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EUR/GBP         –  0.8540

EUR/GBP – The major (A)(B)(C)-(X)-(A)(B)(C) correction from 0.9805 is unfolding and 2nd (A) has possibly ended at 0.6936.

This week’s rally above indicated previous resistance at 0.8531 adds credence to our view that another leg of corrective rise from 0.8312 is underway and above this week’s high at 0.8615 would extend gain to 0.8650-60 and possibly towards 0.8700, however, as broad outlook remains consolidative, reckon upside would be limited and resistance at 0.8735 should cap upside, bring further choppy trading later.

Our latest preferred count is that the wave V of a 5-wave series from 0.5682 ended at 0.9805 earlier and major from there has possibly ended at 0.8067 as A-B-C-X-A-B-C. We are keeping our view that the entire correction from 0.9805 has possibly ended at 0.7756 and as labeled as the attached daily chart and impulsive move from 0.9084 has ended at 0.7756 as a 5-waver which marked either the (C) wave or the A leg of (C), a daily close above resistance at 0.8831 would suggest (C) leg has ended and headway towards 0.9084.

On the downside, whilst initial pullback to 0.8500-05 cannot be rule out, reckon 0.8455-60 would limit downside and bring another rise later. Below 0.8425-30 would abort and signal top is formed instead, bring test of indicated support at 0.8384 (last week’s low), however, only a daily close below there would shift risk back to downside and signal the rebound from 0.8312 has ended, then further fall to 0.8350-60 would follow.
 
Recommendation: Buy at 0.8500 for 0.8650 with stop below 0.8400

Euro's long term uptrend started in Feb 1981 at 0.5039 and is unfolding as a (A)-(B)-(C) move with (A): 0.8433 (Feb 1993), (B): 0.5682 (May 2000) and impulsive wave (C) should have ended at 0.9805 with wave III ended at 0.7254 (May 2003), triangle wave IV at 0.6536 (23 Jan 2007) and wave V as well as wave (C) has ended at 0.9805.

We are keeping an alternate count that only wave III ended at 0.9805 and the correction from there is the wave IV and may extend weakness to 0.7700, however, it is necessary to see a daily close above resistance at 0.9143 would change this to be the preferred count.

The Department of Justice has appointed former FBI head Robert Mueller to investigate whether Russia intervened during the 2016 presidential election. Recent reports from the US are indicating that the probability that Trump's presidency will end this year is around 29% following the Russia leak scandal. Trump is now facing his biggest political crisis since taking office.

Opinion polls, conducted by Politico and Morning Consult, that were released on Wednesday showed that Trump's approval rating has hit a new low of 42% with half of the registered voters disapproving of Trump's performance as a president. Polls, conducted by Public Policy Polling, are showing 48% of All Americans and 81% of Hilary's voters hope to see Trump's presidency to end. With the lack of support from his own Republican Party, Trump's political career and USD prospects become even more gloomy.

Following the firing of FBI director James Comey it was reported that the two candidates to replace him, Judge Merrick Garland and Senate John Cornyn, both showed no interests to take over the position.

The leak scandal hit USD and US stock markets, pushing safe havens up. The VIX index (volatility index) rallied more than 20% on Wednesday.

On Wednesday, the dollar index saw its fourth straight loss hitting a low of 97.30 (last seen November 9 2016). The Index has retraced around 2.22% from May 12 to 17. USD/JPY saw its biggest intra-day loss this year hitting a 3-week low of 110.51. EUR/USD saw its fourth straight gain hitting a high of 1.1171 (again last seen November 9 2016). Spot gold surged hitting a 2-and-a-half week high of $1263.

The Dow Jones index fell by 1.76%, hitting a low of 20591.80 & the S & P 500 index fell by 1.82%, hitting a low of 2353.33 (both lows not seen since April 21).

During the early European session, on Thursday, the dollar index saw a moderate rebound with bulls attempting to recover the 97.50 level. The disappointment with Trump's administration, some soft economic data and profit-taking has resulted in USD has giving up almost all its post presidential gain.

Since Trump took office in January, apart from passing the new healthcare bill, there are hardly any other worthy achievements. Instead, most of his policies have caused substantial controversy and turmoil. In addition, lack of enough support from the Republican Party makes Trump's political career and USD prospects even more gloomy.

USD/CAD – 1.3643

USD/CAD – Wave v ended at 0.9407 and a-b-c correction may extend gain to 1.4700

As the greenback has retreated after rising to 1.3794, suggesting consolidation below this level would take take place and initial downside risk is for pullback to 1.3570 and possibly towards 1.3520-25, however, reckon downside would be limited from there and bring rebound later, above 1.3720-25 would suggest the pullback from 1.3794 has ended, bring test of 1.3770 resistance but break there is needed to signal recent upmove has resumed for retest of 1.3794, break there would extend the erratic rise from 1.2461 low for at least a strong correction of the fall from 1.4690 (2016 high) to 1.3800 and later 1.3835-40 (61.8% Fibonacci retracement of 1.4690-1.2461), however, overbought condition would limit upside to 1.3890-00 and price should falter well below psychological resistance at 1.4000, bring retreat later.

We are keeping our view that the wave b from 1.0657 (a leg top) has possibly ended at 0.9633 with (a): 0.9800, wave (b): 1.0447 and wave c at 0.9633, the subsequent rise from there is now treated as wave c exceeded indicated upside target at 1.3770-80 and 1.4000 and wave (3) has possibly ended at 1.4690 and wave (4) correction has commenced for retracement back to 1.2832 support, then 1.2410-20.

On the daily chart, our latest preferred count remains that the A of (B) rally from 0.9059 low (7 Nov 2007) unfolded into an impulsive wave with i: 0.9059-1.0380, ii ended at 0.9819, iii at 1.3019 followed by triangle wave iv at 1.2026 , then wave v formed a top at 1.3066 and also ended the wave A. The wave B is unfolding as an double three a-b-c-x-a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c at 1.0784, followed by wave x at 1.1725, another set of a-b-c unfolded with 2nd a at 0.9931, 2nd b at 1.0674. the 2nd c has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3900 had been met and gain to 1.4700 would follow.

On the downside, whilst pullback to 1.3570 cannot be ruled out, reckon downside would be limited and support at 1.3530 should remain intact, bring another rise later. A daily close below 1.3530 would defer and suggest top is possibly formed, risk weakness to 1.3450-60 but break of indicated support at 1.3411 is needed to add credence to this view, bring further fall to 1.3380-85, then 1.3335-40.

Recommendation: Exit long entered at 1.3650 and stand aside for this week.

Longer term - The selloff from 1.6194 (21 Jan 2002) to 0.9059 (07 Nov 2007) is viewed as (A) wave which is a 5-waver as labeled on the monthly chart as below, the subsequently rally is labeled as (B) with impulsive A leg of (B) ended at 1.3066, wave B of (B) is unfolding which has either ended at 0.9407 or would extend one more fall but downside should be limited to 0.9200 and 0.9000 should hold.

The pair is consolidating on Thursday after falling 2.02% the previous day, on the biggest one-day fall since 29 July 2016.

Strong pressure on the dollar from political situation in the US that also strongly increased demand for safe-haven instruments, resulted in yesterday's crash of USDJPY pair.

Technical studies are turning into bearish setup after fall and shift near-term risk lower.

Solid support lies at 110.50 (Fibo 61.8% of 108.11/114.36 rally) where the pair found temporary footstep, however, today's consolidation remains capped by broken base of falling daily cloud at 111.39 and risk on retest of 110.50 handle remains in play.

Break below here would trigger large stops below and spark further weakness towards psychological 110.00 support and 200SMA at 109.70.

On the other side, strongly oversold slow stochastic on daily chart suggests correction, but no firmer bullish signal seen so far as the indicator continues to point south.

Stronger bullish signals could be expected on violation of daily cloud base which would sideline persisting downside threats.

Extended consolidation between 110.50 support and cloud base would be likely near-term scenario.

Res: 111.00, 111.23, 111.39, 111.77
Sup: 110.50, 110.00, 109.85, 109.70

Cable is holding at the upper side of multi-day 1.2830/1.2986 congestion and remains biased higher after upbeat UK CPI data on Tuesday and mixed jobs numbers on Wednesday supported the pair. Yesterday's acceleration higher that retested recent highs at 1.2986 and ended day in long bullish candle is positive signal. Also, daily studies in full bullish setup are supportive for final attack at psychological 1.3000 barrier, below which cable showed strong hesitation during past two weeks. On the other side, falling thick weekly cloud heavily weighs on market (cloud base lies at 1.3032) with repeated rejection under 1.3000 barrier to start generating negative signals. However, deeper pullback below 10 and 20SMA's at 1.2927/00 is needed to increase downside pressure and risk retest of lower pivots at 1.2843/30. Release of UK Retail Sales data is expected to give more clues about pair's near-term action. Forecasts are positive for Apr Retail Sales (m/m is forecasted at 1.0% vs -1.8% in Mar, while y/y forecast stands at 2.1% vs 1.7% in Mar).

Res: 1.2988, 1.3000, 1.3032, 1.3074
Sup: 1.2927, 1.2916, 1.2900, 1.2864

The Euro is taking a breather on Thursday and eases from fresh six-month high at 1.1171, posted after strong four-day rally.

The move could be described as corrective on overextended daily studies and reduced pressure on US dollar amid the latest political turmoil in the US. Also, investors are looking to take profits on recent strong rally that may push the pair lower.

In absence of data from the Eurozone today, the pair is expected to be driven by technicals and development of the political situation in the US.

Reversal signal is developing on 4-hr chart as strongly overbought RSI and slow stochastic are turning lower.

Also, slow stochastic is overbought on daily chart and is expected to generate bearish signal.

However, Euro’s strong bullish sentiment suggests that correction should be limited.

Broken Fibo 61.8% of larger 1.1614/1.0338 descend at 1.1127 is so far acting as initial support and is holding today’s action.

Extended pullback should be ideally contained by broken weekly cloud top at 1.1065, however, deeper dips may extend towards former high at 1.1020 (08 May) and psychological 1.1000 support (reinforced by rising daily Tenkan-sen) which mark lower pivots, loss of which would trigger stronger correction and sideline immediate bulls.

Res: 1.1171, 1.1201, 1.1250, 1.1300
Sup: 1.1127, 1.1078, 1.1065, 1.1020

Gold was very strong lately, when stocks sold-off, but interestingly AUDUSD did not follow metals much. There has been some upside move into 0.7460 channel resistance area, but nothing aggressive. So we assume that Aussie is corrective here and that bearish turn may show up, especially once resistance on gold will be seen. From a clear Elliott Wave perspective, we would look for Aussie weakness beneath May 10 levels if lower channel line is broken decisively.

AUDUSD, 30Min

Gold is seen now in an extended wave 3, so be aware of a turn lower after subwave "v" hits a new high near 1265-1270.

GOLD, 1H

The US dollar continued to collapse yesterday, with the USD index reaching its lowest level since November amid heightened uncertainty on the US political front. The recent media reports suggesting President Trump attempted to interfere with an FBI investigation have weighed significantly on risk sentiment, evident by the surge in safe haven assets, as well as the dip in global equity markets.

We stick to our guns that this market sentiment could continue over the next few days. We base our view on the elevated market skepticism over Trump's ability to push his tax plans through Congress, as well as the fact that there is nothing major on the US economic calendar to distract investors from these political developments until the release of the FOMC minutes next Wednesday.

USD/JPY continued to tumble yesterday, falling below the support (turned into resistance) of 111.90 (R1). The plunge brought the rate back within the medium-term downside channel that has been in place since December. Despite the corrective rebound following a test at 110.50 (S2), the fact that we are back within that channel increases the possibilities for the bears to take the reins again soon and perhaps aim for another test near 110.50 (S2). For now though, we stay cautious that the current corrective bounce may target the 111.90 (R1) barrier as a resistance this time.

Strong employment data lift AUD

Overnight, Australia's jobs data for April showed that the nation enjoyed a second consecutive month of strong employment gains. The unemployment rate unexpectedly declined to 5.7% from 5.9% previously, while the labor force participation rate remained unchanged, beating the consensus for a tick down.

Meanwhile, the net change in employment was much higher than anticipated. As a result, the Aussie surged on the release. We think that these encouraging prints are likely to alleviate some of the RBA's concerns regarding the labor market, which according to its May meeting minutes, the Bank was “carefully monitoring”.

AUD/USD traded higher overnight, breaking above the resistance (now turned into support) barrier of 0.7445 (S1). Although the recovery started on the 11th of May is possible to continue for a while, as long as the rate continues to trade below the downtrend line taken from the 30th of March, I would treat it as a corrective move. We see the case for sellers to pull the trigger near the crossroad of the aforementioned downtrend line and the 0.7500 (R1) territory. In order for us to get confident on further upside extensions, we would like to see a decisive close above that crossroad.

Today's highlights:

During the European day, we get UK retail sales data for April. The forecast is for both the headline and the core figures to have rebounded, following a sharp decline the previous month. The forecast is supported by the BRC retail sales monitor, which skyrocketed to +5.6% yoy in April from -1.0% yoy previously. In addition, the fact that the TR/IPSOS and the Gfk consumer sentiment indices both rose during the month, enhances the argument for a rebound in sales. Such a rebound could ease some of the BoE's concerns that household consumption appears to be slowing and thus, bring GBP under renewed buying interest.

From the US, we get the Philly Fed manufacturing index for May and expectations are for another decline. Something like that could raise some speculation for a similar reaction in the ISM manufacturing index, which could extend USD's recent losses. We also get the nation's initial jobless claims for the week ended on May 12th.

We have three speakers on the agenda: ECB President Mario Draghi, ECB Executive Board member Sabine Lautenschlager and Cleveland Fed President Loretta Mester. We think that market participants are likely to focus primarily on Draghi's comments, amid elevated speculation that the ECB may appear slightly more optimistic at its upcoming meetings. Any such hints could bring the euro under renewed buying interest.

USD/JPY

Support: 111.00 (S1), 110.50 (S2), 109.70 (S3)

Resistance: 111.90 (R1), 112.35 (R2), 113.10 (R3)

AUD/USD

Support: 0.7445 (S1), 0.7385 (S2), 0.7330 (S3)

Resistance: 0.7500 (R1), 0.7550 (R2), 0.7600 (R3)

The euro surged ahead to a fresh 6-month high earlier this morning as the price was seen trading above $1.1150. The gains came about as the US dollar index weakened significantly since last Friday, while data from the eurozone turned encouraging.

Latest inflation figures confirmed yesterday that the Eurozone's consumer price index rose 1.9% on the headline and 1.2% on the core, validating the preliminary inflation reports. In the United States, lack of any economic data saw investors focus on the political developments from Washington.

In the UK, the latest monthly jobs report saw the UK's unemployment rate falling to a 42-year low at 4.6% in the periods between January and March 2017. Wages also posted a modest increase, rising from 2.3% previously to 2.4% and matching estimates.

Looking ahead, the economic data today turns to the weekly unemployment claims and the Philly Fed manufacturing index. Earlier in the day, the Australian jobs report saw the unemployment rate falling to 5.7%.

EURUSD intraday analysis

EURUSD (1.1145): EURUSD rose nearly 0.6% yesterday as price breached the 1.1150 level quite comfortably. The EURUSD is now into four days of a strong bull rally as the price was seen testing the resistance level at 1.1150 from late last year.

On the weekly chart, EURUSD is seen posting a hidden bearish divergence, while on the daily chart we have a bearish divergence on the Stochastics posting a lower high. This potentially indicates that a correction could be on its way, provided that EURUSD can break down below 1.1100. Failure to do so could keep the bullish momentum intact and keep prices on track to test 1.1200.

AUDUSD intraday analysis

AUDUSD (0.7459): The Australian dollar is now into its seventh day of gains, well supported by a better than expected jobs report earlier today and a weaker US dollar.

Price is seen testing the lows from late April at 0.7465. There is currently a confluence of resistance level and the dynamic trend line from the falling price channel at 0.7465 which could potentially signal the end of the correction. Support at 0.7377 remains to be tested to the downside, while to the upside a breakout above 0.7465 is essential to keep prices to push higher.

GBPUSD intraday analysis

GBPUSD (1.2966): The British pound continues to remain muted but well supported above 1.2800. Price action was seen testing the resistance level at 1.2988 - 1.2965 region which was previously tested just last week.

Another failure to break out above this resistance level could imply a move back to the downside with 1.2800 support coming back into the picture. On the daily chart, there is a strong indication of a downside correction towards 1.2600 on the bearish divergence to the Stochastics. However, a close below 1.2911 is required to confirm this view. Coming up later today will be the retail sales figures which are expected to see a gain of 1.2%, partly offsetting last month’s declines of 1.8%.

The main event risk for Sterling on Thursday will be April's UK retail sales report which will be vital in providing some insight over the behaviour of consumers amid Brexit developments. With wage growth lagging behind inflation, the sales data may come under scrutiny for any signs of falling wages impacting consumer confidence. If retail sales fail to meet expectations and follow the same pattern as they did in March, concerns are likely to heighten over the sustainability of the UK's consumer-driven economic growth. Although markets are expecting retail sales to rebound in April to 1% due to the Easter holiday, this still may not be convincing enough to brush away Brexit concerns. The Bank of England has already warned of a consumer spending squeeze while the uncertainty blanketing Brexit continues to weigh on sentiment.

Sterling was unnaturally resilient against the bearish sentiment this week with a vulnerable Dollar playing a key role. The GBPUSD is at risk of depreciating lower if bulls fail to conquer the 1.3000 resistance level.

It's all about the 'Trump Slump'

The brewing political instability in Washington has raised questions about Donald Trump's ability to deliver his pro-growth policies, with a growing sense of uncertainty hastening the flight to safety. Global stocks were exposed to downside shocks during trading on Wednesday amid a lack of appetite for risk with Asian, European and American markets concluding depressed. With optimism rapidly diminishing over Trump's proposed fiscal spending and his administration coming under increasing pressure, the Trump rally seems to be a theme of the past. Stock markets may be instore for further punishment moving forward as political turmoil in the US and ongoing geopolitical tensions are adding to the mountinguncertainty over Trump.

Euro bulls unstoppable?

The EURUSD has experienced an incredible appreciation this week with prices marching to a fresh six-month high at 1.1170 as investors embraced the encouraging macro-fundamentals in Europe. A vulnerable Dollar has fuelled the upside rally and is likely to elevate the currency higher in the short to medium term. With the current reliefof political risk in Europe also boosting the attraction for the Euro, bulls have won this current battle. Investors may direct their attention towards the ECB meeting minutes and the speech by Mario Draghi this evening which could offer the Euro a further boost if hawks make a guest appearance.

From a technical standpoint, the EURUSD fulfils the prerequisites of a bullish trend on the daily charts as there hasbeen consistently higher highs and higher lows. A technical correction seems to be pending with bulls potentially exploiting the 1.1100 support level to drive prices higher towards 1.1200.

Emerging Market Currencies shine

Emerging market currencies heaved a sigh of relief this week with most edging higher after the Dollar sharply depreciated. Concerns over the political instability in the US weighing on prospects for pro-growth policies are likely to expose the Greenback to further downside risks with the resurgence of emerging market currencies taking the shine away from Trump pushing legislative agendas. Bond markets may be poised to rally further as the lingering concerns over slowing growth and the possible threat of the GOP agenda falling apart weigh on sentiment. A rally in the Bond market is good for emerging market appetite as foreign interest increases.