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The UK and the Eurozone Markit Manufacturing PMI for April will be released today at 09:30 BST. German Unemployment rate and Unemployment change for April will be released at 08:55 BST Wednesday May 3. It will be followed by the Eurozone Q1 GDP initial readings (YoY and QoQ) at 10:00 BST.

The German unemployment rate saw a notable downtrend since early 2014. The reading in March was 5.8% hitting a record low. Eurozone GDP readings (YoY and QoQ) have been oscillating steadily in a range between 1.5%-1.7% and 0.3%-0.6% respectively since September and February 2015. The market is expecting the upcoming Q1 GDP to show 1.7% yearly and 0.5% quarterly expansion.

ECB Governor Draghi stated last Thursday that “the Eurozone economic recovery is becoming increasingly solid, and the downside risks have further diminished”. However, inflation has not yet seen a convincing upward trend.

Recent underperforming US economic data has provided support to EUR/USD; holding above the psychological level at 1.0900. If the upcoming German labour market data and the Eurozone Q1 GDP outperforms, then we can expect continuing strengthening of EUR, and a rise in European equity markets.

The FOMC meeting will be held on Wednesday May 3. Markets expect the Fed to raise rates in June instead of May. Nevertheless, we might get further clues about the probability of a rate hike in June from Fed Chair Yellen's tone of her speech. The recent weak US economic data might make Yellen's speech less hawkish. Per the CME's FedWach tool, the probability for a rate hike in June is 67.4%.

The dollar index saw a rebound and attempted to recover the psychological level at 99.00, after hitting a 1-month low of 98.55 on April 25. It was helped by the US Congress' agreement on a $1 trillion budget deal to maintain the operation of the US federal government until 30 September.

Trump has proposed cuts on several science budgets aiming to reduce the US government's financial stress. The cuts in budgets include the Environmental Protection Agency (EPA), the National Institutes of Health (NIH) and the National Science Foundation (NSF). However, Congress has already rejected the NIH budget cut.

Trump has been trying to finance his tax reform bill in several ways; such as replacing Obamacare and cutting the science budget. Unfortunately, both attempts have failed. There seems to be plenty of hurdles in Trump's administration. The prospect of the US government's financial condition still remains less than optimistic.

The Aussie cracked 200SMA barrier on Tuesday's recovery extension to 0.7554, following strong rally on Monday (the biggest one-day gains since 15 Mar).

However, the pair was so far unable to hold gains, as the price returned to 100SMA (0.7524), after yesterday's rally closed just below it.

Failure to clearly break 100 and 200SMA barriers would signal recovery stall and risk fresh downside, as daily studies are overall bearish.

Conversely, reversal signal will be generated on sustained break above 200SMA, where the upper boundary of falling wedge also lies.

Res: 0.7510, 0.7549, 0.7558, 0.7582
Sup: 0.7524, 0.7513, 0.7482, 0.7464

EUR/JPY - 122.36

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Near term up

Original strategy:

Buy at 120.20, Target: 122.20, Stop: 119.60

Position: -
Target: -
Stop: -

New strategy :

Buy at 120.65, Target: 122.85, Stop: 120.05

Position: -
Target:  -
Stop:-

Although the single currency has surged again after brief pullback and broke above previous resistance at 122.01 and near term upside bias remains for further gain to 122.55-60, loss of upward momentum should prevent sharp move beyond previous resistance at 122.89 (b leg top) and price should falter below 123.50-60, risk from there has increased for a retreat to take place later this week.

In view of this, would not chase this rise here and would be prudent to buy euro on subsequent pullback as 120.60-65 should limit downside. Below 120.25-30 would defer and suggest top is possibly formed, risk weakness to 120.00, then 119.45-50 but reckon support at 118.92 would contain downside and euro may stage another rally from there. 

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

AUD/USD – 0.7530

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term down

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Although aussie extended recent decline to as low as 0.7440 last week, lack of follow through selling and the subsequent rebound to 0.7556 suggest low has possibly been formed there and consolidation with mild upside bias is seen, break of said resistance would extend gain to resistance at 0.7592 but a sustained breach above this level is needed to add credence to this view, bring further subsequent rise to 0.7611.

In view of this, would not chase this rise here and would be prudent to stand aside in the meantime. Only below 0.7490-95 would suggest top is possibly formed, bring weakness to 0.7465-70 but break of said support at 0.7440 is needed to signal recent decline has once again resumed and extend fall to 0.7390-00 first.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

USDJPY is trading higher, but pair is seen in 5th wave of a five wave rally so upside can be limited. Technically we expect a three wave set-back this week, which can be confirmed once market falls below the channel support at 111.40 area. Divergence on the RSI also suggests that upside can be limited.

USDJPY, 1H

Weekly

    •    Last Candlesticks pattern: Shooting star 
    •    Time of formation: 03 May 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 3 May 2016
    •    Trend bias: Sideways

EUR/USD – 1.0908

After last week’s gap-up opening and breaking of previous resistance at 1.0906, the single currency has maintained a firm undertone, adding credence to our view that the erratic rise from 1.0340 low is still in progress and may extend further gain, above 1.0951 resistance would bring subsequent rise to 1.1000 and then towards 1.1050-60 but upside should be limited to 1.1100 and price should falter well below previous chart resistance at 1.1300, bring selloff later.

On the downside, whilst initial pullback to 1.0820-25 cannot be ruled out, reckon downside would be limited to previous resistance at 1.0778 and bring another rise later. A daily close below the Kijun-Sen (now at 1.0761) would defer and suggest top is possibly formed, risk test of support at 1.0682 but break there is needed to add credence to this view, bring further fall to the lower Kumo (now at 1.0642). Looking ahead, only break of 1.0600-05 would provide confirmation and suggest the aforesaid rise from 1.0340 has possibly ended, risk test of key support at 1.0570 first. 

Recommendation: Buy at 1.0800 for 1.1000 with stop below 1.0700.

On the weekly chart, although the single currency opened higher last week, lack of follow through buying formed a doji candlestick pattern, suggesting the direction is still unclear at the moment, if this week ends with a long white candlestick, this would add credence to our bullish view that low has been formed at 1.0340 earlier and extend this rebound for at least a retracement of recent decline to 1.1000, then test of the lower Kumo (now at 1.1070) but reckon the upper Kumo (now at 1.1161) would limit upside and resistance at 1.1300 should hold, price should falter below strong resistance at 1.1366.

On the downside, although initial pullback to the Kijun-Sen (now at 1.0820) is likely, reckon previous resistance at 1.0778 would limit downside and bring another rise later. A drop below the Tenkan-Sen (now at 1.0723 would risk weakness to 1.0682 support but break of 1.0570 support is needed to abort and signal the aforesaid corrective rise from 1.0340 low has ended instead, then further decline towards key level at 1.0493 would follow.

Daily Pivots: (S1) 0.8430; (P) 0.8444; (R1) 0.8473; More...

The break of 0.8461 minor resistance suggests that pull back from 0.8529 is completed at 0.8404. Intraday bias is turned back to the upside for 0.8529. Break there will resume the rebound from 0.8312 towards 0.8786 resistance. On the downside, below 0.8404 will turn focus back to 0.8303 low instead. Overall, price actions form 0.9304 are seen as a corrective pattern and is extending.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. In case of deeper fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Rise from 0.6935 (2015 low) will resume at a later stage to 0.9799 (2008 high). However, sustained break of 0.8116 could bring deeper decline to next key support level at 0.7564 before the correction completes.

Weekly

    •    Last Candlesticks pattern: Marubozu
    •    Time of formation: 14 Nov 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 15 Feb 2017
    •    Trend bias: Down

USD/JPY – 112.05

The greenback found renewed buying interest at 109.62 (just above last week’s low at 109.59) and has rallied again, dampening our bearishness and suggesting the rebound from 108.13 low is still in progress for retracement of recent decline, hence gain to previous resistance at 112.20 would be seen, however, a daily close above this level is needed to retain bullishness and bring a stronger rebound to the lower Kumo (now at 112.99), then test of 113.35-40 (50% Fibonacci retracement of 118.66-108.13), however, reckon upside would be limited to 114.00 and 114.60-65 (61.8% Fibonacci retracement) and price should falter below key resistance at 115.51, bring retreat later.

On the downside, whilst initial pullback to 111.00 and possibly 110.50-60 cannot be ruled out, reckon the Kijun-Sen (now at 110.17) would limit downside and bring another rise later. Only a daily close below said support at 109.59 would suggest top is possibly formed instead, bring weakness to 108.85-90 but break there is needed to signal the rebound from 108.13 has ended, then retest of this recent low would follow. Looking ahead, dollar needs to penetrate this level to revive bearishness and extend the erratic decline from 118.66 top to 107.85-90 (61.8% Fibonacci retracement of 101.19-118.66) and possibly 107.40-50.

Recommendation : Stand aside for this week.

On the weekly chart, as the greenback rallied after opening higher last week, suggesting low has possibly been formed at 108.13 last month and consolidation with upside bias is seen, break of 112.20 resistance would encourage for a stronger rebound to 113.35-40 (50% Fibonacci retracement of 118.66-108.13), then towards 114.60-65 (61.8% Fibonacci retracement), however, reckon upside would be limited and price should falter well below resistance at 115.51. Looking ahead, only a break of 115.51 would retain bullishness and signal the entire correction from 118.66 has ended at 108.13), bring further rise to 119.50, then 120.00-10 but resistance at 121.69 should remain intact.

On the downside, expect pullback to be limited to 110.60-70 and bring another rise later. Below the Kijun-Sen (now at 109.93) would risk test of last week’s low at 109.59 but a weekly close below previous resistance at 109.49 is needed to signal top is formed instead, bring weakness to 108.80-85, break there would bring retest of 108.13 support, once this level is penetrated, this would revive bearishness an extend recent selloff from 118.66 to 107.85-90 (61.8% Fibonacci retracement of 101.19-118.66), then towards 107.00, however, reckon downside would be limited to 106.50-55 (61.8% Fibonacci retracement of 99.01-119.52) and previous resistance at 105.53 (now support) should remain intact.

USD/CHF - 0.9948

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9953

Kijun-Sen level                    : 0.9947

Ichimoku cloud top                 : 0.9940

Ichimoku cloud bottom              : 0.9929

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite last week’s late fall to 0.9893, failure to penetrate this last week’s low and the subsequent strong rebound to 0.9961 has retained our view that further choppy trading above said support would take place, above 0.9969 would bring test of resistance at 0.9981 but only break of 1.0000-08 resistance would confirm a temporary low has been formed at 0.9893, bring retracement of recent decline to 1.0025-30 (61.8% Fibonacci retracement of 1.0108-0.9893) but price should falter well below resistance at 1.0067.

On the downside, below 0.9915-20 would bring another test of said strong support at 0.9893 but break there is needed to revive bearishness and signal the decline from 1.0108 top has resumed and extend weakness to 0.9865-70 (2 times extension of 1.0108-1.0008 measuring from 1.0067), however, support at 0.9831 would hold from here, bring rebound later. As near term outlook is mixed, would be prudent to stand aside for now.

Daily Pivots: (S1) 1.4434; (P) 1.4515; (R1) 1.4562; More...

Intraday bias in EUR/AUD remains neutral for consolidation below 1.4649 temporary top. We're holding on to the view of trend reversal after defending 1.3671 key support. Hence, downside of retreat should be contained by 1.4334 resistance turned support and bring another rally. Above 1.4649 will target 1.4721 key resistance. Decisive break of 1.4721 will confirm our bullish view. However, break of 1.4334 will suggest rejection from 1.4721 and turn bias back to the downside for 1.3980 support instead.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction could be completed after defending 1.3671 key support. Break of 1.4721 cluster resistance (38.2% retracement of 1.6587 to 1.3624 at 1.4756) should confirm this case and target 61.8% retracement at 1.5455 and above. Overall, we'd expect the up trend from 1.1602 to resume later. However, sustained break of 1.3671 will invalidate our bullish view and would turn extend the fall from 1.6587 towards 1.1602 long term bottom.