Sample Category Title

Weekly
    •    Last Candlesticks pattern: Shooting doji
    •    Time of formation: 20 Feb 2017
    •    Trend bias: Sideways

Daily
    •    Last Candlesticks pattern: Bearish engulfing pattern
    •    Time of formation: 21 Mar 2017
    •    Trend bias: Near term down



Although aussie has risen again after finding support just above the Tenkan-Sen and near term upside risk remains for the rebound from 0.7329 to extend gain towards previous resistance at 0.7556 but only break there is needed low has been formed at 0.7329, bring further rise to another previous resistance at 0.7611, having said that, aussie needs to break this level to signal the fall from 0.7750 top has ended bring subsequent rise towards resistance at 0.7680.

On the downside, below the Tenkan-Sen (now at 0.7428) would bring weakness to 0.7388 support but break there is needed to signal the rebound from 0.7329 has ended, bring retest of this level, break there would extend recent fall from 0.7750 top to 0.7300 and possibly 0.7250-60 but reckon downside would be limited to 0.7200-10 and price should stay well above indicated previous chart support at 0.7158, bring rebound later.

Recommendation: Hold short entered at 0.7440 for 0.7240 with stop above 0.7540.



On the weekly chart, after forming a hammer candlestick pattern earlier this month, last week’s rebound formed a white candlestick, suggesting low has possibly been formed there and consolidation with mild upside bias is seen for gain to 0.7560-65, however, break of previous resistance at 0.7611 is needed to add credence to this view, bring further gain towards resistance at 0.7680, having said that, price should falter below said resistance at 0.7750.

On the downside, although pullback to the Kijun-Sen (now at 0.7454) is likely, reckon downside would be limited to 0.7384 support (last week’s low), bring another rebound later. Only a weekly close below there would signal the rebound from 0.7329 has ended, bring retest of this level, break there would extend recent decline from 0.7750 to 0.7290-00 and possibly towards 0.7230, however, downside should be limited to 0.7200 and price should stay well above previous support at 0.7158, risk from there is seen for a rebound to take place later. 

Yesterday, the Trump administration released the long-awaited budget for the fiscal year 2018 and the administration's priorities for the next 10 years. The Trump administration expects to eliminate the government deficit by 2027 due to a combination of higher GDP growth (3% per year) and large welfare spending cuts.

We think it is unlikely the supply-side effects from Trump's economic policy (deregulation, tax reform,infrastructure investments) will increase GDP growth to 3% even if fully implemented.

The budget reflects the Trump administration's expectation of full implementation of its policy proposals,which we think is unlikely given the disagreement within the Republican Party. Although all Republicansshare the same goal to cut and simplify taxes, they disagree on the financing. While moderate Republicansdo not want to make big cuts in other parts of the budget, fiscal hawks do not want to increase thegovernment budget deficit/debt to finance this. Thus, we may see a repetition of the Republicans'difficulties to change Obamacare.

We do not expect the US Congress to pass a new budget before the fiscal year starts on 1 October, henceCongress likely needs to pass a short-term funding bill to keep the US government running. This alsomeans there is a risk of a government shutdown by 1 October –also note that the US Treasury exhausts itsextraordinary measures during the autumn and Congress has still not found a solution to the debt limitissue.

We maintain our long-held view that Trumponomicswill come later and be smaller than pledged. We do notexpect a deal on tax reform before end of the year, at the earliest.

Market movers today

US durable goods orders will include the core capital goods orders, which is a good proxy for corporate investments. Core orders have moved higher since the middle of last year. The past months have shown somewhat slower momentum. The numbers today will show whether this was just a small pause or whether the loss of momentum is real. We expect investment growth to be robust this year based on strong earnings growth from the beginning of the year and improved sentiment among companies.

The US is due to release revised figures for Q1 GDP as well as for May consumer confidence from the University of Michigan. We do not expect any big revisions to these numbers.

The G7 Summit in Italy will be held on Friday and Saturday. It will be the first summit for US President Donald Trump, Brit ish Prime Minster Theresa May, French President Emmanuel Macron and Italian Prime Minister Paolo Gent iloni. The summit will among other things focus on the global economy and foreign policy. Issues such as protectionism, North Korea, the fight on terror and climate change are likely to be on the agenda.

In Norway, the important Q2 oil investment survey is due out (please see Scandi sect ion for more details).

Selected market news

This morning, emerging Asian currencies and stocks are trading on cautious note following the Moody's downgrade of China's credit rating, which hurt the out look for the region's t radedependent economies. Moody's cut China's rating to A1 from Aa3, citing a worsening out look for the nation's financial strength. We have in recent months pointed to the increasing stress symptoms in the Chinese financial markets and an imminent slowdown in the economy as the Chinese authorities seek to rein in the debt problems in the economy.

Yesterday, the Trump administ ration released its long-awaited budget for the fiscal year 2018 and the administ ration's priorit ies for the next 10 years. The Trump administ ration expects to eliminate the government deficit by 2027 due to a combination of higher GDP growth (3% per year) and large welfare spending cuts. The budget does not contain significant new details on tax reforms than the already known overall principles. We think it is going to be very difficult for the Trump administ ration to get the budget through the US Congress given the divisions in the Republican party and more generally we maintain our longheld view that Trumponomics will come later and be smaller than pledged. See Research US: Trump's budget seem s dead on arrival in Congress –do not expect too much of Trumponomics, 24 May 2017.

For the 24 hours to 23:00 GMT, the AUD rose 0.38% against the USD and closed at 0.7481.

On the economic front, Australia’s Westpac leading index declined 0.12% in April, from an increase of 0.08% reported in March. Additionally, the nation’s Q1 construction work done showed a bigger than expected fall, compared to revised 0.6% rise in the previous quarter.

LME Copper prices declined 0.29% or $16.5/MT to $ 5660.5/MT. Aluminium prices declined 0.87% or $17.0/MT to $ 1926.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7452, with the AUD trading 0.39% lower against the USD from yesterday’s close.

The pair is expected to find support at 0.7427, and a fall through could take it to the next support level of 0.7402. The pair is expected to find its first resistance at 0.7497, and a rise through could take it to the next resistance level of 0.7542.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR declined 0.48% against the USD and closed at 1.1186.

Macroeconomic data showed that manufacturing PMI recorded an unexpected rise to a level of 57.0 in May in the Eurozone, against market expectations for the index to drop to 56.5, following a reading of 56.7 in the previous month. However, the services activity in the region eased to a two-month low of 56.2 from 56.4 reported in April, compared to expectations for an unchanged reading.

Elsewhere, in Germany, the region's powerhouse economy, the seasonally adjusted final gross domestic product (GDP) rose 0.6% on a quarterly basis in 1Q 2017, in line with market expectations. The preliminary figures had also indicated a rise of 0.6%, following an advance of 0.4% in the prior quarter.

Moreover, the manufacturing PMI in Germany unexpectedly rose to 59.4 in May, compared to a reading of 58.2 in the last month. Markets were anticipating manufacturing PMI to decline to a level of 58.0. Additionally, the nation's services activity unexpectedly slid to a level of 55.2 in May, from a reading of 55.4 reported in the previous month. Market anticipation was for services PMI to climb to a level of 55.5.

In other news, the German Ifo business climate index reached to a level of 114.6 in May from a revised prior reading of 113.0. Investors were expecting the index to climb to 113.1. Also, the Ifo current assessment index in the nation advanced unexpectedly to a level of 123.2 in the same month, compared to market expectations of a fall to a level of 121.0, after a revised reading of 121.4 in the previous month.

The greenback traded higher against its peers, after the nation's services PMI climbed to a four-month high in May with a reading of 54.0, which was above market forecasts of 53.2. In the prior month, the index had reported a level of 53.1. On the other hand, Markit flash manufacturing PMI surprisingly declined to 52.5 in May from 52.8 recorded in April, slipping to its lowest level in eight months. Markets were expecting the index to rise to 53.0.

Separately, sales of newly constructed homes fell 11.4% on a monthly basis in April to a seasonally adjusted annual rate of 569.0k, which was below analysts' estimates of a drop to 610.0k. In the previous month, news home sales had posted a reading of 642.0k.

In the Asian session, at GMT0300, the pair is trading at 1.1183, with the EUR trading a tad lower against the USD from yesterday's close.

The pair is expected to find support at 1.1149, and a fall through could take it to the next support level of 1.1116. The pair is expected to find its first resistance at 1.1242, and a rise through could take it to the next resistance level of 1.1302.

Going forward, investors will await a speech by the ECB President, Mario Draghi, scheduled later in the day, to get his insights into the Eurozone economy. Also, in the US, the FOMC meeting minutes along with weekly mortgage applications and existing home sales data for April, all due to release today, will garner a lot of market attention.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP declined 0.32% against the USD and closed at 1.2961, after a suspected terrorist attack in UK's Manchester city killed at least 22 people and left around 60 people injured.

On macro front, UK's public sector net borrowing reported a deficit £9.6 billion in April, from a revised deficit of £2.3 billion in the previous month. Markets were expecting public sector net borrowing to show a deficit of £8.0 billion.

In the Asian session, at GMT0300, the pair is trading at 1.2967, with the GBP trading 0.05% higher against the USD from yesterday's close.

The pair is expected to find support at 1.2935, and a fall through could take it to the next support level of 1.2904. The pair is expected to find its first resistance at 1.3016, and a rise through could take it to the next resistance level of 1.3066.

With no economic release in the UK today, investors will look forward to global macroeconomic data for further direction in Pound.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.43% against the JPY and closed at 111.80.

On macro front, Japan's final machine tool orders rose 34.7% YoY in April, meeting the initial estimates.

In the Asian session, at GMT0300, the pair is trading at 111.89, with the USD trading 0.08% higher against the JPY from yesterday's close.

Meanwhile, Bank of Japan (BoJ) Governor, Haruhiko Kuroda, stated that uncertainty about the natural interest rate is making it difficult for central bankers to steer policy. He further commented that the natural rate of interest has been falling globally, which has led central banks to adopt unconventional economic policies.

The pair is expected to find support at 111.2, and a fall through could take it to the next support level of 110.52. The pair is expected to find its first resistance at 112.28, and a rise through could take it to the next resistance level of 112.68.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.18% against the CHF and closed at 0.9757.

Meanwhile, data showed that Swiss trade surplus dropped to CHF 1.97 billion in April, from a revised trade surplus of CHF 3.04 billion in the previous month, as its industrial sector continued to struggle with the strong currency and pharmaceuticals exports slowed. Additionally, the nation's exports fell 2.5% in April, compared to a revised rise of 1.8% last month. On the other hand, imports climbed 2.6% on a MoM basis, from a revised 0.6% rise in the prior month.

In the Asian session, at GMT0300, the pair is trading at 0.9759, with the USD trading marginally higher against the CHF from yesterday's close.

The pair is expected to find support at 0.9719, and a fall through could take it to the next support level of 0.968. The pair is expected to find its first resistance at 0.9781, and a rise through could take it to the next resistance level of 0.9804.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.03% against the CAD and closed at 1.3515.

In economic news, wholesales sales rose less than expected by 0.9% in March, compared to a revised gain of 0.3% in the previous month. Investors had anticipated a 1.0% rise.

In the Asian session, at GMT0300, the pair is trading at 1.3531, with the USD trading 0.12% higher against the CAD from yesterday's close.

The pair is expected to find support at 1.3481, and a fall through could take it to the next support level of 1.343. The pair is expected to find its first resistance at 1.3557, and a rise through could take it to the next resistance level of 1.3582.

Moving forward, all eyes would be on the Bank of Canada's (BoC) monetary policy meeting, scheduled later in the day.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

Currency pair EUR/USD

The EUR/USD failed to break above the 1.1250-1.13 resistance zone and showed a bearish reversal or correction. Price also broke below the rising wedge chart pattern which is indicated by the broken support (dotted green) and resistance (red).

The EUR/USD seems to have completed the 5th waves (pink/purple) and price could either be retracing within the uptrend or starting a new downtrend. The wave count is showing a bearish 123 (purple) wave pattern, which would become more likely if price manages to break the bear flag (blue lines) and fall towards 1.11-1.1130. Otherwise the bearish price action runs the risk of being a correction which becomes likely if price manages to push above 1.1250.

Currency pair USD/JPY

The USD/JPY broke the resistance trend line (dotted orange) and is approaching the -27.2% Fibonacci target. A bearish bounce could indicate a continuation of the downtrend but a break above 112-112.50 would indicate that the wave C (brown) of wave B (blue) is completed at the recent low.

The USD/JPY is building a potential wave 4 (orange) correction and a wave 5 (orange) continuation before completing wave C (brown). However if price breaks above the 61.8% Fibonacci level of wave 4 (orange), then a different wave structure seems likely.

Currency pair GBP/USD

The GBP/USD has been unable to break above resistance (red/orange) levels which could mean that the Cable is still in a wave 1-2 (blue). A break above the orange trend line indicates the invalidation of wave 2 and the potential for an uptrend continuation whereas but a break below the channel support (green/blue) could see a reversal take place.

The GBP/USD has been unable to break above resistance (red/orange) levels which could mean that the Cable is still in a wave 1-2 (blue). A break above the orange trend line indicates the invalidation of wave 2 and the potential for an uptrend continuation whereas but a break below the channel support (green/blue) could see a reversal take place.