectation of faster Fed tightening even if it posts strong upside surprises. The key to Fed's policy will still lie on the implementation of Trump's fiscal policies and tax reforms. Without that, markets will continue to doubt whether the US economy can withstand another more rate hikes. On the other hand, we could very likely see another round of selloff in the greenback if NFP disappoints.

ECB Lautenschlaeger: It's important to prepare for the exit in good time

In Eurozone, ECB governing council member Sabine Lautenschlaeger said in a newspaper remarks that "the expansionary monetary policy has both advantages and side effects. As time passes, the positive effects get weaker and the risks increase." And, she urged that "it's important to prepare for the exit in good time." But she noted that "what's crucial in that context is a stable trend in the rate of inflation towards our objective of just under 2 percent. It's not quite there yet."

Released today...

Official China PMI manufacturing dropped to 51.4 in July, down from 51.7 and missed expectation of 51.5. Official non-manufacturing PMI dropped to 54.5, down from 54.9. Japan industrial production rose 1.6% mom in June, housing starts rose 1.7% yoy. New Zealand building permits dropped -1.0% mom in June. Australia TD securities inflation rose 0.1% mom in July.

In European session, German retail sales rose 1.1% mom in June. UK will release mortgage approvals an M4 money supply. Eurozone CPI will be a key focus and unemployment rate will also be featured. Canada will release IPPI and RMPI later in the day while US will release pending home sales.

RBA and BoE watched closely ahead too

While there are a number of key events ahead, RBA rate decision will be the first one to watch. The RBA meeting due tomorrow would bring no change in the monetary policy. However, the central bank's "neutral rate" rhetoric gave Aussie a boost. At the July meeting minutes, RBA noted that neutral nominal cash rate is currently at around 3.5%, "given that medium-term inflation expectations were well anchored around 2.5%, although there is significant uncertainty around this estimate". We would like to see if policymakers do any tweak or elaboration on such reference this week. RBA's Monetary Policy Statement due on Friday would provide update economic forecasts.

BoE Super Thursday will be another key focus. It would be of great interest to see how policymakers vote for the policy, after the 5-3 split (Ian McCafferty, Kristin Forbes and Michael Saunders voting for a rise) in June. The dilemma facing the UK is overshooting inflation on one side and lackluster economic growth together with great uncertainty in Brexit negotiation on the other side. The July inflation report show moderation on the price level the headline reading stayed above the BoE's 2% target. UK's 2Q17 GDP grew 0.3% with the first half growth regarded as "notable slowdown" by the government. We believe the Bank rate would stay unchanged at 0.25%. BoE's quarterly inflation report would also be released alongside the meeting minutes.

Here are some more highlights for the week ahead:

• Tuesday: RBA rate decision; China Caixin PMI manufacturing; Eurozone GDP, PMI manufacturing revisions; UK PMI manufacturing; US personal income and spending, ISM manufacturing
• Wednesday: New Zealand employment; Australia building approvals, Japan consumer confidence; Swiss retail sales, SVME PMI; Eurozone PPI; US ADP employment
• Thursday: Australia trade balance; Eurozone retail sales, PMI services revision, ECB bulletin; UK PMI services, BoE rate decision; US jobless claims, ISM services, factory orders
• Friday: Australia retail sales; Japan labor cash earnings; German factory orders; Canada trade balance, employment, Ivey PMI; US non-farm payrolls, trade balance

USD/JPY Daily Outlook

Daily Pivots: (S1) 110.36; (P) 110.84; (R1) 111.14; More...

USD/JPY recovers mildly today but stays well below 112.18 resistance. Intraday bias remains on the downside for the moment. Current decline from 114.49 should extend to 108.81 support first. Break there will resume whole correction from 118.65 and target 61.8% retracement of 98.97 to 118.65 at 106.48. Nonetheless, break of 112.18 resistance will dampen this bearish view and turn focus back to 114.49 resistance instead.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85. If fall from 118.65 extends lower, down side should be contained by 61.8% retracement of 98.97 to 118.65 at 106.48 and bring rebound.

Economic Indicators Update

AUDUSD has a neutral bias after pausing a rally that took the pair to a high of 0.8065 on July 27. This is the highest level since May 2015. The underlying market structure is bullish after a sharp rise from the July 7 low of 0.7571. Looking at the 4-hour chart, upside momentum has faded as indicated by the flat RSI. Consequently, AUDUSD is trading sideways within a range.

The key psychological level at 0.8000 is now a strong resistance level broadly holding so far even though it was pierced last week. AUDUSD closed below 0.8000 on July 28. Support is provided by the 50-period moving average (MA). This is close to a Fibonacci level at 0.7947 (23.6% retracement of the upleg from 0.7571 to 0.8065). Further support is provided by subsequent Fibonacci levels at 0.7875, 0.7816 (July 26 low) and 0.7759.

Prices need to rise above the key 0.8000 level to move out of the range and weaken downside pressure. From this level, AUDUSD would see a re-test of the 0.8065 high and a break of this would see a resumption of the uptrend.

The positively aligned moving averages are supporting a bullish outlook in the short-term. There was a bullish crossover of the 20-period MA with the 50-period one on July 12.

There has been no confirmation of a trend reversal yet and the current consolidation pattern could be a temporary pause before the uptrend resumes. For now, the bias remains neutral on the 4-hour chart, with high odds of a shift to bullish if there is a daily close above 0.8000.

The GBP/USD is in uptrend and we can see the POC zone clearly below the price. The POC 1.3075-1.3100 might look a bit stretched but that happens due to many individual confluence points that are found within the zone – W L3, ATR pivot, D L3, trend line, EMA89, 38.2 fib + ATR (14) has slightly increased. If we see a retracement in the zone, the price might bounce towards 1.3157 and 1.3180. Only above 1.3180 we will see another bullish wave towards 1.3230. As long as the price stays above 1.3060 bulls will have the upper hand, else below 1.3060, short term stops might be triggered so 1.3025 will be possible.

W L3 - Weekly Camarilla Pivot (Weekly Interim Support)

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

Weekly

    •    Last Candlesticks pattern: Shooting star 
    •    Time of formation: 03 May 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 3 May 2016
    •    Trend bias: Sideways

EUR/USD – 1.1648

The single currency only eased to 1.1613 before rising again, adding credence to our bullish view that recent upmove is still in progress and price already exceeded indicated upside targets at previous chart resistance at 1.1714, bullishness remains for medium term upmove to extend further gain to 1.1800-10, break there would encourage for headway to 1.1870-80 but near term overbought condition should limit upside and price should falter below 1.1900-10, bring retreat later.

On the downside, whilst initial pullback to 1.1650 and possibly the Tenkan-Sen (now at 1.1628) cannot be ruled out, reckon 1.1583 (previous resistance turned support) would limit downside and bring another upmove to aforesaid upside targets. Below 1.1530-35 would suggest a temporary top is possibly formed and risk test of the Kijun-Sen (now at 1.1475) but a daily close below there is needed to add credence to this view, bring correction to 1.1400 and possibly test of support at 1.1370. 

Recommendation: Buy at 1.1590 for 1.1790 with stop below 1.1490.

On the weekly chart, as euro has eased after meeting resistance at 1.1777 last week, suggesting minor consolidation would be seen and pullback to 1.1650 and possibly towards support at 1.1613 cannot be ruled out, however, previous resistance at 1.1583 should limit downside and bring another rise later, above said resistance at 1.1777 would extend gain to 1.1800-10, then 1.1870-80, having said that, near term overbought condition should limit upside to 1.1940-50 and price should falter below 1.2000, risk from there is seen for a retreat later.

On the downside, although pullback to 1.1650 and then 1.1613 is likely, reckon 1.1583 (previous resistance turned support) would contain downside and bring another rise later. Below 1.1490-00 would defer and risk test of the Tenkan-Sen (now at 1.1448)  but a weekly close below there is needed to suggest a temporary top is possibly formed, bring correction to support at 1.1370, break there would provide confirmation and extend weakness towards 1.1312 support. 

The monthly read of CPI suggests a rosier outlook than the official quarterly read, although at 0.1% MoM this too may soften over the coming months. The RBA is in focus tomorrow to see if a fresh round of jawboning ensues.

Inflation data for Q2 was met with some scepticism, although we prefer to look at the brighter side of it. Yes, broad CPI softened and missed expectations yet the trimmed and weighted mean remained steady and hot the consensus. It is these latter CPI reads the RBA takes more notice of and as they have stabilised at record lows it does raise the potential for a base to occur.

Today the Melbourne Institute released their monthly inflation read which estimates CPI to be at 2.7% YoY and 0.1% MoM. This is the third consecutive month below 0.2% which suggests the YoY rate will soften in due course unless the underlying index spikes higher.

Private sector credit increased by 0.5% MoM, its highest level since December which suggests support for growth and inflation. It is making headway after declining to just 0.2% in January, although seasonality is likely at play here.

Early tomorrow AiG release their manufacturing PMIs. Currently at 55, the index sits above the 1yr average and the sector has enjoyed 9 consecutive months of expansion. We will keep an eye on the input costs as this tends to track CPI relatively well. So, a rise of input costs assumes this to be passed onto the consumer and therefor provide cost-push inflation.

Private sector credit increased by 0.5% MoM, its highest level since December which suggests support for growth and inflation. It is making headway after declining to just 0.2% in January, although seasonality is likely at play here.

Early tomorrow AiG release their manufacturing PMIs. Currently at 55, the index sits above the 1yr average and the sector has enjoyed 9 consecutive months of expansion. We will keep an eye on the input costs as this tends to track CPI relatively well. So, a rise of input costs assumes this to be passed onto the consumer and therefor provide cost-push inflation.

GBPAUD remains beneath the monthly S1 and 1.65 resistance zone. The upper wick of Wednesdays' bearish pinbar remains unchallenged, so we are seeking signs of weakness on H1 and H4 to consider a bearish swing trade. If we are to see prices move higher from here we can still consider fading below 1.66. It's possible we may see an ABC correction terminate here before losses resume.

As this is the last trading day of the month the pivots will be recalculated. So we can finetune potential targets from tomorrow, although the 1.62 area is still viable support as it is just above the 30th March low.

Weekly

    •    Last Candlesticks pattern: Marubozu
    •    Time of formation: 14 Nov 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 15 Feb 2017
    •    Trend bias: Down

USD/JPY – 110.65

The greenback did meet renewed selling interest at 112.20 last week (we recommended to sell dollar at 112.00 and a short position was entered) and has fallen again since, adding credence to ur bearish view that decline from 114.50 is still in progress and downside bias remains for this move to extend weakness to 110.00, having said that, as broad outlook remains consolidative, reckon downside would be limited to 109.40 and said support at 108.82 should remain intact.

On the upside, whilst initial recovery to the Tenkan-Sen (now at 111.37) cannot be ruled out, reckon upside would be limited and resistance at 111.71 would hold, bring another decline later. A daily close above said resistance at 111.71 would defer and risk test of 112.20 but break there is needed to signal the aforesaid decline from 114.50 has ended, bring a stronger rebound to 112.85-90 first. 
 

Recommendation : Hold short entered at 112.00 for 110.00 with stop lowered to 111.75.

On the weekly chart, as dollar has remained under pressure after brief bounce to 112.20 last week, adding credence to our view that top has been formed at 114.50 and consolidation with downside bias remains for weakness to 110.00, then 109.40, however, reckon 108.82-84 (previous support as well as current level of the lower Kumo) would limit downside and price should stay well above support at 108.13, bring recovery later.

On the upside, although recovery to 111.10-20 cannot be ruled out, reckon the Tenkan-Sen (now at 111.66) would limit upside and bring another decline later. Only above said resistance at 112.20 would signal the retreat from 114.50 has possibly ended, bring a stronger rebound to 112.42, then towards 113.00, however, reckon upside would be limited to 113.55-60 and price should falter well below said resistance at 114.50. Only a break above 114.50 would signal the rebound from 108.13 is still in progress for gain towards resistance at 115.51 but a weekly close above there is needed to signal the fall from 118.66 top has ended at 108.13, then headway to 116.00-10 would follow but resistance at 117.53 should hold from here.