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USDCAD is making a sharp decline for the last few weeks, currently trading south within red wave v), which we now see it as the final piece of an extended blue wave three. If that is the case, then current drop can now face some limited downside near the Fibonacci ratio of 261.8%, so be aware of a new three wave recovery this week. Ideally we will see blue wave iv pullback unfold to the area of a former wave four, up to 1.2940 resistance.

USDCAD, 4H

The Aussie dollar is holding firm tone and consolidating above 0.7900 handle on Wednesday, following strong rally the day before, inspired by hawkish RBA minutes.

Stretched third wave from 0.7571 trough extended above its FE 200% at 0.7933 but gains were so far limited at 0.7946 (today's marginally higher high/the highest since mid-May 2015).

The pair may extend lower as RSI/slow stochastic are strongly overbought on daily chart, with dips expected to find solid supports at 0.7850/00 zone (hourly cloud base / Fibo 38.2% of 0.7572/0.7946 upleg), before bulls resume towards target at 0.8000.

Australian jobs data, due on Thursday, are in focus. Unemployment is expected to tick higher to 5.6% in June from 5.5% in May, while the number of employed in June is expected to increase by 15K which is well below previous month's increase by 42K.

Res: 0.7946, 0.8000, 0.8044, 0.8114
Sup: 0.7908, 0.7889, 0.7850, 0.7800

Spot Goldis consolidating after strong three-day rally that peaked at $1244 on Tuesday but maintaining firm near-term tone.

Monday's close above double-Fibonacci barrier at $1239 has generated strong bullish signal for further advance.

Cracked daily Kijun-sen ($1242) is capping for now, with extended consolidation on overbought slow stochastic on daily chart, seen as likely near-term scenario.

Rising thick hourly cloud (spanned between $1235/30) underpins the action and should contain extended corrective dips, before fresh upside action (cloud base is reinforced by 200SMA).

Immediate targets lay at $1246/47 (converged 55/100SMA's), followed by $1250 (50% retracement of $1296/$1204 descend) and daily cloud base ($1255).

Only return below $1230 pivot would sideline near-term bulls and signal stronger easing.

Res: 1244, 1246, 1247, 1250
Sup: 1235, 1230, 1225, 1220

EUR/USD – 1.1527

EUR/USD:   Wave (c) of 2 ended at 1.3993 and wave 3 of III has commenced for weakness to 1.0411 (1.236 of wave 1), then 1.0000.

The single currency has surged again after brief pullback to 1.1370 last week, adding credence to our bullish view that the upmove from 1.0340 low is still in progress and indicated upside targets at 1.1480-85 (50% projection of 1.0570-1.1296 measuring from 1.11190) and 1.1565-70 (61.8% projection) had been met, upside bias remains for this move to extend headway to previous chart resistance at 1.1616, then 1.1660, however, reckon another previous resistance at 1.1714 would hold on first testing due to near term overbought condition and price should falter below 1.1800-10, risk from there is seen for a retreat later.

Our preferred count on the daily chart remains that a wave (II) from 1.2329 ended at 1.5145 with A-leg ended at 1.4720, followed by wave B at 1.2457, the wave C from there was also a 3 legged move and is labeled as (a): 1.3739, (b): 1.2885, the wave iii of the 5-waver (c) from 1.2885 has ended at 1.4339 and wave iv is a triangle ended at 1.3878 and wave v formed a top at 1.5145. The decline from there is a 5-waver (C) with minor wave (i) of I of (C) ended at 1.4218 with wave (ii) ended at 1.4580, wave (iii) ended at 1.3267 and wave (iv) ended at 1.3692 and wave (v) ended at 1.1876, this is also the low of wave I of (C) and wave II ended at 1.4940, hence wave III is now in progress with a diagonal wave 1 ended at 1.2042, the breach of previous support at 1.1876 (wave I trough) adds credence to our view that the wave 2 has ended at 1.3993, wave 3 has commenced for further weakness to 1.0411, then towards 1.0000.

On the downside, whilst initial pullback 1.1475-80 is likely, reckon downside would be limited to 1.1435 minor support and bring another rise later. Below 1.1435 would defer and bring test of said support at 1.1370 (last week’s low) but only break there would signal a temporary top is formed instead, bring correction to 1.1312 support, however, downside should be limited to 1.1250 and price should stay well above support at 1.1109-19, then euro shall head north again.

Recommendation: Stand aside for this week

Euro's long-term uptrend started from 0.8228 (26 Oct 2000) with an impulsive structure. The rise from 0.8228 to 0.9593 (5 Jan 2001) is labeled as wave I, the retreat to 0.8352 (6 Jul 2001) is wave II and the rally to 1.3670 (31 Dec 2004) is wave III. Wave IV from there ended at 1.1640 (15 Nov 2005), the subsequent upmove to 1.6040 (July 15, 2008) is treated as wave V, the major selloff from the record high of 1.6040 to 1.2329 (October 27, 2008) signals a reversal has taken place with (I) leg ended at 1.2329 and once (II) ended at 1.5145, wave (III) itself is an extended move with I: 1.1876 and complex wave II ended at 1.4902, wave III has commenced with wave 1 and 2 ended at 1.2042 and 1.3993 respectively, wave 3 of III is now unfolding for weakness towards parity.

USD/JPY - 112.05

USD/JPY – Wave V of larger degree circle V has possibly ended at 75.31 and major correction has commenced and already met indicated target at 125.00.

Although the greenback extended gain to 114.50 earlier this month, lack of follow through buying on break of previous resistance at 114.39 and the subsequent retreat suggest the entire corrective rebound from 108.13 has possibly ended there (tentatively wave b top), hence consolidation with downside bias is seen for the retreat from 114.50 to extend weakness to 111.45-50, then 110.95-00, however, reckon downside would be limited to 110.60-65 and price should hold above 110.00. Only break of support at 108.82 would provide confirmation and signal wave c has commenced for retest of 108.13 first.

Our preferred count is that, triangle wave IV (with circle) ended at 101.45 and the circle wave V brought dollar down to the record low of 75.31 in 2011 and the subsequent rebound signal major correction has commenced with A leg ended at 84.19, followed by wave B at 77.14 and impulsive wave C is now unfolding (indicated upside target at 125.00 had been met) for gain towards 127.00 level. In the event dollar drops below support at 99.01, this would confirm medium term decline from 125.86 top (2015 high) has resumed for subsequent weakness to 98.00 and possibly 97.00.

Under this count, this wave C is unfolding as impulsive waves with (1) (2), 1 2 ended at 80.67, 79.07, 82.84 and 81.69 respectively, hence the extended wave 3 has ended at 103.74 and wave 4 correction of recent upmove should bring weakness to 92.57, then towards 90.88 but psychological support at 90.00 should limit downside and bring another rally later in wave 5, indicated target at 125.00 had been met and gain to 127.00 cannot be ruled out but reckon price would falter below 130.00.

On the upside, whilst initial recovery to 112.65-70 is likely, reckon 113.40-50 would limit upside and bring another decline later to aforesaid downside targets. Above 113.55-60 would bring another bounce to 114.00, then test of said resistance at 114.50 but only break there would extend the corrective rise from 108.13 to 114.90-00, then towards previous resistance at 115.51 which is likely to hold on first testing.

Recommendation: Sell at 113.50 for 111.50 with stop above 114.50.

On the monthly chart, we have changed our preferred count that an impulsive wave is unfolding with major wave III with circle ended at 79.75, then followed by wave IV with circle and is labeled as a triangle with A: 147.64 (11 August, 1998), B: 101.25, C: 135.20, D: 101.67 and E leg ended at 124.14 to end the wave IV with circle. Hence, wave V with circle commenced from there and hit a record low of 75.31, however, the subsequent strong rebound signals this circle wave V has possibly ended there, hence gain to (indicated upside target at 122.00 and 125.00 had been met), the retreat from 125.86 suggests wave A of major correction has ended there and wave B correction back to 99.00, then 95.00 would be seen, however, reckon downside would be limited to 90.00, bring another rebound in wave C next year.

Heading into BoJ meeting short JPY

While other major central banks have shifted bias toward tighten we don't anticipate that the BoJ will follow. Despite political pressure and questions over the effectiveness of unorthodox policy, the BoJ should reiterated its currently monetary policy strategy at its two-day monetary policy meeting. Japan remains far from its inflation target of 2% and is likely to lower its CPI forecast for 17-2018, therefore immediate pressure to change approach is lower than other nations. However, the BoJ has already shifting its focus from JGB purchases, already slowing from ¥80trn per year as member recognizing reaching quantitative limits, to yield curve control. While this strategy is likely to have a less direct effect on domestic inflation (although balance sheet expansion in Japan failed to impress), yields curve management enable BoJ to widen interest rate spread and easily influence the highly interest rate sensitive JPY. BoJ comments should be focused on their ability to control the curve including but not limited to pinning the 10yr JGB yields at 0%.

Markets might be discussing potential of Kuroda's exiting from its ultra-accommodative policy we won't see any hints at this meeting. Interestingly to policy board members that consistently resisted Kuroda expansionist policy were Takahide Kiuchi and Takehiro Sato are both leaving after this monetary policy meeting.

With the Fed preparing to shrink its balance sheet and the ECB expected to contemplate asset purchase tapering, both subtle ways of tightening. Yields curves in US and European should steepen further. We are slightly optimistic that the Fed will hike rates by 25bp in Dec, yet markets in the last weeks have backed away from this hawkish view. Only 40bp are pricing in to the Fed Fund rate down from 55bp only a week ago, while US 10yr yields dropped 13bp to 2.26%. A repricing of tighter rates in the US should pushed USDJPY back towards 114. BoJ steadfast in their dovish ways while the Fed and ECB marching toward the exit should reverse current JPY strength. We would reload long USDJPY at 111.80/90 level for a mid-term move towards 114.49.

Russia: Unemployment declines but the economic situation looks mixed

Since the 2008 crisis, unemployment rate is declining and the data that will be released today will approach 5%. The metric is expected to print lower at 5.1% versus 5.2% a month earlier.

The jobless rate is then declining but the proportion of unemployed person having higher education is growing. Yet, the ruble collapse in 2014 has created strong difficulties for companies to hire those skilled workers. On top of that it is clear that there are now more people with higher education than 10 years ago. As a result the proportion is naturally growing.

Meanwhile, real disposable income is falling for the 4th consecutive month (-0.4% in June). On the other hand, retail sales have grown 1.1% y/y in June after the positive increase of 0.1% y/y in May. However, that was at least three years that the annualized retail sales growth was negative. Inflation have increased by 4.4% y/y in June. It is the highest rate since February.

The Russia key rate has been lowered at 9%. The differential with inflation is still important and we should see the CBR tightening its monetary policy at a slow pace as growth remains weak. The last GDP data, the Q1 has shown a positive print, even though weak, at 0.5%.

We then believe that the ruble is set to appreciate but the appreciation should remain limited due to the CBR intervention. We target 56 before year-end.

The DAX index is unchanged in the Wednesday session. With no major events on the schedule, we can expect investors to concentrate on earnings news, so it could continue to be a quiet day for the DAX. Currently, the DAX is trading at 12,430.00, unchanged on the day. On Thursday, the ECB will release its monthly rate statement.

The Trump administration continues to flounder, as a key plank in Trump's agenda appears dead in the water. Trump's proposed health care bill, which replaces much of Obamacare, has stalled in the Senate before lawmakers even voted on the bill. With some conservative Republicans against the bill, it's questionable if the Republicans can craft a new proposal which could be passed before Congress takes a recess in August. Trump had promised to pass a health care before the summer break, so his credibility will take another hit if he's unable to do so. With this latest defeat, there is growing skepticism as to whether Trump will be able to convince Congress to pass other key parts of his agenda – tax reform and fiscal spending. The Republicans also have egg on their faces, as they have been unable to pass any significant legislation since Trump took over, despite having control of both houses of Congress and the White House. This paralysis on Capitol Hill has deepened investor pessimism about the Trump administration and has hurt the US dollar.

Investors are keeping a close on the ECB, which holds its policy meeting on Thursday. What can we expect from Mario Draghi & Co.? The bank is unlikely to make any changes to its asset-purchase program (QE). With the eurozone showing improvement in 2017, there has been speculation that the bank might taper QE or change the expected end of the scheme, which is December of this year. The ECB makes every attempt to avoid shaking up the markets, but this policy doesn't always work. Case in point – at the ECB forum in June, upbeat comments by ECB President Mario Draghi about tweaking QE led to a sharp rally by the euro. If the eurozone economy continues to show strong numbers, we could see the ECB make some adjustments in its September meeting. In December 2016, the bank tapered QE while extending the scheme until December, and this type of scenario could be adopted once again. Analysts will be combing through the July statement, as well as Draghi's press conference, looking for any nuances to tweaks which could hint at substantive changes to come in September.

GBP/USD – 1.3040



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 :



Bought at 1.2835, met target at 1.3000



Position: - Long at 1.2835


Target:  - 1.3000


Stop: -




New strategy :



Sell at 1.3080, Target: 1.2880, Stop: 1.3140



Position: -


Target:  -


Stop:-




Although cable resumed recent rise as suggested in our previous update (we recommended to buy at 1.2835 and a long position was entered, indicated upside target at 1.3000 was met as well with 165 points profit) and rose to as high as 1.3126 yesterday, lack of follow through buying and the subsequent retreat suggest top is possibly formed and consolidation below this level is seen with mild downside bias for test of 1.3000-05, however, break there is needed to add credence to this view, bring retracement of recent rise to 1.2950, then towards 1.2870-80, however, reckon support at 1.2812 would remain intact, bring rebound 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. 



On the upside, whilst recovery to 1.3080-90 cannot be ruled out, price should falter below said resistance at 1.3126 and bring another retreat later. Break there would signal recent upmove is still in progress and may extend headway to 1.3150, then towards 1.3190-00 but loss of upward momentum should limit upside to 1.3250, bring another retreat later.

As it was expected the common European currency extended its gains against the US Dollar until the middle of Tuesday's trading session. However, it was also expected that a reversal of the direction of the rate could take place, and that occurred in the second half of the day's trading. The change in direction happened due to the pair encountering the resistance of a massive scale descending channel pattern in the range from 1.1550 to 1.16. It is most likely that the pair will soon make another attempt at the resistance and begin a medium length period of fluctuations around it. Although, in regards to today's trading session, the Euro is likely going to retreat down to the combined support cluster of the weekly R1 and the 55-hour SMA below the 1.1520 mark. Afterwards a rebound could occur.

Tuesday's session started with the Pound appreciating substantially against the US Dollar, which resulted in the rate reaching the upper channel boundary. However, weak data from the UK set the Pound for a free fall down to the 1.3020 mark, thus erasing all morning gains. The British currency bounced off the weekly PP at 1.3009, but failed not recover, thus remaining stranded between the 55– and 100-hour SMAs until the point of writing. The market may be relatively calm and therefore remain in this range prior to US data release at 1230GMT after which some changes should occur. Gains could be capped at the upper channel boundary, while losses should be limited by the 200-hour SMA circa 1.2940. In case the given data disappoint, the rate might remain below the 100-hour SMA for the whole session.