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WTI oil remains firmly in red for the third straight day and approaches support at $44.05 (Fibo 61.8% retracement of $42.04/$47.30 recovery rally).

Fresh bears found temporary footstep at $44.19 (4-hr cloud base) but strong bearish structure on all timeframes sees risk of further weakness

Oil price was sharply down in early Friday as strong concerns about global oversupply continue to heavily weigh on overall sentiment and offset positive impact from upbeat US crude stocks data, which showed much stronger than expected draw in crude inventories last week. (crude stocks fell 6.3 million barrels, beating forecast for 2.4 million barrels draw).

Close below $44.05 pivot would generate strong bearish signal for further weakness towards targets at $43.28 (Fibo 76.4%) and $43.62/52 (26/23 June lows), with final push towards key support at $42.04 (21 June low) not ruled out.

Broken 20SMA marks initial resistance at $44.71, followed by top of 4-hr cloud at $45.00 and broken 10SMA at $45.14.

Res: 44.71, 45.00, 45.14, 45.40
Sup: 44.19, 44.05, 43.66, 43.28

NFP will grab attention today

The opening of the G20 meeting today will most likely be completely sidelined by financials since, as usual, no key decision will be taken there. Maybe we'll get some action should Donald Trump make another incredible declaration that only he knows how to make. The key event this Friday is the June US jobs report which is due for release at GMT 12:30. After disappointing substantially last month as it printed at 138k versus 182k median forecast, June's non-farm payrolls are expected to come in at 178k.

However, the fact that the continuous improvement of the past months in the job market has failed to translate into sustained wage pressure has considerably diminished investors' interest for this data. Average hourly earnings are expected to have risen 2.6% y/y last month, compared to 2.5% in May. Finally, the unemployment and participation rate should remain stable at 4.3% and 62.7% respectively.

EUR/USD inched up 0.75% yesterday and is on its way to test the 1.1445 resistance from June 30th. We remain constructive on the euro as we anticipate the ECB is finally on its way to start talking - even cautiously - about reducing its support to the economy, while the Federal Reserve will likely be forced to slow down its tightening pace against the backdrop of weakening inflationary pressure.

G20: What to expect?

The G20 meeting is always a good occasion to get economic and geopolitical visions of world leaders regarding key topics such as the global recovery. Today and tomorrow, the leaders will meet in Hamburg. It will be very interesting to see the first time Donald Trump and Vladimir Putin will ever meet in person.

We expect to see what will be the nature of Trump's message and in particular the nature of global relations in the future, especially relations between Russia and the US. Other important topics such as the migrant crisis or the climate should be discussed but this won't likely have any impact on markets. We recall that Trump exited the Paris Climate Agreement and further negotiations on climate should at some point take place.

For the time being, stocks are sliding lower and we believe that markets will remain stable today waiting for further developments. Declarations about the global economic recovery and estimation of the potential risks that are threatening growth are definitely important. Markets are calm in the beginning of the summer and this G20 may disrupt it.

Global yields rally

Markets have hit a reflection point on central banks' reflation trade. Perhaps reflation is not the correct term since policy makers are not waiting for inflation to reach satisfactory levels but rather are using the solid economic outlook to unwind extreme policy measures.

Market movements for most of the summer have been lacking historical recognisable patterns. However this week, particularly, behaviour is starting to exhibit identifiable trends. Bond yields are rising globally, driving FX and equity markets (slow motion taper tantrum). Traders are slowly liquidating low yielding G10 and high beta EM currencies. So far the move has been orderly, however, it's easy to see how the rotation could change to disorderly.

The BoJ were forced to intervene as 10yr JGBs hit the upper threshold of curve control strategy at 10bp. The Japanese central banks offered unlimited quantity of 10yr JGB at 11bps. The decisive move highlights the BoJ's commitment to achieve its 2% inflation target and pinning the rate curve long-end.

Investors are now convinced that for a majority of G10 central banks, the next move will be tightening. It may be represented by subtle shifts in language that removed the probability of lower interest rates or additional asset purchased but comments can have tightening effects.

Speculations of the ECB exit has weighed on German equity markets despite Draghi's efforts to backtrack from original statements. Despite the summer heat, traders should be wary that a shift in monetary policy regime generally have extreme consequences in financial markets. As yield differentials widen, watch for carry heavy positions to unwind while in-stock interest rate sensitive sectors such as real estate and construction will come under selling pressure.

Cable came under pressure after UK Industrial, Construction and Manufacturing output unexpectedly fell in May.

Industrial production was at -0.1% in May vs 0.4% forecast, Construction output fell 1.2% against forecast rise by 0.7%, while Manufacturing output numbers showed decline of 0.% in May, below forecasted increase of 0.5%.

Cable erased gains from Thursday on fall back to 1.2912 and pressuring again daily cloud top support (1.2906), break of which would generate fresh bearish signal.

Res: 1.2974, 1.2983, 1.3000, 1.3029
Sup: 1.2906, 1.2893, 1.2872, 1.2861

Due to a rebound that occurred on Friday morning, the borders of the previously discovered ascending channel pattern on the hourly chart of the yellow metal can be adjusted. It can be observed that the metal’s price might after all reach above the 1,230 mark. However, on its way the bullion is set to face the resistance put up by the 55 and 100-hour SMAs, which are located just below and above the 1,225 mark. By examining the course of the SMAs, it can be seen that both of them will meet with the commodity price at the 1,225 mark. If their combined resistance is passed, then the 1,230 level becomes a target. Meanwhile, if the SMAs force the rate lower, a far down to the 1,220 level would be most likely, as until next week the lower trend line of the ascending channel is not reaching above that level.

On Thursday, USD/JPY failed to form a distinctive trend either direction, thus remaining in the 112.90/113.44 range the whole trading session and being supported by the 100-hour SMA. Nevertheless, the stillness of the market was disrupted by a sudden 49-pip surge early on Friday. The given move shifted tremendously indicator readings that became strongly bullish. It is expected that the given upward momentum might maintain for several hours; however, the monthly R1 at 113.90 could resist any attempts to move the rate north. The base scenario favours the US Dollar appreciating against the Yen in short term, but reversing somewhere near the two-month high at 114.34.

The Pound appreciated against the US Dollar on Thursday, reaching the 1.2974 mark late in the evening. The pair found support at the weekly PP and the 55-hour SMA, while minor resistance was met at the 100-hour SMA. Friday’s morning session started with weak volatility prior to the pair gaining momentum to the downside. In the short term, the pair may be pushed south, testing a resistance cluster formed by the 100– and 55-hour SMAs. However, technical indicators favour further appreciation that may consequently confirm an up-trend. Thus, a possible trading range in this session may be 1.2940/1.3030, regarding as very likely an attempt to approach the upper limit. Meanwhile, a breakout of the aforementioned support cluster could lead to a test of the 1.2920 area.

EUR/JPY - 129.80




EUR/JPY: Wave v as well as larger degree wave (C) ended at 94.11 and first leg of larger degree wave C upmove has possibly ended at 149.79 and wave 2 correction has possibly ended at 109.49.




As the single currency has continued trading with a firm undertone after breaking previous resistance at 125.82, adding credence to our bullish view that recent upmove is still in progress and upside bias remains for medium term uptrend to extend further gain to 130.00, then towards 130.90-10, however, near term overbought condition should prevent sharp move beyond 132.00 and price should falter below 132.90-00 (1.236 times projection of 109.49-124.10 measuring from 114.85), risk from there has increased for a retreat to take place later.

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 downside, although initial pullback to 129.00-10 and 128.00 cannot be ruled out, reckon 127.40-45 would limit downside and bring another rise to aforesaid upside targets. Only a drop below support at 126.49 would suggest top is possibly formed, bring test of previous resistance at 125.82 (now support), a sustained breach below this level would add credence to this view, bring correction to 125.15-20 but previous resistance at 124.65 would hold, bring another upmove later. In the unlikely event, euro drops below 124.65 on a daily basis, this would signal a temporary top is formed instead, then further fall to 124.00 and later towards support at 123.66 would follow.



Recommendation: Buy at 126.50 for 130.00 with stop below 125.50.

Remark: Due to holidays, update will resume on 19 July 2017

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.

USD/CHF –  0.9619

 
USD/CHF – Wave IV ended at 1.1730 and wave V has possibly ended at 0.7068

 
The greenback found support at 0.9552 last week and has rebounded, suggesting minor consolidation above this level would be seen and above 0.9700 would bring recovery towards resistance at 0.9771, however, reckon resistance at 0.9808 would attract renewed buying interest and bring another decline later. Below said support at 0.9552 would signal the decline from 1.0344 top has resumed and may extend weakness to 0.9500 but loss of downward momentum should prevent sharp fall below previous support at 0.9444 (2016 low) and reckon 0.9390-00 would hold, bring rebound later. 

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 upside, above 0.9700 would bring a stronger recovery to 0.9771 but reckon upside would be limited to resistance at 0.9808, bring another decline later. A daily close above 0.9808 would suggest a temporary low has been formed, bring retracement of recent decline to 0.9850-60 and later towards 0.9900-10 but price should falter well below 1.0000 psychological level. 
 
Recommendation: Stand aside for this week.

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.

On Friday morning the common European currency traded above the 1.14 mark against the US Dollar. The reason for that was the fact that instead of bouncing off the upper trend line of the short term pattern the currency exchange rate broke through the trend line. From a technical perspective it was done by the support of the 55 and 200-hour SMAs together with the weekly PP near the 1.1350 mark. However, the pair continued to surge until midnight. Due to that reason the fundamentals need to be examined. At 11:30 GMT on Thursday the ECB meeting accounts were published. It is most likely that in the minds of the market participants the rhetoric of the ECB officials has caused the strengthening of the Euro. Due to that reason once can expect the pair to reach for the 1.15 mark soon.

Fresh strength on Friday eventually broke above 113.50 resistance zone, signaling bullish continuation.

The pair was congested within narrow consolidation in past three days, signaling strong indecision on triple Doji candles.

Firmly bullish studies on daily chart support the price for attempts through 114.00 barrier towards targets at 114.36 (10 May peak) and 114.65 (Fibo 61.8% of 118.65/108.16 descend).

Rising 10SMA continues to track broader advance, offering strong support at 112.80.

US jobs data are eyed for further signals, with acceleration through 114.36/65 targets expected on upbeat results and return towards 112.00/111.80 supports on NFP miss scenario.

Res: 114.00, 114.36, 114.65, 115.00
Sup: 113.54, 113.10, 112.80, 112.65