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EUR/JPY Sideways price action.

EUR/JPY's bullish run has broken resistance at 124.59 (07/05/2017 high), Hourly support is given at 122.93 (05/05/2017 low). Major support is given at 114.90 (18/04/2017low). Expected to see further renewed buying pressures towards 126.00.

In the longer term, the technical structure validates a medium-term succession of lower highs and lower lows. As a result, the resistance at 149.78 (08/12/2014 high) has likely marked the end of the rise that started in July 2012. Strong support at 94.12 (24/07/2012 low) looks nonetheless far away.

EUR/GBP Growing demand.

EUR/GBP is strengthening. The technical has turned positive since the pair has broken resistance at 0.8530 (25/04/2017 low). Support can be found at 0.8304 (05/12/2017 low). Expected to see further consolidation around 0.8600.

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.

EUR/CHF Slowly declining.

EUR/CHF is getting lower. Despite the sharp increase and the recent bullish breakout which was very likely psychological, we believe that the medium-term pattern suggests us to see at some point renewed bearish pressures towards key support that can be found at 1.0623 (24/06/2016 low).

In the longer term, the technical structure is mixed. Resistance can be found at 1.1200 (04/02/2015 high). Yet,the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

GBP/USD – 1.2954

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: 1.2970

Position: - Short at 1.2920
Target:  - 1.2770
Stop: - 1.2970

New strategy :

Hold short entered at 1.2920, Target: 1.2770, Stop: 1.2970

Position: - Short at 1.2920
Target:  - 1.2770
Stop:- 1.2970

Although cable has rebounded again and marginal gain from here cannot be ruled out, outlook remains consolidative and reckon upside would be limited, bring another retreat, below 1.2900-10 would bring test of indicated support at 1.2866, break there would signal the rebound from 1.2844 has ended, bring another test of this level, below there would extend the corrective fall from 1.2991 for retracement of recent rise to 1.2831, then towards 1.2770-75 but previous support at 1.2757 should hold from here. 

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 1.2965-70 would signal the pullback from 1.2991 has ended, bring retest of 1.2991 later, only above there would revive bullishness and extend recent upmove to 1.3040-50 but overbought condition should limit upside to 1.3075-80 and price should falter below 1.3100. We are keeping our view that the wave c as well as larger degree wave B has ended at 1.2109, hence impulsive wave C has commenced from there with wave i of C ended at 1.2616, follow by a correction to 1.2365 (end of wave ii) and wave iii rally is unfolding.

GBP/JPY - 145.50

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:

Buy at 144.50, Target: 146.70, Stop: 143.90

Position: -
Target: -
Stop: -

New strategy :

Buy at 144.50, Target: 146.70, Stop: 143.90

Position: -
Target:  -
Stop:-

As sterling has slipped again after meeting renewed selling interest at 147.10 yesterday, retaining our view that further consolidation below recent high of 148.10 would be seen and near term downside risk remains for corrective fall to 144.50-60, however, reckon downside would be limited and bring rebound later. Above 146.30-35 would suggest low is possibly formed, bring rebound to 146.80 but break of said resistance at 147.10 is needed to signal the pullback from 148.10 has ended, bring further gain to 147.50-60, then towards said resistance at 148.10, only a break above there would extend recent upmove from 135.60 to previous chart resistance at 148.45 which is likely to hold from here.

In view of this, we are inclined to buy sterling on subsequent pullback as 144.50-60 should limit downside, bring another rise later. Below said support at 144.00-10 would abort and suggest a temporary top is formed instead, bring correction to 143.50-60 but reckon 143.10-15 would hold from here, bring another rise 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 euro has ticked upwards in the Wednesday session, after recording strong gains on Tuesday. Currently, EUR/USD is trading at the 1.11 line. On the release front, Eurozone Final CPI climbed 1.9%, matching the estimate. There are no major US releases on the schedule. On Thursday, the US releases unemployment claims and the Philly Fed Manufacturing Index. The president of the ECB, Mario Draghi, will speak at an event at the University of Tel Aviv.

The markets continue to do a good job of predicting key consumer data, as Eurozone Final CPI matched the forecast with a strong gain of 1.9% in April. This figure was considerably higher than last month's gain of 1.5%. Eurozone inflation is closing in on the ECB's target of 2.0%, which could increase pressure on the ECB to consider tapering its ultra-loose monetary policy. Germany, for one, is finding that ultra-low interest rates is hampering growth, and wants Brussels to adopt a tighter monetary policy. On Tuesday, Eurozone Flash GDP was unrevised from the April forecast, posting a gain of 0.6% in the first quarter. The eurozone continues to show improved numbers in 2017, boosted in no small part by the German economy, which also expanded 0.6% in the first quarter. The well-respected ZEW Economic Sentiment surveys, which gauge optimism among investors and analysts, were a mixed bag for May. The German indicator improved to 20.6, short of expectations. What was more surprising was the unexpected jump from the Eurozone indicator, which improved to 35.1, its strongest level in almost two years.

The euro posted considerable gains on Tuesday, buoyed by the political uncertainty which has engulfed Washington. News reports on Tuesday said that Trump asked former FBI director James Comey to end an investigation into ties between Russia and Trump's former security adviser, Michael Flynn. Another brewing controversy is Trump's passing of classified intelligence to the Russian foreign minister. Trump initially denied the claim, but has since backtracked, admitting that he did share intel with the Russians, but that he had acted within his rights. With the Trump administration busy putting out political fires, investors are growing increasingly nervous that the president's agenda for a stimulus package and tax reform will stall, and the euro has taken advantage, gaining 1.5% against the greenback.

USD/CHF Monitoring support at 0.9814.

USD/CHF continues to push lower after monitoring of resistance given at 1.0107 high (10/04/2017 high). Support located at 0.9856 (23/04/2017 low) has been broken. Expected to continue going lower.

]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 Continued weakness.

USD/CAD is declining declined after failing to reach 1.3800 before bouncing back. Hourly support can be found at 1.3411 (24/04/2017 high) then 1.3353 (20/01/2017 high). Expected to show bearish pressures as the pair.

In the longer term, there is a golden cross with the 50 dma crossing the 200 dma indicating further upside 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 Consolidating within symmetrical triangle.

AUD/USD has paused above key support at 0.7339 (intraday low). As long as prices remain below the resistance at 0.7608 (17/04/2017 high), the short-term technical structure is negative. Key resistance stands at 0.7681 (30/03/2017 high). Expected to show further weakness.

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 Strong demand.

EUR/USD is trading higher. Resistance now lies at 1.1122 (17/05/2017 high). Hourly support can be found at 1.0842 (11/05/2017 low). Strong support is now given at 1.0682 (21/04/2017 base) and key support can be found at 1.0494 (22/02/2017 low). Expected to continue growing higher.

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 Strengthening.

GBP/USD is trading mixed. Hourly resistance is given at 1.2989 (07/05/2017 high). Hourly support can be found at 1.2757 (21/04/2017 low). An unlikely break of this support would indicate further weakness. Expected to push higher.

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 Renewed bearish pressures.

USD/JPY has exited the symmetrical triangle. Hourly support at 113.86 (11/05/2017 low) has been broken. Stronger support is located at 108.13 (17/04/2017 low). Other key supports lie at a distant 106.04 (11/11/2016 low).The road is now wide-open for further decline.

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).

EUR/CAD – 1.5010



EUR/CAD: Wave 4 ended at 1.4380 and wave 5 as well as circle wave C has possibly ended at 1.2129, major (A)-(B)-(C) correction has commenced and indicated target at 1.6000 had been met.




The single currency only retreated to 1.4825 last week before finding renewed buying interest (we recommended in our previous update to buy at 1.4770) and the pair has surged again since, adding credence to our bullish view that the rise from 1.3784 low is still in progress, above resistance at 1.5153 resistance would extend gain to 1.5215-20 (61.8% Fibonacci retracement of 1.6106-1.3784), then towards previous resistance at 1.5282, however, loss of upward momentum should prevent sharp move beyond 1.5350 and price should falter well below 1.5500, risk from there is seen for a retreat later.



Our latest preferred count is that larger degree wave [C] from 1.3289 as well as circle wave B ended at 1.7509 in Dec 2008 with (A): 1.6325, (B): 1.4719 followed by wave (C) at 1.7509, hence circle wave C is unfolding with wave 1 ended at 1.5186 (diagonal wave 1), wave 2 at 1.6096, impulsive wave 3 has ended at 1.2451, followed by wave 4 at 1.4380, in view of recent strong rebound, we are now treating the wave 5 as well as larger degree circle wave C has ended at 1.2129, hence (A)-(B)-(C) correction has commenced from there with impulsive wave (C) now unfolding and indicated initial upside target at 1.6000 had been met and reckon 1.6500 would hold.



On the downside, whilst pullback to 1.5050-60 cannot be ruled out, reckon downside would be limited to 1.5000 and bring another rise later. Below 1.4900 would defer and prolong consolidation, risk another corrective fall to 1.4825, break there would bring correction to 1.4750-60, however, downside should be limited to 1.4690-00 and price should stay we above previous resistance at 1.4600 (wave i top), bring another rally later.




Recommendation: Buy at 1.5000 for 1.5250 with stop below 1.4900.



On the bigger picture, our long-term count on the monthly chart is that a big sideways consolidation from 2000 low of 1.2557 has possibly ended at 1.7509 as circle wave B with [A]: 1.6976 ( (A): 1.4513, (B): 1.2612, (C): 1.6976), wave [B]: 1.3289 is a double three with 1st a-b-c: 1.5384, x: 1.6709 and 2nd a-b-c: 1.3289. As indicated above, the wave [C] has ended at 1.7509. The selloff from there is now unfolding which itself should be labeled as an impulsive wave with wave 1: 1.5186 (diagonal wave 1), followed by wave 2: 1.6096 and wave 3: 1.2451, wave 4: 1.4380, wave 5 as well as larger degree circle wave C has possibly ended at 1.2129 and major correction has possibly commenced for retracement of recent decline towards 1.4000, then 1.4180-90 (38.2% Fibonacci retracement of 1.7509-1.2129). Below said support at 1.2129 would risk weakness to psychological support at 1.2000 and then 1.1851 (50% projection of 1.7509-1.2451 measuring from 1.4380) but reckon 1.1500 would remain intact, bring reversal later.

AUD/USD     –  0.7402




AUD/USD – Wave 5 of C and (B) has possibly ended at 1.1081




Aussie has recovered after falling to 0.7329 earlier this week, suggesting minor consolidation above this level would be seen and corrective bounce to 0.7450 cannot be ruled out, however, reckon upside would be limited to 0.7490-00 and bring another decline later, below said support would add credence to our bearish view that fall from 0.7750 is still in progress, hence further decline to 0.7300 is likely, however, oversold condition should prevent sharp fall below 0.7270-80 and reckon 0.7200-10 would hold from here, price should stay well above previous chart support at 0.7158, bring rebound later. 


We are keeping our count that top has been formed at 1.1081 (wave 5 of V) and major correction (A-B-C-X-A-B-C) has commenced, indicated downside targets at 0.7945 (61.8% Fibonacci retracement of entire rise from 0.6007-1.1081) and 0.7750 had been met and downside bias is seen for further weakness to 0.6800, then 0.6700 but reckon 0.6500 would hold from here.



Our preferred count is that the rally from 0.6007 to 0.7270 (7 Jan 2009) is marked as wave A, the retreat to 0.6248 (2 Feb 2009) is wave B and the subsequent upmove is labeled as wave C with wave (iii) and wave (iv) ended at 0.8265 and 0.7700 respectively and wave (v) as well as 3 ended at 0.9407, then wave 4 ended at 0.8066 (instead of 0.8578). The wave 5 has met our indicated projection target of 1.1060 and could ended at 1.1081, this level is now treated as the peak of wave (C) as well as larger degree wave B, hence major fall in wave C has commenced, our initial downside target at psychological support at 0.7000 has just been met and further weakness to 0.6500 would be seen later.



On the upside, whilst initial recovery to 0.7450 cannot be ruled out, previous support at 0.7473 should turn into resistance and bring another decline later to aforesaid downside targets. Above 0.7500 would risk test of last week’s high at 0.7556 but only a daily close above there would signal a temporary low is formed, bring a stronger rebound to another previous resistance at 0.7592, break there would add credence to this view, bring correction of recent decline to strong resistance at 0.7611 first. 



Recommendation: Sell again at 0.7490 for 0.7290 with stop above 0.7590



Our alternate count on the daily chart treated the top formed in 2008 at 0.9851 could be a larger degree wave I and was followed by a deep and sharp correction in wave II to 0.6007 and wave III is unfolding from there.

The long-term uptrend started from 0.4775 (2 Apr 2001) with an impulsive structure. Wave I is labeled as 0.4775 to 0.9851 (15 Jul 2008), wave II has ended at 0.6007 (Oct 2008) and wave III is still in progress which may extend further gain to 1.1265.

OPEC rally runs out of steam

After hitting $50.39 on Monday amid the positive outcome of discussion between the oil ministers of Saudi Arabia and Russia, the price of a barrel of West Texas Intermediate crude for delivery in September returned to $48.92 on Wednesday. Indeed the market's enthusiasm following the decision to extend the supply cut deal until March 2018 was short-lived as investors got a reality check.

According to data compiled by Baker Hughes, US total oil and gas rig counts rose to 885, the highest level since August 2015, while total US oil rigs increased by 9, which bring the total to 712.

As already discussed last week, OPEC and its allies are in a difficult position as any effort they'll do to stabilise oil prices will actually benefit the US shale industry. US companies active in the exploration and production sector are ideally positioned to take advantage of the situation. Therefore we maintain our position of continued crude oil prices gains, though modest, in the short-term. We believe it is very unlikely to see sustainable improvement in crude prices with US producers pumping like crazy while OPEC and its allies cut production. We need to see some significant improvements of the fundamentals to see a barrel of WTI above $60.

On Wednesday, the WTI extended losses to $48.38 (generic price), down 0.58% on the day, while its counterpart from the North Sea fell 0.35% to $51.47.

Fade risk inducing noise

Selling of risky asset shifted into high gear after a weak US session. The lack of real drivers has allowed noise around US politics to derail fundamentals optimism. The initial news of allegations that Trump leaked classified then demand x-FBI Director Comey pledge loyalty generated scant market impact. Yet suddenly markets have created a theme to trade-off. Given the fact that there have been no structural shifts we suspect that current bout of risk aversion to be short lived. Our defining theory for 2017 has been to avoid hype and focus on fundamentals, which we will despite lots of red on the board.

US long end yields fell, flattening the curve slightly, as investors liquidated risk assets. The narrowing of US-JP yield differential gave JPY a broad based boost providing further effect of a global concern. Despite the choppy rally in volatility (which was going to happen regardless due to ultra-low levels) the economic data continue to support risk taking. EU data indicated that growth momentum remains solid. US industrial production surged in April to its fast pace since March 2014 (house building data disappointed slight but from an elevated level). Only China industrial output came in softer than expected, yet since controlled policy tightening was the primary culprit, deeper deterioration is unlikely.

While the Trump reflation's story has taken a hit on lower expectation for his pro-growth agenda, we remain buyer of EM FX in dips as the core themes (higher growth, low interest rates / vol, and fading protectionism) should support risk taking. USD has been on the front of much selling as weaker CPI and strong EU data has shifted the balance of tighten expectations to Euro. The low USD position suggests that in our view markets are underpricing the Fed policy path. Improvement in economic data from now till 14th June will asymmetrical favor USD.

Japan: Growth is only spurred by QE

The future does not seem so bright for Japan when looking at fundamentals. The level of debt is astonishing (€8.6 billion debt at 0% interest rate) and the population is ageing. The debt now represents 250% of the GDP.

Inflation is still very weak and Japan's policymakers have been unable to spur it. Yet, growth has increased 1.7% in Q1 and retail sales have also increased 0.5%. The data since the start of the year has clearly outperformed expectations. However today's data such as machine orders (-0.7 y/y) or industrial production (-1.9%) are clearly on the soft side.

What really matters is that the Bank of Japan is continuing its QE. The amount of debt it owns is not reimbursable. Social security spending is growing as the population is getting older. We believe this is actually very costly for Japan. The central bank must also keep its credibly and not default. At the moment, there is no reason for less QE as it would certainly uncover all Japan's difficulties.

In the short-term, we bet on renewed demand for the yen as it seems likely the US economy, which we also believe is overestimated, will drive investors towards the land of the rising sun. When looking for an example, towards the S&P direction, if we remove big blue chips such as Amazon, Apple or Alphabet, the S&P is actually down.

We are certainly at an inflexion point. We reload our long USD/JPY towards 115.00 with a two-month horizon.

The EUR/USD is enjoying a positive momentum surge after French elections and generally good latest Eurozone data. At this point, I expect further gains in EUR/USD with buying into dips should the pair retrace. The POC (23.6, D L3, ATR low) 1.1045-60 could be used for fresh buyers but any momentum move above 1.1120 could target 1.1150. That means we would possibly see 1.1150 without a retracement to POC first. Any 4h close or h1 strong marubozu breakout above 1.1150 will open the doors to 1.1210.