Sample Category Title

EUR/USD - 1.1143

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1142

Kijun-Sen level                  : 1.1138

Ichimoku cloud top             : 1.1174

Ichimoku cloud bottom      : 1.1158

Original strategy  :

Sell at 1.1175, Target: 1.1085, Stop: 1.1210

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1185, Target: 1.1085, Stop: 1.1220

Position : -

Target :  -

Stop : -

Yesterday’s breach of previous support at 1.1132 confirms recent decline has resumed and bearishness remains for further weakness to previous support at 1.1109, however, break there is needed to retain our bearish view and extend subsequent selloff to 1.1075-80 but loss of near term downward momentum should prevent sharp fall below 1.1050, risk from there is seen for a rebound later.

In view of this, we are looking to sell euro on recovery as 1.1175-80 should limit upside. Only above 1.1213 resistance would defer and risk a stronger rebound to 1.1230-35 but upside should be limited to 1.1260-70, bring another decline later.

USD/JPY - 111.59

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 111.50

Kijun-Sen level                  : 111.41

Ichimoku cloud top             : 111.45

Ichimoku cloud bottom      : 111.22

Original strategy  :

Buy at 110.65, Target: 111.65, Stop: 110.30

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 110.65, Target: 111.65, Stop: 110.30

Position :  -

Target :  -

Stop : -

Although the greenback has rebounded after finding support at 111.07 and test of yesterday’s high at 111.79 is likely, break there is needed to confirm the rise from 108.82 low has resumed and may extend headway to 111.90-95 (50% projection of 108.82-111.42-110.65) but upside should be limited to resistance at 112.13 and 112.25 (61.8% Fibonacci retracement of 114.37-108.82 and 61.8% projection) should hold from here. If said resistance continues to hold, then another retreat to 111.07 cannot be ruled out but 110.65 (previous support as well as 38.2% Fibonacci retracement of 108.82-111.79) would limit downside and bring another rise later.

In view of this, would not chase this rise here and we are looking to buy dollar on pullback as 110.65 support should limit downside. Below 110.30-35 (50% Fibonacci retracement of 108.82-111.79 and previous resistance turned support) would abort and signal a temporary top has been formed instead, risk weakness towards 109.95-00 (61.8% Fibonacci retracement).

The British pound has stabilized and posted slight gains in the Wednesday session. In North American trade, GBP/USD is trading at 1.2660. On the release front, the UK deficit narrowed to GBP 6.0 billion, better than the forecast of GBP 7.3 billion. The BoE's chief economist, Andy Haldane, made headlines when he said he supports raising rates later this year. In the US, Existing Home Sales improved to 5.62 million, beating the estimate of 5.54 million. On Thursday, the US releases unemployment claims.

There were more developments out of the BoE, as policymakers continue to make public statements as to whether the BoE should raise interest rates or not. On Wednesday, MPC member Andy Haldane said that the bank might need to raise interest rates soon, in order to ward off inflation. Haldane noted that the British economy continues to grow and the labor market remains strong. Haldane was not one of three MPC members who voted for a rate hike last week. The markets misread the amount of support for a hike, predicting that the vote to hold rates would be 8-1. Haldane said that he had voted with the majority due to concerns over the recent election and weak wage growth.

BoE Governor Carney was unusually blunt in a speech in London on Tuesday, when addressing interest rate policy. Carney poured cold water on raising interest rates, saying that "now is not yet the time to begin that adjustment". The pound reacted sharply to Carney's comments, losing 0.91% in the Tuesday session. With the economy having weathered the Brexit storm quite well, there have been calls for the BoE to raise rates, which hasn't happened in over a decade. The pressure was ratcheted higher last week, when three of nine MPC members voted to raise rates. Clearly, Carney felt the need to act and resist the calls for higher rates. The cautious Carney noted that consumer spending had dropped, and that more time was needed to evaluate how the economy reacted to the "reality of Brexit negotiations". Carney finds himself in a corner, as he is dead set against hiking rates, but the weak pound has pushed inflation to unhealthy levels, as CPI rose 2.9% in May. If Carney holds back on any rate increases, inflation could continue to climb.

In another relatively quiet European session in terms of economic releases and in similar fashion to yesterday, forex market participants mainly reacted to comments by central banking figures, namely the hawkish remarks by a Bank of England policymaker which helped the pound bounce higher. In terms of the few releases during the day, those that attracted most attention were existing home sales data and the Energy Information Administration's weekly report on crude stockpiles out of the US.

Sterling received a significant boost today after Andy Haldane, a Bank of England Monetary Policy Committee member, said he expected to support an interest rate rise in the second half of the year. Haldane's comments stand in contrast to BoE Governor Carney's dovish speech yesterday and are more significant in sight of the fact that he has generally been perceived as adopting a dovish approach. The pound surged on the news relative to the dollar and the euro and looks set to finish the day higher, recovering a significant portion of yesterday's losses versus the two currencies. At its highest pound/dollar exceeded the 1.27 handle, while earlier in the day it fell to a fresh two-month low of 1.2588. Euro/pound was last eyeing the 0.88 mark. The pair opened at 0.8816.

In other UK-related news, it is important to note that ahead of Brexit negotiations Prime Minister Theresa May has yet to secure a functioning parliamentary coalition with Northern Ireland's Democratic Unionist Party (DUP). If May's Conservative party and the DUP fail to strike a deal, this is likely to create additional political uncertainty and consequently volatility for the pound.

Turning to today's economic releases, US existing home sales for the month of May surprised to the upside by growing by 1.1% relative to the previous month to reach 5.62 million units. The figure represents the third highest monthly level in a decade. Expectations were for a decline by 0.5%, while the figure favorably compares to April's 2.5% fall as well. House inventory shortages led to the median home price rising to the all-time high of $252,800 during the month. Indicative of the high demand is the fact that homes were on the market for the shortest amount of time (27 days) since the National Association of Realtors began collecting such data in 2011. Dollar/yen posted some minor gains as the data hit the markets. Those were short-lived though.

Looking at the dollar index which gauges the greenback against the currencies of six major US trade partners, it was last close to where it started the day at 97.73, in proximity to yesterday's one-month high of 97.87. Dollar/yen was last slightly up on the day at 111.59. Against the euro, the greenback was slightly down with euro/dollar trading at 1.1143 during afternoon European trading hours.

The Canadian dollar is suffering on the back of oil falling to multi-month lows, as Canada is a major oil exporter. Dollar/loonie is rising for the third straight day while it climbed above the 1.33 handle today. Last week it fell to the near four-month low of 1.3164.

Concluding with commodities, gold was last near the day's open of $1242.59 an ounce. Should it finish the day lower, it would constitute the sixth consecutive day of declines for the precious metal. Turning to the Energy Information Administration's (EIA) weekly report on crude oil inventories, it showed US stockpiles declining by 2.45 million barrels, more than the expected decline of 2.11m. As a result, WTI oil rose steeply. It was last trading at $43.64 a barrel, up three-tenths of a percent on the day. Brent crude was last up one-tenth of a percent, at $46.08 per barrel.

It has been an uneventful week for USD/JPY, which has posted small gains in the Wednesday session. In North American trade, the pair is trading at 111.70. On the release front, Japanese All Industries Activity posted a strong gain of 2.1%, its sharpest gain since June 2011. In the US, Existing Home Sales improved to 5.62 million, beating the estimate of 5.54 million. Crude Oil Inventories posted a sharp drawdown of 2.5 million, larger than the estimate of -1.2 million. On Thursday, the US releases unemployment claims.

The BoJ released the minutes of its April meeting on Wednesday. Policymakers said that under the bank's asset-purchase program, the amount of government debt purchases would fluctuate, but this did not pose a problem. The minutes also noted that members were optimistic about exports and industrial production. Although the economy has been boosted by stronger global demand, BoJ Governor Haruhiko Kuroda has insisted that the bank's ultra-loose policy would continue until inflation has reached the 2% target. Although the bank shows no signs of exiting its quantitative easing scheme, the BoJ has reduced its purchase of bonds. If this continues, bond purchases could slow to JPY 60 billion/year, down from the current 80 billion/year. The IMF is closely monitoring the BOJ's monetary policy, and on Monday, David Lipton, the IMF's first deputy managing director said that it supported the BoJ's target of 2.0%. At the same time, Lipton expressed doubt as to whether the bank's current policy would push inflation up to this level.

The Fed has tightened policy twice this year and has hinted at one more rate hike in the second half of 2017. As for the markets, they have circled the December policy meeting as the most likely date for a rate move. The CME Group has pegged the odds of a September hike at just 13%, compared to 18% a week ago. However, the odds for a December increase are at 49%, and this could increase if Fed policymakers continue to wax positive about the economy. Earlier this week, Federal Reserve of New York President Charles Dudley continued the upbeat message, cautioning the Fed against halting its current tightening cycle. Dudley said that the tight labor market should lead to higher wages, which in turn would push inflation to the Fed's target of 2.0%. The markets like what they are hearing – not just the positive spin on the economy, but also that the Fed has signaled that it plans to reduce the bloated balance sheet of $4.2 trillion.

• U.K. government bonds declined after BoE Haldane's hawkish remarks, while Sterling eked out its biggest daily gain in a week against the dollar, after reaching a two-month low earlier in the day. Oil meanwhile continues to hover around $43.5.
• The European markets opened in the red, but reduced losses to around 0.30%. US equities started trading mixed with NASDAQ again outperforming.
• Bank of England chief economist Haldane declared today he considered voting for a rate hike in the past policy meeting. He stated that the risks of tightening policy too late are rising. This communication adds to earlier conflicting views from the BoE's members with an unexpected hawkish 3-5 voting for a hike countered by governor Carney signalling he wasn't in a hurry to raise rates.
• UK PM Theresa May promised to listen more closely to businesses' concerns about Brexit as she set out a Brexit-focused government programme. The program underscores May's fragility after she miscalculated in calling a snap general election that stripped her Conservative Party of its majority.
• Macron faced multiple resignations in his cabinet recently, three from the MoDems and one socialist. Macron's party however has a big majority in the French parliament. Beyond the need for a more thorough reshuffle of his cabinet, the resignation has little impact.

Rates

UK Gilts pull Bunds and US Treasuries lower

Global core bond trading showed two faces today. Initial European equity market weakness and a dip of Brent crude to yesterday's lows (around $45.5/barrel) provided a safe haven bid for German Bunds and US Treasuries. The minor upward bias remained in place until comments of BoE chief economist Haldane. He advocated a rate hike later this year and joins the growing hawkish wing inside the Bank of England. Last week, 3 other governors already voted in favour of immediate tightening. UK Gilts suffered a significant blow and pulled German Bunds and US Treasuries also lower in absence of eco data or other news. The UK yield bear flattened with the 2-yr yield up to 7.5 bps higher and testing the 2017 high around 0.2%. Equity market sentiment also improved in the run-up to the start of US dealings and lifted safe haven flows.

At the time of writing, changes on the German yield curve range between +2.2 bps (5-yr) and -1.4 bps (30-yr). The outperformance of the very long end of the curve was partly supply-related (see below). Changes on the US yield curve vary between +0.9 bps (30-yr) and +1.7 bps (5-yr). On intra-EMU bond markets, 10-yr yield spread changes versus Germany are nearly unchanged with Portugal underperforming (+5 bps).

The German Finanzagentur concluded this week's scheduled EMU bond supply with a 30-yr Bund auction (€1B 2.5% Jul2044). Total bids amounted to €1.66B, which was better than the €1.2B average at the previous 4 very long Bund auctions. The Bundesbank retained €0.19B for secondary market operations, resulting in an official bid cover of 2. The auction tailed 1 cent.

Currencies

USD trading still confined to tight ranges

As was the case earlier this week, there was still an absolute lack of news to inspired USD trading. EUR/USD was locked in well-known territory in the mid 1.11 area. USD/JPY traded more or less to the tune to of the equity swings. In the afternoon, a cautious rise in core bond yields supported an intraday comeback. Even so, USD/JPY 111.50/60 was quite a familiar level of late. The waiting for Godot process for USD traders continues.

Overnight, Asian equities lost modest ground, but less than Wall Street yesterday. Oil ($46 p/b for Brent) struggled to prevent further losses, but had no direct impact on USD trading. USD/JPY lost a few ticks on the modest risk-off sentiment and traded in the 111.30 area at onset of European trading. EUR/USD traded unchanged (1.1135).
European equities recorded substantial losses in the open. The decline of the oil price and, maybe, some political noise from France (resignation of ministers from the Macron government) triggered some further profit taking. Initially, the impact on the major dollar cross rates was again negligible. EUR/USD held a tight range in the mid 1.1130/55 area. USD/JPY lost slightly ground and filled bid in the low 111 area.

There was a bit more animo as soon as US traders joined the fray. Hawkish comments from BoE chief economist Haldane not only triggered a rise in UK yields, but the rise also spilled over to US and European yields. At the same time, equities started an intraday comeback. USD/JPY returned to the 111.50/60 area. EUR/USD still didn't go anywhere and is paralysed in the mid 1.11 area. Interest rate differentials between the US and Germany hardly changed.

Sterling makes another U-turn on conflicting BoE talk

Comments from BoE governors continue to the haunt UK interest rate markets and sterling. Yesterday, sterling reversed recent gains as BoE governor Carney explicitly said that it is too early for a rate hike. Sterling declined against the dollar and the euro and remained in the defensive this morning. EUR/GBP even came within reach of the 0.8854/66 key resistance. However, a real test didn't occur. Early afternoon, sterling fortunes changed, as BoE chief economist Haldane said that it could be prudent to withdraw some policy stimulation in the second half of the year. At last week's BoE meeting, Haldane was the in the camp of the MPC members who voted to leave rates unchanged. So, the division within the BoE on how to handle current economic uncertainty is profound. If eco data remain constructive, the outcome of the next BoE meetings shall be a close call. Sterling rebounded impressively. EUR/GBP dropped to the 0.8775 area. Cable returned close to the 1.27 mark.

EUR/GBP - 0.8788

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term up

Original strategy  :

Buy at 0.8660, Target: 0.8860, Stop: 0.8620

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.8660, Target: 0.8860, Stop: 0.8620

Position : -

Target :  -

Stop : -

 
As the single currency has retreated after meeting resistance at 0.8846 today, retaining our view that further consolidation below recent high at 0.8866 would be seen and another retreat to 0.8740-50 cannot be ruled out, however, downside should be limited to support at 0.8652, bring another rise later. Above said resistance at 0.8846 would signal the retreat from 0.8866 has ended, bring retest of this last week’s high but break there is needed to confirm recent erratic upmove from 0.8304 low has resumed and extend further gain to 0.8880, then 0.8900, having said that, as broad outlook remains consolidative, reckon current c leg of larger degree wave b should be limited to 0.8950 and price should falter well below 0.9000 psychological level.

In view of this, we are looking to buy euro on subsequent pullback but one should exit on such rise. Below 0.8650 would defer and risk test of 0.8620, a break below there would signal top is formed instead, bring further fall to 0.8620, then 0.8600 which is likely to hold from here.

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3308

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term down

 
Original strategy       :

Sell at 1.3350, Target: 1.3130, Stop: 1.3410

Position: -

Target:  -

Stop: -

 
New strategy             :

Sell at 1.3365, Target: 1.3130, Stop: 1.3425

Position: -

Target:  -

Stop:-

Current rebound from 1.3191 has retained our view that further consolidation above 1.3165 support (last week’s low) would be seen and another bounce to 1.3330 cannot be ruled out, however, as this move is viewed as retracement of recent fall, reckon upside would be limited to 1.3360-65 and bring another decline later, below said support at 13191 would bring retest of 1.3165 but break there is needed to confirm reentry decline from 1.3794 top has resumed and extend weakness to 1.3100-10 and later towards previous support at 1.3078.

In view of this, would be prudent to sell again on subsequent recovery as 1.3350-60 should limit upside. Above previous support at 1.3387 (now resistance) would defer and suggest low is possibly formed, bring a stronger rebound to 1.3420-25 but break there is needed to provide confirmation. 

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

The CAC index has posted losses in the Wednesday session. The index has dropped 0.53% and is currently trading at 5254.80 points. On the release front, there are no economic indicators out France or the eurozone.

Oil prices were down sharply on Tuesday, as Brent crude declined 3.5%. Currently, Brent crude is trading below $46 a barrel, its lowest level since November 2016. This has weighed on global stock markets, and sent the CAC lower on Wednesday. June has been a disaster for oil producers, with Brent sinking 10.5% this month. With the world awash in oil, crude prices could be headed even lower. OPEC has made intensive efforts to cut production, but supply continues to outstrip demand. Lower oil prices have also taken the wind out of inflation in North American and Europe (with the exception of Britain), as central banks in the US, Japan and the eurozone continue to grapple with weak inflation levels that are well below the target of 2.0%.

The Fed has tightened policy twice this year and has hinted at one more rate hike in the second half of 2017. As for the markets, they have circled the December policy meeting as the most likely date for a rate move. The CME Group has pegged the odds of a September hike at just 13%, compared to 18% a week ago. However, the odds for a December increase are at 49%, and this could increase if Fed policymakers continue to wax positive about the economy. Earlier this week, Federal Reserve of New York President Charles Dudley continued the upbeat message, cautioning the Fed against halting its current tightening cycle. Dudley said that the tight labor market should lead to higher wages, which in turn would push inflation to the Fed's target of 2.0%. The markets like what they are hearing – not just the positive spin on the economy, but also that the Fed has signaled that it plans to reduce the bloated balance sheet of $4.2 trillion.

USD/CHF - 0.9745

Original strategy :

Bought at 0.9705, Target: 0.9805, Stop: 0.9690

Position : - Long at 0.9705

Target :  - 0.9805

Stop : - 0.9690

New strategy  :

Hold long entered at 0.9705, Target: 0.9805, Stop: 0.9690

Position : - Long at 0.9705

Target :  - 0.9805

Stop : - 0.9690

As the greenback has retreated after faltering below resistance at 0.9771 (last week’s high), suggesting further consolidation below this level would be seen, however, as long as support at 0.9695 holds, bullishness remains for recent upmove to resume after initial sideways trading, break of said resistance at 0.9771 would confirm recent rise from 0.9613 low has resumed for test of resistance at 0.9808 but reckon previous resistance at 0.9825 would hold from here due to near term overbought condition.

In view of this, we are holding on to our long position entered at 0.9705. Below said support at 0.9695 would defer and risk weakness towards said support at 0.9641 but only break there would abort and revive bearishness, this would also suggest the rebound from 0.9613 has ended instead, bring retest of this level later.