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USD/CHF Heading lower.

USD/CHF continues its decline below support given at 0.9692 (22/05/2017 low). Strong resistance is given at 1.0107 (10/04/2017 high). Expected to show continued weakness towards hourly support at 0.9550 (09/11/2017 low).

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USD/CAD Edging lower

USD/CAD is trading below 1.3500. The pair has exited short-term uptrend channel. Hourly support can be found at 1.3424 (28/05/2017 low) then 1.3388 (25/01/2017 high). Expected to show continued very short-term bearish pressures.

In the longer term, there is now a death cross with the 50 dma crossing below the 200 dma indicating further downside pressures. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low).

AUD/USD Strong upside.

AUD/USD is pushing higher since the pair has failed to reach hourly support given at 0.7329 (09/05/2017 low). As long as prices remain below resistance at 0.7608 (17/04/2017 high), there are nonetheless strong downside risks.

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

EUR/USD Stalling below 1.1300.

EUR/USD is consolidating below strong resistance given at 1.1300 (09/11/2017 high). Hourly support is given at 1.1110 (22/05/2017 low) has been broken. Stronger support lies at 1.0842 (11/05/2017 low) and key support is given at 1.0494 (22/02/2017 low). Expected to show continued bullish pressures.

In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD Sideways price action.

GBP/USD keeps on bouncing from hourly support given at 1.2757 (21/04/2017 low). Hourly resistance lies at 1.3046 (18/05/2017 high). Expected to show continued bullish pressures.

The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY Continued bearish pressures.

USD/JPY is trading lower. The road seems wide open towards strong support located at 108.13 (17/04/2017 low). Hourly resistance is given at 112.13 (24/05/2017 high). Other key supports lie at a distance 106.04 (11/11/2016 low).

We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

AUD rose to a one-month high amid solid GDP estimates

The Australian dollar rose 0.64% on Wednesday amid the release of solid growth figures for the first quarter. The better-than-expected GDP figures caught investors off guard as many were expecting the Australian economy to have suffered more during the first three months of the year. The gross national product rose 1.7% y/y compared to 1.6% median forecast. On a quarter-over-quarter basis, the economy grew 0.3% (seasonally adjusted).

Looking at the detail, the picture is not that rosy as consumer spending slowed down in the first quarter, capital expenditures were quite soft and mining inventories exploded. Today's figures were indeed good news, however the weakness seems to be broad based, suggesting that an acceleration in growth is more than unlikely.

The appreciation of the Aussie over the last week looks mad and we believe this is more due to the broad USD weakness rather than due to Australian fundamentals. Investors are looking for yields and the AUD is still an interesting alternative, especially against the backdrop of failing Trumponomics.

After rallying 2.5% since June 1st, AUD/USD is currently testing the 0.7556 resistance (high from May 2nd). A break of the latter would open the road toward the following resistance area at around 0.76. On the downside, a support lies at 0.7469 (Fibonacci 38.2% on May-June rally).

EURCHF remains marginally stable

Global risk appetite remains shaky heading into an event filled Thursday. S&P fell 0.4% while US long end yields fell 5bp - both clearly suggesting risk aversion. The concern around the pace of the Fed tightening cycle and low inflation print combined with general risk off sentiment has allowed JPY to gain nearly 4.50% against the USD. However, the other major safe-haven cross EURCHF has not benefited as aggressively. CHF has only gained 1.30% against the EUR which is surprising considering the size of the broader FX moves.

One rationale is the SNB remains active in managing any CHF appreciation (although SNB FX reserves fell marginally) while the other is that there is increased expectation that the ECB era of unorthodox policy is heading, albeit slowly, to a close. There is increasing probability that at tomorrow's ECB meeting Draghi could take the first baby step towards removing emerging monetary policy. This could come in a shift in wording on the balance of risk or stating that interest rate are less likely to go lower.

But to investors that would be as clear a signal as ending asset purchases or rising interest rates. In addition, trading EU will always come with perpetual political risk and now is not different. Yet, in the near term European political risk has declined which lessens capital flight pressure. ECB tapering sentiment increase should rise the threshold for disruptive social / political risks and allow EURCHF to steadily appreciate.

Germany Factory orders disappoint

German Factory orders declined - surprisingly - more than expected in April at -2.1% m/m. Indeed, recent economic data was on the strong side and showed that Germany was on a strong recovery road.

The Factory Orders forecast, even though negative, was way more optimistic. Markets estimated the data to slightly decline to -0.3%. We now wonder whether there is a reason to worry after the very positive first half of the year. It is anyway important to notice that the annualized data remains largely positive with a +3.5% print.

As explained above, other economic fundamentals are positive. Growth is running at a strong pace above Eurozone average at 0.6% for Q1 and the labour market is widely recovering. Unemployment has never been so low. So today’s Factory Orders seem to be contradicting the current momentum in Germany.

Amid the release of this German data, the single currency is trading mixed and remains below 1.1300. Markets are optimistic of the Eurozone recovery and continue pricing in US difficulties.

Safe haven assets came under renewed buying interest yesterday while riskier assets like equities underperformed, as investors sought to insulate their portfolios ahead of three major risk events tomorrow. The UK General Election, the highly anticipated ECB policy decision and a testimony by former FBI Director James Comey all have the potential to rattle financial markets.

Markets will probably focus on how big of a majority Theresa May will manage to secure, if the ECB will drop aspects of its dovish forward guidance, and on whether Comey will confirm that Trump attempted to influence an FBI investigation. Without anything notable on the agenda today, we think that investors could keep their gaze locked on these major events. As such, this risk-averse mood could linger today as well, and we may experience similar market moves.

Gold surged yesterday, clearing the downside resistance line taken from the peak of the 6th of July 2016. The price broke two resistance (now turned into support) barriers in a row, to stop near 1295 (R1). The short-term path appears positive, but given that our short-term momentum studies show signs of topping, we see the case for a corrective setback before the bulls decide to take the reins again. Switching to the daily chart, we see that the metal is getting very close to the important psychological zone of 1300 (R2). Therefore, we prefer to wait and see whether the bulls will appear strong enough to overcome that key obstacle, especially with tomorrow’s risk events looming.

Australia’s GDP beats consensus, AUD gains further

Overnight, the Australian dollar extended its latest gains, following the release of the nation’s GDP data for Q1. Even though GDP growth slowed notably from the previous quarter, the print was a touch better than expected. Nonetheless, we doubt this will be any surprise for the RBA, which in its policy statement yesterday noted that it expected GDP growth to have slowed in Q1, and that it views this slowdown as transitory. With regards to the Bank, we maintain our view that policymakers will probably remain on hold for the foreseeable future.

AUD/USD managed to overcome the downside resistance line taken from the peak of the 17th of April, and hit the resistance (now support) zone of 0.7515 (S1) ahead of the release of Australia’s GDP data. As soon as the data were out, the rate rallied, broke above 0.7515 (S1), and now looks to be headed towards our next resistance hurdle of 0.7550 (R1). In our view, the break above the aforementioned downside line has turned the short-term outlook positive and as such, we see the prospect for the pair to continue trading higher for a while. A decisive break above 0.7550 (R1) is likely to set the stage for more bullish extensions, perhaps towards the 0.7600 (R2) territory.

Today’s highlights:

The European morning is very quiet in terms of data releases, as we mostly get second-tier economic indicators. In Germany, factory orders for April are expected to have fallen, a turnaround from previously.

From Sweden, we get industrial production for April and the forecast is for a modest acceleration.

In Eurozone, the final GDP print for Q1 is anticipated to confirm the 2nd estimate and as such, any reaction in EUR may remain limited.

From Canada we get building permits for April, although no forecast is available.

XAU/USD

Support: 1288 (S1), 1282 (S2), 1278 (S3)

Resistance: 1295 (R1), 1300 (R2), 1308 (R3)

AUD/USD

Support: 0.7515 (S1), 0.7500 (S2), 0.7455 (S3)

Resistance: 0.7550 (R1), 0.7600 (R2), 0.7625 (R3)

GBP/USD – 1.2918

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

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

The British pound met resistance at 1.2950 and retreated, suggesting minor consolidation below this level would be seen and weakness to 1.2870-75 cannot be ruled out, however, break of 1.2845-50 is needed to signal top is formed, bring test of indicated support at 1.2830, only a break below support at 1.2830 would revive bearishness and signal the rebound from 1.2769 low has ended, bring further fall to 1.2800 first.

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, above said resistance at 1.2950 would signal the rebound from 1.2769 low is still in progress and may extend gain to 1.2975-80, however, reckon resistance at 1.3015 would limit upside, bring further choppy trading later. Only a break of said resistance at 1.3015 would signal the correction from 1.3048 top has ended, bring resumption of upmove for retest of this level first.
 

On Wednesday morning the yellow metal was in a decline down to the 1,290 mark. The reason for that from a technical perspective could be explained by the fact that the commodity price had overextended its gains. Such a fact is hinted by the fact that the only notable resistance, which the metal faced, when it changed its direction, was the upper Bollinger band of the hourly chart. Most likely this is the beginning of a short consolidation, as the metal had been trading in limbo between the various support levels that were providing resistance on Tuesday. Due to these reasons combined the previous target of the weekly R3 near the 1,307 mark remains intact. However, market participants should watch closely, where the rebound occurs

The USD/JPY pair behaved in accordance with expectations yesterday, being that the monthly S1 at 109.22 was the level that managed to prevent the pair from edging lower. Although the monthly S1 managed to limit the losses on Tuesday, risks remain skewed to the downside, meaning that the given demand level could fail today. A breach of this support would open the door for a drop beyond 109.00, with the second closest strong support being only under 108.00. Technical studies do suggest the bearish momentum is to prevail today, but given the latest USD movements, a positive development would not be a surprise. The recovery, however, would just be a bullish correction from the recent declines and could well take place if the given trend-lines prove to be viable.

The Cable experienced minor volatility on Tuesday, with the exchange rate mostly gravitating towards the monthly pivot point. Flat trade could indicate that the Pound’s bullish momentum is nearing its end, even though technical studies suggest the opposite. In either case, the Sterling is likely to consolidate for another day, with trade anchored around the 1.29 major level and the three-month up-trend remaining a strong support, which is to limit any losses should those occur today. Gains, however, are unlikely to exceed the 1.2940 handle, as the British currency struggled to climb over this area through all of the previous week. Meanwhile, traders retain a neutral outlook towards the GBP/USD pair, as 52% of all open positions are long.

GBP/JPY - 141.10

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 up

Original strategy:

Sold at 143.65, met target at 141.65

Position: - Short at 143.65
Target: - 141.65
Stop: -

New strategy :

Sell at 142.00, Target: 140.00, Stop: 142.60

Position: -
Target:  -
Stop:-

As sterling has remained under pressure after recent anticipated selloff, suggesting recent selloff from 148.10 top is still in progress and bearishness remains for this move to extend weakness to 140.50-55, then towards psychological support at 140.00, however, near term oversold condition should prevent sharp fall below previous support at 139.20, risk from there has increased for a rebound later. 

In view of this, would not chase this fall here and would be prudent to sell sterling again on recovery as 142.00-10 should limit upside and bring another decline later. Above 142.55-60 would suggest low is possibly formed, risk a stronger rebound towards resistance at 143.10 but a sustained breach above there is needed to confirm, bring a stronger rebound towards resistance at 143.95-00.

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) 140.39; (P) 141.51; (R1) 142.32; More....

Intraday bias in GBP/JPY remains on the downside for 61.8% retracement of 135.58 to 148.09 at 140.35. At this point, we'd continue to look for bottoming around there and bring rebound. Break of 143.93 will indicate near term reversal and turn bias back to the upside. However, sustained break of 140.35 will bring deeper fall to 135.58 key support level.

In the bigger picture, rise from 122.36 medium term bottom is still expected to extend to of 195.86 to 122.36 at 150.42. And decisive break there could pave the way to 61.8% retracement at 167.78. However, as the cross is starting to lose upside momentum, rejection below 150.42 and break of 135.58 support will indicate reversal and bring deeper fall back to retest 122.36 instead.