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The USD/CAD started to drop fast after the BOC governor Poloz announced a possible rate hike . At this point the pair is below W L5 and D H5 that suggest room for a further drop. The POC zone is 1.3065-85 (D H5, ATR high, EMA 89) that stands slightly above 23.6 fib retracement of the swing low that is usually tested in the strong trend. But if the pair proceeds lower below 1.2970 we might expect 1.2950 and 1.2920 in near term. Pay attention to these levels today as it is Friday - a profit taking day.

EUR/USD

Current level - 1.1428

The overall bias is still positive, with a key support at 1.1385. Crucial on the downside is 1.1290 low.

USD/JPY

Current level - 112.25

Yesterday's test of 113.00 area failed and the intraday bias is negative, as the pair is currently testing 111.70 support zone. The latter is crucial for the whole rise from 108.81.

GBP/USD

Current level - 1.3004

AS the pair is approaching 1.3050 resistance, there is a risk of a more significant reversal and trigger on the downside is 1.2950 area. A violation of the latter will signal a broad consolidation pattern towards 1.2830-50 zone.

The pair stays at the back foot on Friday and retests strong support at 111.80, provided by daily cloud top / 100SMA.

The support has already contained dips of past two days and daily cloud (spanned between 111.23/83) is expected to hold pullback after Thursday's strong upside rejection just under next target at 113.05 (Fibo 76.4% of 114.36/108.80 descend), as overall structure is bullish and the pair is on track for the third consecutive bullish weekly close.

Alternative scenario sees increased downside risk on reversal below daily cloud which would expose pivotal supports at 111.11 and 110.86 (26 June low / daily Kijun-sen) loss of which will generate stronger bearish signal.

Res: 112.17, 112.46, 112.92, 113.05
Sup: 111.80, 111.46, 111.23, 110.86

USD/CHF –  0.9583

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

 
The greenback has dropped after meeting renewed selling interest at 0.9757, suggesting the decline from 1,9344 top is still in progress and downside risk remains for further weakness to previous support at 0.9444 (2016 low), however, a sustained breach below this level is needed to retain bearishness and extend further decline to 0.9390-00, then towards 0.9350, however, as broad outlook remains consolidative, reckon downside would be limited to 0.9300 and previous support at 0.9259 should remain intact, 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, whilst recovery to 0.9600 cannot be ruled out, reckon upside would be limited to 0.9647 and price should falter below previous support at 0.9676, bring another decline later. Only a daily close above 0.9676 would defer and suggest a temporary low is possibly formed, bring a stronger rebound to 0.9710-20 and possibly test of resistance at 0.9738 but price should falter below indicated resistance at 0.9757, bring another selloff later.
 
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.

EUR/JPY - 127.62




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 rallied 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 129.00 (61.8% Fibonacci retracement of 141.06-109.49), then towards 129.50, however, near term overbought condition should prevent sharp move beyond 130.00, 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 127.30 cannot be ruled out, reckon support at 126.49 would contain downside and bring another upmove to aforesaid upside targets. Only a drop below said previous resistance at 125.82 (now support) would defer and suggest top is possibly formed, 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 128.50 with stop below 125.50.

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.

GBP/USD – 1.2981

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 down

Original strategy :

Buy at 1.2870, Target: 1.3020, Stop: 1.2810

Position: -
Target:  -
Stop: -

New strategy :

Buy at 1.2870, Target: 1.3020, Stop: 1.2810

Position: -
Target:  -
Stop:-

Although sterling edged higher to 1.3030 earlier today, as cable has retreated after faltering below recent high at 1.3048, suggesting consolidation below this level would be seen and pullback to support at 1.2916 cannot be ruled out, however, reckon previous resistance at 1.2861 would turn into support and limit cable’s downside, bring another rise later, above said resistance at 1.3030 would extend the rise from 1.2589 low towards recent high at 1.3048 but break there is needed to retain bullishness and bring subsequent headway towards 1.3090-00. 

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 downside, whilst initial pullback to 1.2900-10 is likely, reckon 1.2861 (previous resistance turned support) and bring such a rise. Below support at 1.2794 would abort and signal top is formed instead, risk further fall to 1.2750, then towards 1.2706 support.

GBP/JPY - 145.30

Recent wave: Medium term low formed at 120.50 and (A)-(B)-(C) major correction has commenced with (A) leg ended at 148.45, hence wave (B) is unfolding for retreat to 131.00-10.

Trend: Near term down

Original strategy:

Buy at 144.30, Target: 146.30, Stop: 143.70e

Position: -
Target: -
Stop: -

New strategy :

Buy at 144.30, Target: 146.30, Stop: 143.70

Position: -
Target:  -
Stop:-

Sterling’s retreat after rising to 146.50 yesterday has retained our view that minor consolidation below this level would be seen and pullback to 145.00 is likely, however, reckon previous resistance at 144.20 would turn into support and limit downside, bring another rise later, above said resistance at 146.50 would extend the erratic rise from 138.70 low to 147.10 (previous resistance) but price should falter below recent high at 148.10.

In view of this, would not chase this rise here and we are looking to buy sterling on subsequent pullback as previous resistance at 144.20 should limit downside and bring another rise. Below 143.90-00 would defer but only break of support at 143.30 would signal top is formed instead, bring correction to 142.90-00. 

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.


Daily Pivots: (S1) 145.12; (P) 145.82; (R1) 146.56; More....

A temporary top is in place at 146.52 in GBP/JPY and intraday bias is turned neutral for consolidations. But downside should be contained above 142.53 resistance turned support to bring another rise. Above 146.52 will extend the rally from 138.65 and target 148.09/42 resistance zone. Decisive break there will resume whole rebound from 122.36 for key fibonacci level at 150.43.

In the bigger picture, price actions from 148.42 are viewed as a consolidative pattern. And medium term rally from 122.36 is expected to resume later. Decisive break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case of another fall, we'd bee looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.

Daily Pivots: (S1) 127.73; (P) 128.27; (R1) 128.85; More...

A temporary top is in place at 128.82 in EUR/JPY and intraday bias is turned neutral for consolidation. Downside of retreat should be contained by 125.80 resistance turned support to bring another rally. Above 128.82 will target 61.8% projection of 114.84 to 125.80 from 122.39 at 129.16 first next. That's also close to medium term projection level at 129.89.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 should target 100% projection of 109.03 to 124.08 from 114.84 at 129.89 first. Break there will pave the way to 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will now remain bullish as long as 122.39 support holds.

Daily Pivots: (S1) 1.4853; (P) 1.4890; (R1) 1.4925; More...

A temporary top is in place at 1.4997 and intraday bias is turned neutral. Break of 1.4813 will argue that rebound from 1.4625 has completed and will turn bias back to the downside for this support. On the upside, above 1.4997 will target a test on 1.5226 high next.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed at 1.3624 after defending 1.3671 key support. Rise from 1.3642 would extend to 61.8% retracement of 1.6587 to 1.3624 at 1.5455. Sustained break there will pave the way to retest 1.6587. However, sustained break of 1.4669 support will dampen this bullish view. We'll assess the outlook later after looking at the structure and depth of the pull back.