Sample Category Title

GBP/USD - 1.2951

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2932

Kijun-Sen level                    : 1.2935

Ichimoku cloud top              : 1.2963

Ichimoku cloud bottom        : 1.2935

Original strategy :

Sell at 1.2960, Target: 1.2860, Stop: 1.2995

Position : -

Target :  -

Stop : -

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite intra-day euro-led retreat to 1.2903, as cable found good support there and has rebounded in NY morning, suggesting an intra-day low is possibly formed and consolidation with mild upside bias is seen for gain to 1.2960-65, however, break of indicated resistance at 1.2991 is needed to revive bullishness and signal recent upmove has resumed and extend gain to 1.2999-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance), then towards 1.3040-50 which is likely to hold from here due to near term overbought condition. 

In view of this, would be prudent to stand aside in the meantime. Below said support at 1.2903 would revive near term bearishness and suggest a temporary top has been formed at 1.2991, brig correction to 1.2875-80 but price should stay well above last week’s low at 1.2831, risk from there is seen for another rebound later.

Headlines

European equity markets hold on to their positive momentum and gain up to 1%. US stock markets opened slightly higher as well with Nasdaq outperforming.

Manuel Valls, the former Socialist prime minister of France, will fight next month's National Assembly elections under the banner of Emmanuel Macron's centrist En Marche, as he declared his Socialist party "dead and gone".

US NFIB Small Business Optimism declined from 104.7 to 104.5 in April while consensus expected a bigger drop to 104. The indicator remains near multi-year highs.

South Korean voters were poised to elect Moon Jae-in as the country's next leader ending nine years of conservative rule and bringing to power a forceful advocate for closer ties with North Korea. The 64-yr-old former student activist, human rights lawyer, lawmaker and presidential aide thinks that South Korea needs to learn to say "no" to the US.

British PM May pledged to cap household energy prices if she is re-elected on June 8, which would be the biggest market intervention since the sector was privatised almost 30 years ago.

Rates

Outperformance Greek bonds continues

Global core bonds experienced an uneventful session. Recent trends continued with the Bund and US Note future under slight downward pressure. Investors already have key ECB and Fed meetings in June in mind, which might surprise in a hawkish manner. The eco calendar was empty apart from NFIB small business optimism which stabilised at a very high level. Stock markets gained ground while Brent crude remains stuck below $50/barrel.

At the time of writing, the German yield curve steepens with yield changes ranging between -0.3 bps (2-yr) and +3.7 bps (30-yr). Changes on the US yield curve range between +1.1 bp (30-yr) and +1.5 bps (5-yr). On intra-EMU bond markets, 10-yr yield spread changes versus Germany widened up to 2 bps with Austria (-1 bp; good auction) and Greece (-4 bps) outperforming. Greek bonds perform very well since last week's agreement between Greece and international creditors on additional structural reforms. It should pave the way for a new aid payment, debt relief talk and inclusion in the ECB's APP programme. Greek PM Tsipras said today that Greece is "closer than ever" to reaching a deal with its international lenders that will help ease its debt mountain. He added that negotiations on debt relief were ongoing and were expected to continue until the May 22 Eurogroup.

The Dutch debt agency tapped the on the run 5-yr DSL (€2.2B 0% Jan2022). The amount sold was in the lower end of the €2-3B target range, but that's often the case at Dutch auctions. The Austrian treasury auctioned the on the run 10-yr RAGB (€0.575B 0.5% Apr2027) and 30-yr RAGB (€0.425B1.5% Feb2047). The combined amount sold was the maximum targeted. The auction bid cover was good (2.06). The treasury set an additional 10% of each allotted volume aside for secondary market operations. The US Treasury starts its mid-month refinancing operation tonight with a $24B 3-yr Note auction. Currently, the WI trades around 1.56%.

Currencies

From euro correction to USD rebound

The risk rally resumed today after yesterday's pause. There were few eco data which hardly impacted trading. The safe haven currencies like the yen and the Swiss franc were sold. Contrary to what was the case of late, the dollar profited more from the risk-on sentiment and from the rise in core yields than the euro. USD/JPY revisits the 114 area. EUR/USD is drifting below 1.09. Apparently there was still some unwinding of excessive euro longs to do.

Overnight, Asian equity markets traded narrowly mixed in the absence of new eco info. EUR/USD stabilized in the 1.0930 area. USD/JPY maintained yesterday's gains and traded in the 113.30 area. The Aussie dollar was hurt by disappointing retail sales, pushing AUD/USD back sought to the 0.7355 area.

Yesterday's post-Macron profit taking on the European equity markets was short-lived. Good corporate results, solid EMU eco data (including a further rise of the German trade surplus) and the absence of high profile event risk were all good reasons for European equities to resume their uptrend. The risk-on trade weighed on safe havens like the Swiss franc (EUR/CHF 1.0940 area) and the yen (EUR/JPY> 124). Contrary to what was the case last week, the dollar this time profited more from the risk rally and from the rise in core yields than the euro. Interest rate differentials between the US and Germany didn't change much. If anything, they widened slightly in favour of the dollar. (2-y differential again at 200bps+ level). The market was still a bit too much long euro as investors raised euro long positions after the first round of the French presidential election, betting on a change in the ECB-policy guidance. There were also few data in the US. The NFIB small business confidence declined less than expected to 104.5. This remains a very high level in a historical perspective and suggests that the US recovery remains broad-based. The report is no market mover, but it also didn't hamper the case for further USD gains. EUR/USD trades currently in the 1.0885 area. USD/JPY is gaining further momentum an tries to regain the 114 big figure.

Global trends dominate sterling trading

Sterling trading was still driven by external factors rather than by UK specific issues. The Brexit quarrelling between the EU and the UK has eased a bit. This might be a slight help for sterling. EUR/GBP drifted cautiously lower in the 0.84 big figure, feeling a modest spill-over effect from the broader EUR/USD correction. The pair trades currently in the 0.8425 area. At the same time, cable is losing modest ground on the overall comeback of the dollar. However, at GBP/USD, 1.2920 sterling is holding strong. The recent top (1.2989) is still not that far away.

USD/JPY has posted considerable gains in the Tuesday session. In North American trade, the pair is trading at 114.20, marking the first time that the dollar has broken above 114 yen since March 15. On the release front, Japanese wage growth declined by 0.4%, well off the forecast of a 0.4% gain. In the US, there was another strong employment report, as JOLTS Jobs Openings remained unchanged at 5.74 million, above the estimate of 5.67 million.

The dollar has pushed above the 114 line on Tuesday, as a soft Japanese wage growth report weighed on the yen. Wage growth declined 0.4% in March, marking the sharpest decline since June 2015. Prime Minister Abe's government has urged businesses to raise worker's wages, but the message has largely fallen on deaf ears, even with a tight labor market. A sluggish economy and weak consumer spending and dampened business confidence in the economy, so businesses are showing little appetite for raising wages and thus incurring more expenses.

The Japanese yen continues to lose ground, and has slipped 2.4% in the month of May. A weaker yen should result in a boost to the export sector, but on Saturday, BoJ Governor Haruhiko Kuroda said that this was not the case for Japan, since many Japanese companies were producing goods overseas. This argument may ring hollow with US president Trump and US exporters, who will likely cry foul if the yen move close to the 120 level. Early in his presidency, Trump accused Japan of manipulating the yen in order to gain a trade advantage over the US. The two sides have since agreed to let their foreign ministers handles issues related to currency matters, but flare-ups over the strength of the yen could emerge if the yen slide continues.

What's next for the US Federal Reserve? On Friday, the US released key employment numbers for March. The data was generally positive, and this means that a June rate hike has become very likely. Nonfarm Payrolls improved to 211 thousand, easily beating the forecast of 194 thousand. The unemployment rate fell to an impressive 4.4%, compared to the estimate of 4.6%. This was the lowest rate since May 2007. Wage growth remained weak at 0.3%, but still matched the forecast. Still, with such little slack in the labor markets, we should see wage growth start to move higher. If that happens sooner rather than later, the Fed will have to reconsider a third rate hike in 2017. As things stand now, two more moves is the likely scenario. The strong job numbers have cemented a rate hike in June, as the odds of a June hike continue to rise and are currently at 87%, according to the CME Group.

Today's Highlights

• Sterling steady in data void
• Aussie Dollar weaker as retail sales drop
• No change expected from Reserve Bank of New Zealand

Current Market Overview

The Sterling-Euro exchange rate is a tad higher this morning after a lacklustre Monday. Sterling did gain half a cent or so against the Euro after The British Retail Consortium posted a strong 5.6% year-on-year gain in April's retail sales after a drop of 1.0% in March. It is unlikely the Pound will make further gains today as the data diary lacks anything UK related. Traders may twitch on rumours and speculation ahead of Thursday's Bank of England meeting, but that is about all.

For its part, the Euro is weakened by poor German industrial output figures. The data was better than expected but still showed a decline of 0.4% in March. EU data today is of a minor nature; i.e. nothing that is likely to significantly shift the Euro. Traders will be interested in tomorrow's speech by European Central Bank (ECB) President, Mario Draghi, though. His speech about monetary policy may yield hints as to when the ECB is going to be seeking rate hikes.

Overnight news from Australia showed a fall in March's retail sales. Slack wage growth and a soft labour market are being cited as the reasons for the 0.1% decline from the month earlier and the fact that retail sales only gained 0.1% in the first quarter of the year. The Reserve Bank of Australia is caught between these poor stats and fears over regional variations in house price rises. As such, no change is expected in Aussie interest rates any time soon. The Aussie Dollar weakened against the Pound for the sixth day in a row.

Overnight tonight we get the interest rate decision from the Reserve Bank of New Zealand (RBNZ) and, whilst no change is expected, we will be interested to see how the RBNZ sees the recent bout of NZD weakness affecting their decision making. Central banks always say they don't concentrate on the exchange rate, but of course they do. A weak NZD is very welcome for exports, but hampers their attempts to manage inflation. There will be NZ retail data released tonight, so a volatile NZD is likely overnight.

And I have to dash now, because I am off to buy some Nordstrom jeans. They are SO 'this year'. They come with actual caked on mud and grime and they're only $425 a pair. They are a must have for the budding Z list celebrity with gullible tattooed on their botoxed foreheads.

EUR/GBP - 0.8423

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term down

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

 
As the single currency has retreated after meeting resistance at 0.8509 late last week, retaining our view that further consolidation would be seen but only a break of indicated support at 0.8405 would signal the rebound from 0.8312 has ended, bring further fall to 0.8370-75, however, support at 0.8351 should remain intact, bring another rebound later.

On the upside, above 0.8475-80 would bring test of said resistance at 0.8509, however, reckon upside would be limited to resistance at 0.8531 and bring retreat later. Only a break of this level would add credence to our view that a temporary low has been formed at 0.8312 and extend the rebound from there for retracement of recent decline to 0.8550, however, reckon resistance at 0.8580 would limit upside and 0.8600-10 would hold from here. As near term outlook is mixed, would be prudent to stand aside in the meantime. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3740

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term up

 
Original strategy       :

Buy at 1.3540, Target: 1.3750, Stop: 1.3480

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.3655, Target: 1.3850, Stop: 1.3595

Position: -

Target:  -

Stop:-

As the greenback has rebounded again after finding support at 1.3642, suggesting bullishness remains for recent upmove to resume after consolidation, above resistance at 1.3794 would extend recent upmove to 1.3840-50 but near term overbought condition should prevent sharp move beyond 1.3890-00 and price should falter below 1.3950, risk from there is seen for a retreat to take place later. 

In view of this, would not chase this rise here and would be prudent to buy again on pullback as said support at 1.3642 should limit downside and bring another rise later. Below 1.3600-10 would defer and risk correction to 1.3570 but reckon 1.3530 support would hold from here. A firm break below this level would abort and signal a temporary top is formed instead, risk correction to 1.3500 and later towards 1.3450-60 but support at 1.3411 should remain intact, bring another upmove later.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

GBP/USD – 1.2932

 
GBP/USD – Wave 4 is unfolding as an (A)-(B)-(C) and could have ended at 1.7192

 
Cable has maintained a firm undertone after breaking above indicated previous resistance at 1.2775, adding credence to our view that low has indeed been formed at 1.1986 earlier and bullishness remains for the erratic rise from there to bring retracement of medium term decline, hence further gain to psychological resistance at 1.3000 and then 1.3050-55 would be seen, however, loss of near term upward momentum should prevent sharp move beyond 1.3100 and price should falter below 1.3140-50 (38.2% Fibonacci retracement of 1.5018-1.1986), risk from there has increased for a retreat later. 

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 possibly ended at 1.7192, below support at 1.4232 would add credence to this count, then further fall to 1.4000 level would follow but reckon downside would be limited to 1.3655 support and price should stay above previous support at 1.3500.

On the downside, whilst initial pullback to 1.2845-50 cannot be ruled out, reckon downside would be limited to 1.2757 support and previous resistance at 1.2706 would turn into support and contain downside, bring another rise later. Only below previous resistance at 1.2616 (tentatively wave i top) would abort and suggest top is possibly formed, risk weakness to 1.2550-60 but break of 1.2500 support is needed to provide confirmation.
 
Recommendation: Buy at 1.2760 for 1.3000 with stop below 1.2660.

 
Longer term - Cable's rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver with wave (A) ended at 1.3500 (23 Jan 2009), wave (B) itself is labeled as A: 1.6733, triangle wave B: 1.4813 and wave C as well as top of wave (B) ended at 1.7192 (2014), hence the selloff from there is an impulsive wave (C) with wave I : 1.4566, wave II 1.5930, an extended wave III is unfolding and already exceeded our downside target at 1.3500 and 1.3000, hence weakness to 1.2500 and possibly 1.2000 cannot be ruled out, however, price should stay well above psychological level at 1.0000.

GBP/CHF – 1.2978

  


 

GBP/CHF – Circle wave v ended at 0.9106 and major correction has commenced for subsequent gain to 1.5547.


 

As sterling has surged again after brief pullback to 1.2729 late last week and price finally broke above indicated previous resistance at 1.2915, adding credence to our view that another leg of corrective upmove from 1.1475 low is underway, hence further gain to 1.3000, then 1.3045-50 (50% Fibonacci retracement of 1.4614-1.1475) and possibly towards previous chart resistance at 1.3122 would be seen, however, near term overbought condition should limit upside and reckon 1.3190-00 would hold from here. 



To recap the larger degree count, the selloff from 2.4965 (July 2007) is the beginning of wave V with circle and is labeled as 1: 2.3760, 2: 2.4425, wave 3 extension ended at 1.1470, followed by wave 4 at 1.5547, the quick rebound from 0.9106 suggests wave 5 as well as entire circle wave V could have ended there, hence consolidation with mild upside bias is seen for major correction to take place, bring initial test of 1.5547 (previous 4th of a lesser degree).



On the downside, whilst initial pullback to 1.2940-50 cannot be ruled out, reckon downside would be limited to 1.2890-00 and bring another rise later. Below 1.2800-10 would defer and risk weakness towards said support at 1.2729 but only a drop below this level would signal a temporary top is formed instead, bring correction of recent upmove to 1.2690-95, then towards 1.2600-10 which is likely to contain sterling’s downside. 

 


Recommendation: Buy at 1.2895 for 1.3150 with stop below 1.2795.

On the Monthly chart, the longer-term count is that major downtrend is under way with circle wave I at 2.8645 (Sep 1.978), then wave II with circle at 4.6175 (Feb 1981), the wave III with circle ended at 1.7425 (Nov 1995) and followed by wave IV with circle at 2.4965 (July 2007 with a short wave C) and wave V with circle has possibly ended at 0.9106. A monthly close above 1.5547 would add credence to this view, bring major correction to 1.7000, then towards psychological level at 2.0000.

USD/CHF - 1.0043

Original strategy :

Buy at 0.9955, Target: 1.0055, Stop: 0.9920

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9980, Target: 1.0080, Stop: 0.9945

Position : -

Target :  -

Stop : -

As the greenback has rallied yesterday and broke above indicated resistance at 0.9966-69, adding credence to our view that low has been formed at 0.9859 and suggesting recent decline from 1.0108 top has ended, hence consolidation with upside bias remains for further gain to 1.0067 resistance, however, near term overbought condition should prevent sharp move beyond previous resistance at 1.0090 and price should falter below chart point at 1.0108, bring retreat later.

In view of this, we are looking to buy dollar on dips as 0.9980 should limit downside. Below previous resistance at 0.9957 would defer and suggest top is possibly formed, bring test of 0.9920-25 but break of previous resistance at 0.9903 is needed to add credence to this view, brig further fall to 0.9880-85.

GBP/USD - 1.2931

Original strategy :

Sell at 1.2960, Target: 1.2860, Stop: 1.2995

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.2960, Target: 1.2860, Stop: 1.2995

Position : -

Target :  -

Stop : -

Although cable rose to as high as 1.2991 yesterday, the subsequent retreat suggests consolidation below this level would be seen and pullback to 1.2900-10 is likely, however, break there is needed to suggest top is possibly formed, bring further fall to 1.2875-80 but price should stay well above last week’s low at 1.2831, risk from there is seen for another rebound later.

In view of this, we are looking to turn short on recovery. Above said resistance at 1.2991 would extend recent upmove to 1.2999-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance), then towards 1.3040-50 which is likely to hold from here due to near term overbought condition.