Sample Category Title

Weekly
    •    Last Candlesticks pattern: Hammer
    •    Time of formation: 19 Sep 2016
    •    Trend bias: Down

Daily
    •    Last Candlesticks pattern: Doji
    •    Time of formation: 28 Mar 2017
    •    Trend bias: Near term up



EUR/JPY – 117.65

The single currency opened sharply higher this week, a large window was formed on the daily chart, signaling low has been formed at 114.85 earlier this month and upside bias is seen for the rebound from there to extend gain to 122.25-30, however, break of resistance at 122.89 is needed to signal recent decline from 124.10 has ended, bring further gain to 123.31 resistance but price should falter well below said recent high at 124.10 (2016 high). Looking ahead, only a break of 124.10 would retain bullishness and extend early upmove from 109.49 low to 125.25-30 (50% Fibonacci retracement of 141.06-109.49).

On the downside, whilst pullback to 120.00-10 cannot be ruled out, reckon downside would be limited to 119.40-50 and 118.90-95 should hold, bring another rise later to aforesaid upside targets. Below the Kijun-Sen (now at 118.42) would suggest a temporary top is formed instead, bring weakness to 117.82 (previous resistance) but still reckon downside would be limited to 117.30-35 and support at 116.45-50 would hold, bring rebound later. 

Recommendation: Stand aside for this week.

On the weekly chart, this week’s gap-up opening signals recent decline from 124.10 top has ended at 114.85 earlier this month and consolidation with upside bias is seen for further gain to 122.00-10, then towards resistance at 122.89, however, a weekly close above there is needed to signal the fall rom 124.10 has ended at 114.85, bring further rise to 123.31, then retest of 124.10. Looking ahead, a break of 124.10 would confirm early rise from 109.49 low has resumed and extend gain to 124.85-90 (38.2% Fibonacci retracement of 149.79-109.49), then 125.25-30 (50% Fibonacci retracement of 141.06-109.49) but reckon upside would be limited to 126.00 and 126.45-50 would hold.

On the downside, although pullback to 120.00-10 cannot be ruled out, reckon downside would be limited to 119.40-50 and bring another rise. Below 118.85-95 would defer and suggest top is possibly formed, risk weakness to 118.00 but downside should be limited to previous resistance at 117.82 and bring rebound later. A weekly close below 117.82 would suggest first leg of rebound from 114.85 has ended, bring weakness to 117.00 but price should stay above 116.20-25, bring another rebound later.

Weekly
    •    Last Candlesticks pattern: Bullish engulfing
    •    Time of formation: 02 May 2016
    •    Trend bias: Up

Daily
    •    Last Candlesticks pattern: Hammer
    •    Time of formation: 19 Oct 2016
    •    Trend bias: Up



USD/CAD – 1.3649

The greenback only retreated to 1.3411 early this week (just missed our long entry at 1.3400) before finding renewed buying interest and the subsequent rally above indicated resistance at 1.3535 and 1.3599 adds credence to our bullish view that early erratic upmove from 1.2461 low has resumed and may extend further gain to 1.3700-10, then 1.3750-60 but near term overbought condition should limit upside to 1.3835-40 (61.8% Fibonacci retracement of 1.4690-1.2461) and price should falter below 1.3900, risk from there is seen for a retreat later. 

On the downside, whilst initial pullback to 1.3575-80 cannot be ruled out, reckon 1.3530 support would limit downside and bring another rise later. Below the Tenkan-Sen (now at 1.3467) would defer and risk test of the Kijun-Sen (now at 1.3447) but only a daily close below this level would signal top is possibly formed, bring test of support at 1.3411, once this level is penetrated, this would provide confirmation and bring retracement of recent upmove to the upper Kumo (now at 1.3331) but downside should be limited to the lower Kumo (now at 1.3252) and support at 1.3223 should remain intact.

Recommendation: Buy at 1.3500 for 1.3700 with stop below 1.3400.


On the weekly chart, as the greenback has continued moving higher after forming a white candlestick last week and broke above indicated resistance at 1.3535 and 1.3599, adding credence to our view that the erratic upmove from 1.2461 (2016 low) has resumed and bullishness remains for this move to extend headway to 1.3700 and then 1.3770-75, however, reckon upside would be limited to 1.3835-40 (61.8% Fibonacci retracement of 1.4690-1.2461) and 1.3900 should hold, price should falter well below psychological resistance at 1.4000.

On the downside, although initial pullback to previous resistance at 1.3599 and possibly 1.3535 (another previous resistance) cannot be ruled out, reckon downside would be limited to 1.3500 and bring another rise later. A weekly close below support at 1.3411 would defer and suggest top is possibly formed, risk test of the Tenkan-Sen (now at 1.3377) but break of the Kijun-Sen (now at 1.3320) is needed to add credence to this view, bring further fall towards support at 1.3223 which is likely to hold from here.

USD/CHF - 0.9927

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9939

Kijun-Sen level                    : 0.9942

Ichimoku cloud top                 : 0.9944

Ichimoku cloud bottom              : 0.9938

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As dollar has remained confined within near term established range, suggesting further sideways trading is in store, however, break of indicated support at 0.9918 is needed to signal the rebound from 0.9893 (this week’s low) has ended, bring retest of this level, break there would confirm recent decline from 1.0108 has resumed and extend weakness to 0.9865-70 (2 times extension of 1.0108-1.0008 measuring from 1.0067) but reckon support at 0.9831 would hold from here, bring rebound later.

On the upside, above 0.9955-60 would bring test of 0.9980-85 but break of 1.0000-08 resistance is needed to signal low is formed at 0.9893, bring rebound to 1.0025-30 (61.8% Fibonacci retracement of 1.0108-0.9893), however, price should falter below resistance at 1.0067. As near term outlook is still mixed, would be prudent to stand aside for now. 

GBP/USD - 1.2938

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2918

Kijun-Sen level                    : 1.2905

Ichimoku cloud top              : 1.2854

Ichimoku cloud bottom        : 1.2831

Original strategy :

Buy at 1.2830, Target: 1.2945, Stop: 1.2795

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2855, Target: 1.2975, Stop: 1.2820

Position : -

Target :  -

Stop : -

As cable has surged again after brief pullback, adding credence to our bullish view that recent upmove has resumed and upside bias remains for further gain to 1.2970-75, then towards 1.2990-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance), however, overbought condition should prevent sharp move beyond there and risk has increased for a retreat later. 

In view of this, would not chase this rise here and would be prudent to buy cable on pullback as downside should be limited to the upper Kumo (now at 1.2854) and bring another rise. Below 1.2815-20 would risk test of support at 1.2805 but break there is needed to signal top is formed, bring correction to 1.2770-75 first. 

EUR/USD - 1.0894

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0878

Kijun-Sen level                  : 1.0892

Ichimoku cloud top             : 1.0906

Ichimoku cloud bottom      : 1.0904

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although the single currency has rebounded after finding support at 1.0850 yesterday, break of yesterday’s high at 1.0933 is needed to signal the pullback from 1.0951 (this week’s high) has ended, bring retest of this level, break there would extend recent upmove from 1.0340 low to 1.0975-80 and possibly towards 1.1000 which is likely to hold on first testing due to loss of momentum.

On the downside, below said support at 1.0850 would prolong consolidation below 1.0951 and risk correction to support at 1.0821, however, still reckon downside would be limited to 1.0800 and previous resistance at 1.0778 should hold from here, bring another rise later. As near term outlook is mixed, would be prudent to stand aside for now.

The euro has edged upwards in the Friday session, as EUR/USD trades at 1.0890. The week wraps up with a host of events in the eurozone and US, so traders should be prepared for some movement from the pair. In the eurozone, German Retail Sales dropped to 0.1%, matching the estimate. Later in the day, the eurozone releases CPI Flash Estimate, with an estimate of 1.8%. The US will publish Advance GDP, with a forecast of 1.3%. As well, the UoM Consumer Sentiment report is expected to improve to 98.1 points.

The euro dipped on Thursday after the ECB policy meeting, as the rate statement and comments from Mario Draghi were more dovish than the markets would have liked. Draghi stated that policymakers did not discuss tightening monetary policy. The current ultra-loose policy, which includes interest rates at 0.00% and a quantitative easing program of EUR 60 billion/mth, has been in place since 2008. Draghi acknowledged more favorable economic conditions, noting the eurozone economy had improved and downside risks had decreased. There had been speculation that the ECB might taper or bring forward its asset-purchase program, or which runs until December. The ECB holds its next meeting in June, and the markets will again be looking for some tightening from the ECB.

The French presidential election may be in the daily headlines, but the euro has not showed significant movement this week. Voters will be back at the ballot boxes next Sunday, and the markets have priced in a victory by Emmanuel Macron over Marie Le Pen. A major reason for the market’s calmness is that opinion polls before the first round were fairly accurate, and correctly forecast that Macron would win 24% of the vote and Le Pen 22%, with both advancing to the May 7 runoff. The markets are thus relying on the polls for the second round, which show Macron with a comfortable lead of 60-40. Le Pen is a heavy underdog, compounded by the fact that some candidates from the first round as well as former President Francois Hollande have publicly called for voters to support Macron. Still, a strong showing by Le Pen on Sunday would show that her strident anti-EU stance has wide popularity, and this could sour investor sentiment and send the euro downwards.

One of President Trump’s most important campaign platforms was overhauling the US tax code. Trump finally announced his long-awaited tax plan on Wednesday. The proposal calls for sharp reductions for both individuals and corporations. The plan calls for three tax brackets for individuals – 10%, 25% and 35%. The corporate sector would also see significant tax relief, with the corporate tax rate dropping from 35% to 15%, and the tax on multinationals’ overseas profits lowered from 35% to 10%. However, any tax reform proposals from the White House will require a stamp of approval from Congress, so Trump’s proposal should be viewed as a blueprint that is a long way off from becoming law. Trump’s proposal was short on details, although government officials are praising it as one of the largest tax cuts and broadest overhauls of the tax system in history. There hasn’t been much reaction to the Trump tax plan from the currency markets.

USD/JPY - 111.31

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 111.22

Kijun-Sen level                  : 111.32

Ichimoku cloud top             : 111.28

Ichimoku cloud bottom      : 110.88

Original strategy  :

Buy at 110.45, Target: 111.55, Stop: 110.10

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 110.45, Target: 111.55, Stop: 110.10

Position :  -

Target :  -

Stop : -

Dollar’s retreat after meeting resistance at 111.60 yesterday has retained our view that consolidation below this week’s high at 111.78 would be seen and pullback to 110.60-69 (previous resistance and 50% Fibonacci retracement of 109.59-111.78) cannot be ruled out, however, reckon downside would be limited and 110.40-45 (61.8% Fibonacci retracement) should hold, bring another rise later, above said resistance at 111.78 would signal recent rise from 108.13 low has resumed and extend further gain to 111.90-00 but overbought condition should prevent sharp move beyond another previous resistance at 112.20.

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as 110.40-45 (61.8% Fibonacci retracement of 109.59-111.78) should limit downside. Only break of 110.05-10 (50% Fibonacci retracement of 108.32-111.78) would defer and suggest top is possibly formed, risk weakness to 109.80 but break of support at 109.59 is needed to provide confirmation.

The ECB remained on hold yesterday, while the statement accompanying the decision contained no major changes from previously. The Bank kept intact its dovish forward guidance that the QE program can be extended or expanded if needed, and that rates will remain at present or lower levels for an extended period of time.

Draghi's press conference was more eventful. The euro gained initially, after the President indicated that even though the risks surrounding the outlook for growth are still tilted to the downside, they are moving closer to being broadly balanced. However, the currency quickly gave back all its gains to trade even lower, after he said the Governing Council did not discuss any strategy for exiting stimulus. He added that policymakers are still not sufficiently confident that inflation will converge back to their target. In our view, these signals call into question the recent media reports that the Bank is likely to sound more optimistic at upcoming meetings, perhaps as early as in June. Even though something like that will probably depend on how the data evolve until then, it would be rather odd for the ECB to communicate a completely different message in six weeks' time, in our view.

For the time being, investors are likely to turn their attention back to incoming economic data in order to assess whether the Bank will indeed shift towards a more upbeat bias in June. Eurozone's preliminary CPI data for April, due to be released today, could provide a first hint on this prospect (see below).

EUR/USD edged down as soon as Draghi poured cold water on speculation with regards to a more optimistic bias. The pair slid after it found resistance above 1.0915 (R1) to hit our support level of 1.0855 (S1). We still believe that the short-term path is to the upside and that buyers may take advantage of yesterday's setback and aim for another test near the 1.0915 (R1) barrier. A clear break above that resistance could target the next one at 1.0955 (R2), marked by Tuesday's and Wednesday's highs. A potential rise in Eurozone's CPI rates combined with the likelihood of a slowdown in US GDP could prove the catalyst for such a move today.

Riksbank keeps rates unchanged, extends QE duration

The Riksbank kept its key policy rate unchanged yesterday, but extended the duration of its QE program by 6 months to December 2017. It also pushed somewhat further out the timing for its first planned rate hike, and maintained an ultra-dovish tone in the statement accompanying the decision. SEK tumbled on the news and could remain under selling pressure for a while.

Today's highlights:

As we already noted, we get Eurozone's preliminary CPI data for April. The forecast is for both the headline and the core rates to have risen. The ECB has repeatedly noted that it places more emphasis on the core rate, where a potential increase today could amplify speculation that the Bank may appear more optimistic in coming months. This could help the euro to recover some of its ECB-related losses.

From Germany, Sweden, and Norway, we get retail sales figures, all for March.

From the UK, we get the 1st estimate of Q1 GDP. The forecast is for economic activity to have slowed, something supported by the notable slide in retail sales for March, the disappointing industrial production for January and February, and the weaker performance of the nation's PMIs compared to that seen at the turn of the year. A potential slowdown in GDP could confirm that the BoE will likely keep its accommodative policy stance intact in order to support growth and thereby, reverse some of the pound's recent gains.

EUR/GBP also traded south on Draghi's remarks, falling below the support (now turned into resistance) of 0.8450 (R1) to stop near 0.8410 (S1). Given that the rate is trading below the long-term uptrend line taken from the lows of November 2015, we consider the outlook to be cautiously negative. However, accelerating Eurozone CPIs combined with slowing UK GDP could cause a corrective bounce before the bears decide to take the reins again. A break back above 0.8450 (R1) may confirm that and could open the way for the next resistance of 0.8500 (R2).

We get the 1st estimate of Q1 GDP from the US as well. The forecast is for GDP growth to have slowed to +1.1% qoq SAAR from +2.1% qoq SAAR in Q4. Bearing in mind that the Atlanta Fed GDPNow model suggests that growth was a mere +0.2% qoq SAAR, we see the risks surrounding that forecast as tilted to the downside. Coming on top of the slowdown in the nation's CPIs for March, a weak Q1 growth rate could push back expectations regarding the timing of the next Fed rate hike, which may weigh on USD.

We have only one speaker on the agenda: SNB Chairman Thomas Jordan.

EUR/USD

Support: 1.0855 (S1), 1.0825 (S2), 1.0800 (S3)

Resistance: 1.0915 (R1), 1.0955 (R2), 1.1000 (R3)

EUR/GBP

Support: 0.8410 (S1), 0.8345 (S2), 0.8315 (S3)

Resistance: 0.8450 (R1), 0.8500 (R2), 0.8530 (R3)

There are two crucial GDP figures to be released today; UK Q1 GDP initial reading will be released at 09:30 BST, followed by the US Q1 GDP annualized initial reading, Q1 PCE and Q1 core PCE inflation figures (QoQ) at 13:30 BST.

This will be the first US GDP figure reported after Trump took office. Presently the US economic condition remain sound – whereas, per the Q4 GDP annualized final reading, we saw a 2.1% growth showing a slowdown compared to a 3.5% growth in Q3. Market expectations for the upcoming Q1 GDP initial reading is 1.3%, which is lower than a 2.1% growth in Q4.

Growth around 2% is still sound however it shows a slowdown compared to the robust economic expansion over past decades. The reason for the recent slowdown is partially because of reduced consumer spending (especially on automobiles) caused by delayed tax returns and a warm winter. In addition; decreased corporate investment and government spending (Trump froze federal hiring ) also weighed on Q1 GDP growth.

However, the global economy is seeing a gradual recovery. Furthermore, the weakening of USD since the beginning of the year has boosted overseas demand for US products and US exports. In addition, the US job market is close to full employment which also provides Q1 GDP some support.

The US economic cycle is typically sluggish during the winter months then starts to see a revival in spring and summer. Therefore, the Q2 and Q3 GDP readings will likely see a better performance.

The dollar index saw a rebound over the past two days after hitting the lowest level of 98.55 since November 11. The current price is trading below the significant psychological level at 99.00.

Per the CME’s FedWatch tool the current probability for a rate hike in June is 67.6%. If the US Q1 GDP reading beats expectations, then we can expect an increase in the probability and further support to USD. Conversely, if Q1 GDP underperforms, it will likely weigh on USD and lower the probability of a rate hike in June.

The Euro is softer on Friday following double upside rejection at 1.0950 and two consecutive days in red but is still holding above strong support at 1.0834, provided by 200SMA. Near-term risk is shifted lower after dovish ECB on Thursday and reversal of slow stochastic from overbought zone on daily chart. Focus is on 1.0834/19 pivots (200SMA/low of the week, reinforced by weekly Kijun-sen) as well as 1.0804 (Fibo 38.2% of 1.0568/1.0950 rally), violation of which is expected to generate strong bearish signal. Alternatively, the pair may hold in extended congestion while 200SMA support stays intact. Release of US GDP data due later today may give more clues about pair's near-term direction.

Res: 1.0900, 1.0935, 1.0950, 1.1000
Sup: 1.0855, 1.0834, 1.0819, 1.0804