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The Aussie dollar remains in steep descend against its New Zealand counterpart and approaches round-figure 1.0400 support on fresh bearish extension on Friday.

The pair is riding on extended wave C of five-wave cycle from 1.1019 (16 Mar peak) which met its 138.2% Fibonacci expansion and could travel to key support at 1.0324 (217 low, also FE 161.8%).

Series of long red daily candles weigh and maintain strong bearish pressure, along with recently formed 10/200SMA Death Cross.

The pair is also on track for third consecutive strong weekly close in red that reinforces strong bearish stance.

Previous week’s long bearish candle marks the biggest one-week loss since the last week of Apr 2016 and also produces strong bearish pressure, along with thick weekly cloud (cloud base lies at 1.0533).

Deeply oversold daily studies suggest correction, however, no firmer signal being generated so far that keeps the pair in strong downtrend.

Corrective actions should be ideally capped under weekly cloud base, reinforced by falling 10SMA.

Res: 1.0453, 1.0500, 1.0533, 1.0598
Sup: 1.0400, 1.0374, 1.0324, 1.0236

The crucial US labour market data for May will be released today, June 2nd at 13:30 BST. It includes non-farm payrolls, unemployment rate and average hourly earnings. Please note that the release of US labour market data will likely cause volatility for USD, USD crosses and commodities.

Non-farm payroll in April was 211K, beating the shocking low downward revised reading of 79K in March. The unemployment rate in April hit a record low of 4.4%, not seen since May 2007.

US unemployment rate has seen a downtrend since 2010 and has stabilised in a range between 4.6% – 5% since early 2016. The readings over the past two months had continued reaching even lower than 4.6%, indicating the US labour market remains sound.

Average wages have seen an upswing since early 2015, however seeing a moderate slowdown over the past three months.

Be aware that, the revision figures are also significant which also affect data performance. In addition, based on prior experience after the release of the data, market trends sometimes reverse within 1-2 hours after the initial move.

The Fed sees the labour market as close to full employment. The FOMC June meeting will be held on Wednesday June 14th. Per the CME FedWatch tool, the probability for a rate hike in June has rose to 95.8%. If the incoming US labour market data overall in line with or better than consensus, despite the uncertain political climate, markets will likely see a June rate hike to happen nearly for sure, which will likely strengthen USD.

Originally markets expect two more rate hikes by end of the year: in June and September respectively. Nevertheless, per the FOMC May meeting minutes released on May 25th, the Fed sees to raise rates once again is ‘soon be appropriate’, and considers it prudent to wait for further evidence for subsequent rate hikes. That said, it will likely take an extended period to raise rates after a June rate hike, unless seeing incoming data continuously being robust.

On Thursday June 1st, the dollar index bounced around 0.87%, breaking the 97.00 resistance level. This morning in early European session, USD consolidates ahead of NFP, trading around 97.15.

On Thursday, USD/JPY rallied 0.21% hitting a 1-week high of 111.70. EUR/USD fell by 0.27%. AUD/USD plunged by 0.75%. NZD/USD fell by 0.31%. Spot gold fell by 0.23% on Thursday and hit a 1-week low of 1258.92 on Friday morning.

The Aussie is consolidating in a narrow range on Friday, holding above fresh three-week low at 0.7370, posted after strong two-day fall.

Australian currency accelerated lower strongly on Thursday, pressured by weak Chinese data and generated strong bearish signal on daily close below 0.7400 pivot (Fibo 61.8% of 0.7328/0.7517 upleg).

Two long red daily candles on Wed/Thu weigh on near-term action which shows risk of return to key short-term support at 0.7328 (09 May low / weekly cloud top).

Slow stochastic entered oversold territory on daily chart, suggesting stronger hesitation on approach to 0.7328 target, however, no firmer signal being generated for now.

The pair is also on track for strong weekly bearish close which is expected to maintain bearish pressure.

Broken 0.7400 support now acts as initial barrier, followed by converged daily Kijun-sen / Tenkan-sen lines at 0.7442/43, where extended upticks should be capped.

Res: 0.7400, 0.7421, 0.7443, 0.7475
Sup: 0.7370, 0.7350, 0.7328, 0.7300

The dollar remains well support against yen on Friday and extends rally of the previous day, sparked by upbeat US data. Recovery extension on Friday hit one week high at 111.70 and pressures key near-term barrier at 111.80, provided by top of daily Ichimoku cloud. Near-term studies are back to bullish mode and turn bias higher, as Friday's price action is underpinned by formation of 10/55SMA's bull-cross. Firm break above daily cloud would trigger fresh acceleration higher for test of resistances that lay between 111.95 and 112.28, consisting of 30/20 and 100SMA's. The pair may pause under 111.80 pivot, awaiting release of US NFP data for fresh signals. Broken 10 and 55 SMA's offer immediate supports at 111.33/24, with extended dips not to exceed 111.00 handle to keep near-term bullish bias in play.

Res: 111.70, 111.80, 112.12, 112.28
Sup: 111.24, 111.00, 110.62, 110.50

GBP/USD – 1.2867

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 :

Sold at 1.2920, Target: 1.2770, Stop: 1.2920

Position: - Short at 1.2920
Target:  - 1.2770
Stop: - 1.2920

New strategy :

Hold short entered at 1.2920, Target: 1.2770, Stop: 1.2920

Position: - Short at 1.2920
Target:  - 1.2770
Stop:- 1.2920

Although the British pound rebounded after finding support at 1.2769 earlier this week, as sterling met resistance at 1.2921 and has retreated, retaining our bearishness and as long as this level holds, mild downside bias remains, below 1.2840 would signal the rebound from 1.2769 has ended, bring weakness to 1.2800, then retest of said support, break there would extend recent decline from 1.3048 to support at 1.2757 which is likely to hold on first testing.

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 1.2921-26 (said resistance and previous support) would defer and suggest low has been formed instead, risk a stronger rebound to 1.2965-70 and possibly towards 1.3000 but only break of resistance at 1.3015 would signal the retreat from 1.3048 has ended.

'The sector should have sufficient momentum to see it through the uncertainty generated by the current unexpected general election and into the start of Brexit negotiations later in the quarter.' - Rob Dobson, IHS Markit

Manufacturing activity in the United Kingdom fell less than expected last month, a private survey revealed on Thursday. Markit reported that its PMI for the British manufacturing sector came in at 56.7 points in May, the strongest since June 2014, down from the preceding month's 57.3. However, market analysts anticipated a bigger drop to 56.5 during the reported month. Furthermore, Markit noted that new order growth remained strong, whereas the pace of job creations hit its 35-month high in May. The Markit Senior Economist Rob Dobson said that the strong PMI data suggested that the British economy gained positive momentum in the second quarter. Strong manufacturing activity is set to provide a boost to the UK Prime Minister Theresa May's ruling Conservative Party ahead of the 2017 General Election, which is scheduled to take place on June 8. Markit also noted that domestic demand remained the key driver of growth in the manufacturing sector. Apart from that, the report showed that manufacturers' optimism over the economy hit a 20-month high last month.

GBP/JPY - 143.55

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, Target: 141.65, Stop: 144.25

Position: - Short at 143.65
Target: - 141.65
Stop: - 144.25

New strategy :

Hold short entered at 143.65, Target: 141.65, Stop: 144.00

Position: - Short at 143.65
Target:  - 141.65
Stop:- 144.00

Although sterling edged higher to 143.95, as price has retreated after meeting resistance there, suggesting as long as this level holds, consolidation with mild downside bias would be seen and weakness to 143.00, then 142.50-55 would be seen, however, break of latter level is needed to signal the rebound from 141.50 has ended, bring another fall towards this level. Looking ahead, below said support at 141.50 would extend the selloff from 148.10 top to 141.00 but loss of momentum should limit downside to 140.50-55 and price should stay above psychological support at 140.00, bring rebound later. 

In view of this, we are holding on to our short position entered at 143.65. Above 143.95-00 would risk a a stronger rebound to 144.50 but upside would still be limited to 145.00 and price should falter well below said resistance at 145.45, bring another decline later.

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.


'The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses' number one challenge will be a shortage of labor.' — Mark Zandi, Moody's Analytics

US private companies created more than expected jobs last month, official figures showed on Thursday. The ADP National Employment Report revealed that the US private sector added 253K new jobs to the economy in May, compared to the preceding month's downwardly revised gain of 174K positions. Meanwhile, analysts expected private firms to create 181K new jobs during the reported month. The Moody's Analytics Chief Economist Mark Zandi said that wage growth would likely accelerate 'through the year into 2018' amid the tightening labour market. Strong job creation is expected to comfy the Federal Reserve and force it to raise interest rates further in the upcoming months. The ADP data come ahead of the Labour Department's non-farm payrolls report, scheduled to be released on Friday. According to analysts, both US private and public sector created 181K new jobs last month, following April's gain of 211K new positions. Moreover, the jobless rate is set to come in at 4.4% for May, unchanged from the previous month. Economists suggest that the US labour market is close to or at full employment.

'The euro retained its resilience and stayed close to an one-week high hit during the Asia session despite softer manufacturing data out of France and Italy.' – Vassilis Karamanis, Bloomberg

Pair's Outlook

On Friday morning the common European currency traded in the range of the previous trading session against the US Dollar. Namely, the currency exchange rate was located just above the support of the weekly PP, which is located at the 1.1204 level. Meanwhile, it faced the resistance, which kept the pair from surging on Thursday, in the form of the weekly R1 at the 1.1248 mark. From a technical perspective on the daily chart it looks like the pair will break out to the upside. The reason for such a hypothesis is the fact that the weekly PP is supported by the close by located 61.80% Fibonacci retracement level at the 1.1190 level.

Traders' Sentiment

SWFX traders remain bearish, as 60% of open positions are short. Meanwhile, 53% of pending orders are to buy the Euro.

'The near-term balance of risk appears to favor JPY strength.' – Scotiabank (based on FXStreet)

Pair's Outlook

Even though the Greenback outperformed the Yen yesterday, it was still unable to close above the 111.40 mark, but still partially broke through the immediate resistance. Upbeat ADP data triggered the rally, with the NFP now anticipated to strengthen the US Dollar even further. The highest level is expected to be the 112.30 one, where the 100-day SMA rests, assuming other resistances on the path fail to contain the gains. Meanwhile, technical indicators keep giving bearish signals, insisting that the Buck is to edge lower and pierce the 110.75 psychological support area, leaving the 200-day SMA at 110.33 as the next target.

Traders' Sentiment

Traders' sentiment remains bearish, with 55% of all open positions now being short. The share of buy orders surged from 30 to 59%.